The use of a bank located outside the legal jurisdiction of the country of one's residence for all banking and financial services can be called offshore banking. Offshore banks normally are situated in tax havens and provide secrecy and safety for the depositors. It was the English who coined the word offshore to specify tax havens located in the British Channel Islands, which were actually off the shores of Great Britain. The banks located in these islands offering tax savings were the pioneers and eventually the term has become generic to describe the industry itself. These islands became major global banking centers due to the tax and other benefits offered. These became the preferred banks to hold assets, save and invest. The local governments of these places do not have as many restrictive laws of banking as most countries do. Such freedom enables various types of offshore banking accounts that can be manipulated at will by the depositors. With a daily circulation of about $2Trillion, offshore banking is a major player in the global financial markets. The business has come a long way from very small beginnings a few decades ago with a limited number of such centers. Many tales of drug money and illegal funds used to do the rounds then. All the services offered by regular banks can be obtained from offshore banks. Apart from regular corporate and personal checking accounts, offshore financial centers also provide secure Internet banking facilities that allow electronic banking. Transfer of funds, debit, credit and ATM cards valid globally, loans and mortgages are all possible. Some facilities offer anonymous numbered accounts to provide the ultimate in confidentiality. Some banks offer investment management and custodial services as well. Foreign exchange dealings, corporate administration services, trustee services and funds management too can be had. There is a kind of specialization between retail and private banking and so each bank may not offer all the services. While retail banks are more economical offering standard services, private banks tend to be more expensive offering personalized services for their clients. The following are the advantages of offshore banking. Unless proof of criminal activity on the part of the client is offered, offshore banks are not obliged to divulge personal or corporate information and as such, offer great privacy. Government bodies and/or tax authorities cannot get any information out of these banks. They cannot therefore take any kind of legal action against account holders. Offshore banks being usually located in tax havens, one's investments can grow without any charge on account of taxes. So, tax savings is another major advantage. It may however be necessary to pay taxes, if the funds are brought back into the country of residence. Lastly, your assets are completely protected. Your banked assets are protected from the prying eyes of invasive bureaucracy, lawsuits and seizures.
Offshore banking is better described than defined. With growth of international banking in the immediately preceding decades, it became a matter of convenience and expediency for the banks engaged in international finance to rely on booking centers which offer the best facilities in terms of cost and other tax advantages. Regional location also mattered a great deal, since specific geographic advantages also serve particular countries more effectively. Moreover, these regions present benefits that relate to the timing of funds placement and generation and contribute to the increase in the efficiency of the international capital market. With international communications technology allowing transactions to be made in a matter of seconds, funds transactions can be effectively undertaken over different time zones during a large part of the 24-hour working cycle for the world. These factors have contributed to the sophistication of the business of banking and have given rise,...
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