An Offshore Bank Account

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include:

greater privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)
low or no taxation (i.e. tax havens)
easy access to deposits (at least in terms of regulation)
protection against local political or financial instability

While the term originates from the Channel Islands being "offshore" from the United Kingdom, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location, including Swiss banks and those of other landlocked nations such as Luxembourg and Andorra.

Offshore banking has often been associated with the underground economy and organized crime, via tax evasion and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest. Except for certain persons who meet fairly complex requirements,[1] the personal income tax of many countries[2] makes no distinction between interest earned in local banks and those earned abroad. Persons subject to US income tax, for example, are required to declare on penalty of perjury, any offshore bank accounts—which may or may not be numbered bank accounts—they may have. Although offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal. Following September 11, 2001, there have been many calls for more regulation on international finance, in particular concerning offshore banks, tax havens, and clearing houses such as Clearstream, based in Luxembourg, being possible crossroads for major illegal money flows.

Defenders of offshore banking have criticised these attempts at regulation. They claim the process is prompted, not by security and financial concerns, but by the desire of domestic banks and tax agencies to access the money held in offshore accounts. They cite the fact that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, suggesting that Organisation for Economic Co-operation and Development (OECD) countries are trying to stamp out competition.

Barclays Offshore Banking

Barclays International and Private Banking Division offer offshore and private banking solutions to those with cross border needs, the Division is a part of the 300 year old UK based Barclays financial institution.

Barclays’ offshore banking solutions are often chosen by British expatriates who already have a business relationship with the bank before they leave the UK and who are aware of the bank’s pedigree and reputation. But because Barclays has a growing international presence particularly across Europe, America, Africa and Asia their presence on the international high street is becoming more high profile.

In terms of the Barclays’ offshore banking services available, the group offer personal, corporate and private banking solutions as well as a unique international premier banking solutions for those with in excess of GBP 100,000 to bank and invest.

For expatriates, international business professionals or those with cross border needs who are seeking a straightforward offshore personal bank account, Barclays International Personal Banking from Barclays International and Private Banking Division offers easy and secure access to funds with telephone and internet banking available, discounts on international money transfers, the ability to bank in multiple currencies, international mortgages, UK tax advice, good interest rates and a safe and secure account are also offered and assured.

Offshore corporate banking services available from Barclays offer corporate clients or intermediaries the ability to streamline cross border trading and banking. Their relevant corporate products and services include financing, investing, day to day banking and trading - and as with personal Barclays offshore bank accounts, corporate accounts are also safe and secure as Barclays is a bank with an excellent reputation.

For those seeking private offshore banking solutions there is an international private banking division at Barclays and also the aforementioned premier banking solutions which are available to those who require a more personalised banking and investment service from Barclays.

The focus of the private and premier banking services available from the offshore division of the bank is the provision of a first class service for the management, protection and growth of a client’s wealth. Offshore Private banking is most suited to those with in excess of GBP 1 million and the premier banking service is for those with in excess of GBP 100,000 – either to invest, trade or bank.

All in all Barclays offshore banking division services the main requirements of the individual and corporate client, and because Barclays have a good industry recognised reputation from Standard and Poors, Fitch and Moodys their offshore and international client base is apparently growing.

How To: Set Up An Offshore Bank Account?

For some guys, an offshore bank account may sound like something out of a James Bond film or maybe a clever way for an arms dealer to conduct business. But the truth is that lots of guys use offshore accounts for a variety of reasons. It may sound sexy to talk about an offshore account, but for the most part, banking offshore is about saving on tax dollars.

But if taxes aren’t a concern, liability may very well be -- in which case offshore banking limits a creditor’s access to your funds (different country, different law). Finally, there are some guys who don’t need that Swiss bank account, but open it while on vacation because what better pickup line is there than dropping “my Swiss bank account” into the conversation?

If any of those reasons sound like they match your own motivations, here’s how you can open an offshore bank account.
Legal issues
If you’re a U.S. citizen, it’s not illegal per se to open an offshore account. If the underlying reason, however, for setting up the account is an illegal act, you might be keeping your money safe, but you could still be in hot water. For example, if you’re accused of tax evasion and you’ve sent the funds abroad, you could still face criminal charges here. The offshore bank account, however, may remain free from the long arm of the law.
Risk
When you bank in the U.S., you can be secure in the knowledge that your money is insured by the government. No such guarantees exist with offshore banks. In other words, a country could have a coup or a natural disaster or an accounting scandal one day and all the money could be gone the next. Furthermore, you could find yourself scammed; it does happen. Remember, this is a business built on skirting the law, so you won’t always deal with the most honest people (but that varies by country).

Money
Offshore banking isn’t just for the super wealthy, but it’s not for paupers either. Minimum deposits vary by bank, but you need to pick a number to make it worth your while. Still, if you’re a U.S. citizen, you’re supposed to declare any amount over $10,000.
Travel
You don’t have to visit your money or even be there to open the account. This is international business at its finest and bankers wire money by phone and e-mail. However, at the end of the day, you’re still in your country and your money is somewhere else. If you really want to be safe and avoid U.S. laws and taxes, move.
location, location, location
Locale: Switzerland

Description/legal status: Accounts can be set up in person or via mail. The key feature of a Swiss bank account is secrecy. It works like your American bank, but most legal matters like divorce, taxes and bankruptcy are considered private. In fact, the Swiss are known for keeping their secrets. While some countries change their laws under American pressure, Switzerland just keeps going. On the other hand, everyone knows about Swiss bank accounts, so if a creditor knows you’ve got one, they also know you’re hiding something.

Locale: Cayman Islands

Description/legal status: Once again, it’s basically like setting up a U.S. account. The difference is that Cayman accounts are geared to corporations, so it’s possible to open an account and keep your identity a secret. In other words, your corporate name will be the only name the bank knows. If you’re clever and really concerned about secrecy, you’ll insulate yourself with a series of corporations, making a paper trail of holding companies that don’t lead to you.

The Cayman Islands don’t officially encourage illegal activity like tax evasion, but they don’t report deposits or interest on those deposits -- that’s your job. But remember: In the war on terror and drugs, Cayman banks have buckled under American pressure. This means that when the bank opens its doors to the American government to catch a drug dealer or terrorist, it also opens the door to your information.

Locale: Singapore

Description/legal status: The setup in Singapore is much the same as anywhere else. Money moves to Singapore primarily for tax reasons because the country has the lowest tax rate in Asia. If you play your cards right, interest earned in Singapore can be tax free. While you might get tax breaks on interest in a lot of places, there’s a good reason to choose Singapore: Investment happens locally.

Singapore banks pump money into China’s growing economy. So when you put your money in a Singapore bank, you’re doing three things: saving on taxes, investing in the world’s fastest growing economy and protecting your money by letting local experts pick and choose the investments for you. In other words, you get to invest in Asia without leaving home and without paying U.S. taxes.

Locale: Luxembourg

Description/legal status: There are a few hurdles to opening an account in Luxembourg, but they’re minor. For example, you’ll need a reference from your current bank and you’ll need to be able to answer some financial questions about how you intend to use that money in Luxembourg (if at all).

Like Singapore, Luxembourg is known for a great return on investment, but that return has dropped for some deposit holders who are citizens of European countries. If you’re not affected, you’ll grow your money tax-free in a very stable country. In other words, if you pick Luxembourg over Singapore, you make a tradeoff: Your money might not grow as fast (although it will likely grow), but you won’t be exposed to the risk of investing in a developing economy.
bank on it
While we tend to think of offshore banking as an underground act, it’s really quite legitimate. But the basic lesson learned here is that if you bank offshore, complying with your native country’s laws is up to you. In other words, unlike American banks that report your income to the IRS, offshore banks leave you on the honor system. You can save a bundle on taxes, clear a higher return on your investment or simply keep your affairs private, but if any of that runs afoul of the laws in your own country, you might need to visit your money in person -- permanently.

On the other hand, if you don’t break the law, you can reap the benefits of offshore banking without breaking a sweat.