There are many advantages to using offshore banking. You gain increased privacy rights as well as reducing the amount of taxation on deposited finances. You can access your accounts with greater ease and less regulations. There is also increased protection against political and financial instability.
The term offshore banking comes from banks on the Channel Islands. These islands off the shore of the United Kingdom offered secured banking away from the established regulations of national banks. Over time the term has been used to describe any bank which has similar practices, regardless of their physical location. Swiss banks are an example and even the name Swiss bank account has become interchangeable with the term offshore banking.
Since their inception, offshore banks have become increasingly associated with illegal manipulation of funds. An underground economy has begun to arise in drug cartels facilitating money laundering and tax evasion. This has caused various countries to push for stricter regulations on offshore banks to report potential fraud.
An offshore bank does not prevent a nation from seizing income taxes or interest owed. It is just not required to report the details or contents of its banks. It is actually the individual who illegally withholds earnings who is committing the crime.
After September 11, 2001 there was an increased effort to force offshore banks to divulge the specifics of accounts believed to be involved in illegal activity. There was a belief that funds held in offshore banks were being used to pay for terrorist activities. Those defending these banks proposed governments were simply trying to prevent competition with their own national banking system.
There are many advantages to using an offshore bank. People experiencing political turmoil often use them to securely protect their money from corrupt public officials. This type of banking allows for higher interest rates as a result of having a lower overhead than standard banks. The lack of government intervention also helps reduce costs. Opening one of these banks is often one of the few ways outlying countries with limited resources can gain a competitive edge in a global market.
The downside to offshore banking lies in the increasing threat of privacy loss. This is a direct result of illegal use by its clients as opposed to any inappropriate actions by the bank itself. A debate continues today about the ethical legitimacy of criminalizing and whether it will prevent a criminal offense.
Banking offshore will continue to be a prosperous enterprise for years to come. They provide a needed service to many law abiding citizens. The only q
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