Offshore Banking in Dubai

In its most basic form offshore banking is simply carrying out your banking activities in a location other than the one in which you live, and different individual and corporate account holders can have very different reasons for needing an offshore bank account and these can range from tax saving requirements to multi currency loan requirements for example.

But the most common reason for opening an offshore bank account nowadays is the flexibility that comes as standard with such an account and expatriates can particularly benefit from an offshore bank account as it will likely allow them to manage their international financial commitments with ease.  With the development of the Dubai International Financial Centre (DIFC) which is the latest free trade zone in Dubai, flexible and unrestricted offshore banking in Dubai is about to become big business.

Many of the world’s largest banks already have significant presence in Dubai, big names such as Abbey National Offshore, HSBC Offshore, ABN Amro, Barclays, Dresdner and Merrill Lynch all have offices in the emirate already and when the DIFC is completed it is expected to house even more offshore branches of the world’s major banks.

At the moment all banking activity in Dubai is regulated by the UAE Central Bank and they place many restrictions on foreign banks such as they may have no more than eight branches in the UAE for example, and every commercial bank operating in Dubai must have paid up capital available amounting to at least Dh 40 million.  The DIFC free trade zone will be governed by a different regulatory authority and it has already been granted legal independence by Dubai’s ruler meaning that it is likely fewer trade restrictions will be placed on banking and financial institutions granted licenses to trade within the zone and the DIFC will attract big name players and promote healthy competition in all financial sectors including offshore banking.

The DIFC will certainly employ comprehensive laws to ensure all international requirements for anti money laundering legislation are complied with for example, but ultimately the free trade zone is being designed to allow financial institutions to work and grow without unnecessary restrictions such as crippling taxation burdens, reporting requirements and anti competition rules.  The offshore banking sector in Dubai has already seen a boost in bank deposits following the introduction of the EU Savings Tax Directive in July 2005 which made many of the more traditional offshore centres unattractive and as soon as the DIFC is completed you can expect to see offshore banking in Dubai take off and the centre become one of the most popular and successful in the world.