Mislead Perceptions of the Offshore Industry
Contrary to common perception opening an offshore bank account is perfectly legal. Not only is it legal but nearly 75% of all Fortune 500 companies have bank accounts in foreign offshore jurisdictions.
As long as you abide by the laws regulating the overseas bank as well as laws within your own country of residency there is no problem. The problems only start to come when you are trying to hide assets. That is illegal. Gone are the days of anonymous Swiss numbered bank accounts.
While there still can be various levels of privacy it depends on the laws in both the offshore jurisdiction and the laws in the country where you live. It’s often the illegality of the offshore industry which grabs headlines. Tax evasion, money laundering, international drug dealing headlines sell papers.
“Middle-aged half-retired man opens an offshore bank account in the Bahamas,” just doesn’t sell papers.
Like all media headlines, illegality and criminal behaviour are always over-reported, and so the reality of things is skewed by what’s reported. Because what’s there to report if there is no scandal?
People have been using offshore finance since the end of World War I when people were looking for a sense of security after a war that ravaged Europe. Seeking security in foreign jurisdictions is nothing knew. However it is only recently that it has fallen afoul by politicians and viewed with cynicism by the public.
Offshore Banking vs Onshore Banking
Offshore banking is merely a reference to a bank located outside the country of where the client lives. If you live in one country and bank in another, the account is technically considered an offshore account. Whereas onshore banks are banks located within the country where the client lives.
You might even have been using offshore banking without even knowing about it. The only real difference between offshore banks an onshore banks is the location of the client.
Offshore banks exist like many other domestic or international banks and can be accessed globally with a touch of a few buttons on your mobile. Offshore banking allows you access to many of the same services as domestic local banks such as ATM withdrawals, online banking and transfer services, customer support as well as the use of credit and debit cards.
Offshore banking has often been associated with criminality, illicit transactions and secretive dealings, largely because of the misunderstood nature of international banking and the flow of capital.
Capital will largely follow the path of least resistance. Meaning it will largely find places in the world where it can enjoy the benefit of accumulating without being continually watched or take advantage of unfairly. As a result, in a bid to attract foreign financial capital smaller countries lowered there tax status for non-resident businesses and individuals looking to setup an offshore company or bank account.
It is estimated that nearly 25% of the worlds wealth is held offshore worth upwards of up to 20 trillion Pounds Sterling. While that is a staggering number, this number shouldn’t be too surprising, as the world is filled with dozens of countries that have lower taxes and liberal banking systems that attract foreign capital.
Offshore Banks Are Not What You Think
If you live in Spain and have your bank in Germany and send monthly stipends to your sick Aunt in the UK, you would be using offshore banking and thrown into the same category of the likes of Al Capone.
While we are quick to assume that every bank that offers client confidentiality must be hiding criminal activity. The reality is that there are a number of reasons why you would legitimately want to conceal ownership of certain assets.
For instance if you are a doctor you will in all likelihood be faced with one or any number of malpractice suits. Although it is common for hospitals insurance policies to pick up an legal claim, however, if the doctor is found personally liable due to negligence they could be the subject of a legal claim.
Offshore banking is not isolated to a specific bank nor a particular practice, it is simply the result of the global economic landscape. Capital will continue to flow across boundaries and seek out new destinations in the ever increasing interconnected landscape likely to erase all distinctions of onshore and offshore.