Companies and affluent individuals want to keep their capitals safe. Economic crises, problems in the home country’s banking sector, national currency depreciation, legal prosecution, and criminal harassment – any of these factors can lead to loss of capital. This fact makes people and companies look for a safe place where they could keep their money. Eventually, they arrive at the conclusion that an offshore bank could be such a place.
Below we discuss the process of setting up an offshore bank account, the reasons why this move is wise, and besides, we touch upon the legality of offshore bank accounts.
Contents
What an ‘offshore bank account’ is and who needs one
Broadly speaking, an offshore bank account is a bank account in any foreign country, outside the country of the account holder’s residence. In practice, however, setting up a foreign bank account may be problematic because banks in some countries are reluctant to open accounts for foreigners. Some other countries welcome foreigners though and these are often referred to as ‘offshore zones’. They not only welcome foreign bank account holders but they also try to attract them by offering reduced (or zero) taxes and simplifying the application procedures. In addition to that, a high level of confidentiality is a serious advantage that offshores offer.
When you have an account with an offshore bank, you can be certain that your money is safe, that you can perform any banking operations in any country, that the tax authorities are not going to bother you, and that the information about the amount of your wealth will remain secret for third parties. These are the main reasons why offshore bank accounts are so popular with wealthy individuals as well as corporate entities from all over the world.
The most popular offshore banks that foreigners can apply for services to are located in the following jurisdictions:
- British Virgin Islands (for instance, FirstCaribbean International Bank, Scotiabank, VP Bank (BVI) Limited, and others);
- Cyprus (for instance, Bank of Cyprus, Piraeus Bank, Hellenic Bank, and others);
- Panama (Multibank, Balboa Bank & Trust, and others);
- Liechtenstein (Valartis Bank (Liechtenstein) AG, etc.);
- Insular countries such as Mauritius, Seychelles, Comoros, and so on.
Many things will be different depending on which bank you choose including the timeframe of the application processing, the cost of the services, the list of application documents, the opportunity to make money transfers to other countries, the amount of the security balance, and so on.
Contrary to a popular belief, both registering an offshore company and opening an offshore bank account is perfectly legal. An offshore bank account will become illegal if you use it for illegal purposes such as money laundering or tax evasion, for example. However, you can hardly do that these days. In any case, you should acquaint yourself with the relevant regulations and the fiscal practices in the foreign country where you would like to have an offshore bank account. Besides, you should find out what your home country’s legislation says about such bank accounts.
How to open a personal account with an offshore bank
Private individuals usually set up offshore bank accounts for asset protection purposes. They don’t want to lose their money due to an unforeseen event and besides, they want the information about their wealth to remain confidential. These are the main reasons why opening an offshore bank account is the right solution:
- Your money is safe.
- You can keep your money in different national currencies.
- You can have access to your money from anywhere in the world.
- You can transfer your money anywhere you wish.
- Offshore banks keep your financial information confidential.
As a rule, a private individual has to supply the following documents to set up a personal account with an offshore bank:
- A personal ID (such as a passport, for instance);
- A completed application form that contains the information about the purposes of opening the bank account, the intended operations, and annual turnover;
- Documents revealing the sources of income;
- Contact information.
The list of application documents may be longer depending on the country and the particular bank. Naturally, all the documents have to be translated into the national language of the country. The process of setting up an offshore bank account can take up to 7 weeks. Some offshore banks do not require personal presence: you can file an application for services remotely. Please note, however, that you cannot open an offshore bank account anonymously: this would go against the contemporary regulations in the banking sphere.
A curious fact
Offshore zones and offshore banks did not appear at the same time. Historians refer to some territories near ancient Athens as the first offshore zones. Ancient Greek traders used these territories to go around Athens and avoid paying taxes. The first ‘secret’ bank accounts appeared only in the 18th century. French catholic monks owed money to Swiss protestant bankers and they did not want their brothers to know about this fact. For this reason, they insisted that the bankers had to be confidential about the monks’ financial matters. This is why the notion of ‘banking privacy’ comes from Switzerland where confidentiality of the banking information is protected by law.
Opening a corporate account with an offshore bank
Companies usually open offshore bank accounts to reduce their fiscal burden. We do not mean to claim that evading taxes is praiseworthy: it is not. Moreover, it is illegal. We insist, however, that any person or company is justified in trying to reduce their fiscal burden in legal ways. One of such ways is registering a company in an offshore jurisdiction with low (or zero) taxes and opening a bank account there.
In addition to other advantages, a corporate offshore bank account allows doing the following:
- Entering international business deals;
- Joining international investment projects;
- Protecting the corporate capital from arrests and seizures.
You have to submit the following application documents:
- Corporate documents;
- Company By-laws;
- Personal information about company owners and directors;
- Confirmations of sources of income.
You have to realize that banks have been made responsible for combating money-laundering practices. Thus, confirming the legality of your sources of income is one of the central requirements that you have to meet. Besides, banks take the KYC requirements seriously: the information about the company owners and officers has to be disclosed in full. Some banks also require business plans, financial reports, and other documents. A general rule is as follows: the more reputable the bank is, the more documents it requires. Some world-renown Swiss banks require recommendations from other clients in addition to multiple documents.
You have two ways to go if you would like to open an offshore bank account. First, you can go into the banking legislation of the foreign country that you are considering and see if it fits your purposes. It does not, you can study the legislation of another country, and so on. Second, you can pay a reasonable fee to an offshore industry specialist who will offer you a few viable options after finding out about your goals and preferences.