Contrary to popular belief, offshore banking did not originate in the Caribbean. The Channel Islands, part of the United Kingdom and located off the coast of northwest France, were actually the first location to offer lower taxes and 100 percent anonymity to wealthy English and European individuals looking to avoid taxation on their wealth.
The popularity of the Channel Islands as a banking haven did not go unnoticed by other “offshore” locales – places where there was an advantageous mix of stability and a strong currency provided by homelands and economic independence. Soon, other countries in Europe and not a few Caribbean locations caught on to the attraction of offshore banking, and now there are offshore financial centres worldwide for the convenience of savvy investors everywhere.
However, this did not mean they would not evade taxes; they just wanted a place from which they could offshore bank in confidence and be taxed as minimally as possible.
When offshore banking first started, only the wealthiest were able to partake in opening accounts – the minimums were high, and often it was necessary to travel to the bank in order to complete the application process. But today, an offshore bank can be utilized by almost anyone. Applications, deposits, withdrawals, wire transfers, internal transfers and many more banking transactions can be performed via long distance, with the help of fax and Internet.
The few cases in which offshore banking has been used for illegal purposes – money laundering, tax evasion, hiding illegally gained assets – have unfortunately given offshore banking a bad name. It’s simply the allure of having an account offshore – with the implication of large sums of money, jet-setting travel and the underworld – brings people to their own conclusions when they hear a highly-publicized story concerning offshore banking.
At Moss, we deal with savvy investors who know the banking world and have seen that offshore banking is the logical choice for wealth management and asset protection. An Offshore bank provides a strong foundation from which to conduct all kinds of business, and can be advantageous to one’s tax bill and one’s bottom line.
In fact, those illegal activities comprise a fraction of a percent of the activity that is handled through offshore banks. Perfectly legitimate individuals and well-run, famous-brand companies choose to conduct a portion of their banking offshore for a variety of reasons, including:
The business of the company or individual might be such that they are under constant threat of being sued – and they want their assets protected from frivolous lawsuits.
Their home country might be politically or economically stable, and they prefer to manage their assets from a location safe from currency exchanges, economic collapse or political coups, often during which bank accounts are frozen and sometimes confiscated.
They want to see their wealth passed on to their children, other heirs or their favorite charity after their death; not into the hands of a government that demands steep estate taxes.
Investment firms that do a brisk international business can prefer to have their assets offshore in order not to have funds sitting in several dozen countries; this facilitates ease of reporting during daily Board audits. Also, employee retirement funds and other benefit assets are often kept offshore to be protected from claims, bankruptcy and other money-losing events that sometimes are not foreseen.
Trading companies choose to open an offshore bank account in order to streamline payments and revenue from a wide variety of currencies.