We have an entire section dedicated to offshore banking on Shelter Offshore because it really is that important for expats. However, we still can’t get past the fact that many people need a complete explanation of what exactly offshore banking is all about before they can even consider their options.
You see, as we’ve mentioned before, the media is to blame for tarnishing the reputation of offshore jurisdictions, and for making people very suspicious of any financial service or product that’s located ‘offshore.’ But it’s our governments who fuel the media and create this confusion, and it’s not fair.
When it comes to offshore and expatriates there is nothing illegal or immoral about it. It comes down to flexibility, security of funds and assets and the ability to potentially access the likes of better interest rates and more interesting and diverse products – which may generate better yields. And when it comes to offshore banking, it’s all about taking an international approach to managing money.
What is Offshore?
Offshore is basically any jurisdiction (country, state, crown dependency, island) other than the one in which you’re now resident.
The term, when applied to financial services products and solutions, such as bank accounts for example, suggests ‘tax advantage.’ However, that’s misleading! Many expats who bank offshore seldom achieve any significant tax benefits, (although we will discuss the potential tax deferral or legal avoidance benefits available below), they simply go offshore to have as flexible a banking solution as possible.
Introducing Offshore Banks
Whilst you can choose to bank with a small, private institution in Andorra or the Cayman Islands, when we talk about offshore banks we’re really talking about the main players such as: -
- HSBC
- Barclays
- Lloyds
- Bank of Scotland
- And Citibank to name but a few
These are major banking players with international arms that service international clients – such as expats.
The key services they generally offer include: -
- Holding clients’ money in offshore secure, well-regulated jurisdictions where there are locally favourable tax regimes in place
- Offering multi-currency account options
- Giving expatriates wealth management services
- Providing international access to money in local currencies
- Perhaps offering preferential transfer services and exchange rates
- And premier account holders will also be offered value added services – e.g., airport lounge access, travel insurance benefits, introductions to international accountancy firms…
Who Needs an Offshore Bank Account?
In our report ‘Offshore Banking Explained’ we touch upon who may benefit from an offshore bank account. However, to further expand upon this here’s a list of who may benefit from an offshore bank account and why: -
- Expats – who may not want to hold all their money in their old or new nations because of privacy, security of capital or tax reasons. Or who may need access to funds at home and abroad, have a need to transfer money between countries and currencies, and who want a much more flexible account as a result
- Foreign property owners – who may benefit from the flexibility to transfer and access funds in different countries and currencies
- International business persons – who may travel extensively and need an account they can access and service from anywhere in the world
Offshore Banking Benefits Defined
The advantages and disadvantages of offshore banks and bank accounts depend on many factors such as the bank you choose, the account option you select, and of course your own personal circumstances.
The general benefits that can be enjoyed if you bank offshore may include the following: -
- Greater security of capital (if the bank is in a secure, well-regulated jurisdiction with investor protection guarantees for example)
- Potential tax saving benefits (if the bank account is in a low/no tax jurisdiction and the account holder is not required to pay tax on deposits held outside their nation of tax residence for example)
- Flexible management of funds (internationally, online, over the phone, via smart phone apps etc.)
- International access to funds (in local currencies through local ATMs)
- Multi-currency bank account options
- Premier account management services (suitable for high-net worth account holders who require greater management of their money from their bank)
- Potentially preferential rates of exchange (only compared to other rates offered within the bank – usually better rates of exchange are enjoyed if you use a currency broker)
- Centralised account management (avoids the need to have accounts in more than one country)
So, What Exactly is Offshore Banking?
For most expats offshore banking is all about having your funds in as flexible and secure an account as possible, held with a leading bank which can offer the breadth of service required.
It’s about having that account in a jurisdiction which is considered politically and economically secure, and where there are depositor guarantee schemes covering the amount on deposit in the bank account.
If you feel you may benefit from a more flexible bank account, then consider your offshore banking options. Remember that your personal status and circumstances will dictate which account from which bank in which jurisdiction is right for you.
Andrew symonds Says:
Fri, July 29, 2011 at 05:22 PM
I still can’t get past the fact that many people need a complete explanation of what exactly offshore banking is all about before they can even consider their options.