As the world changes, so is the offshore banking landscape constantly evolving. What used to be the favourite private banking locations for the wealthy several years ago, has little impact on what is happening today. Academic research shows that the demand for offshore banking is on the rise and will continue to be for some time.
There are indeed many legitimate reasons for opening an offshore account although according to FACTA, for offshore banks to have customers from the USA, it has become rather expensive. In this article we take a closer look at what well-known authorities on the topic say, including Investopia, Luigi Wewege (SVP at Caye International Bank Belize) and others. Starting with basic requirements, then moving onto more complex matters, we will consider a range of issues.
On basic requirements to open an offshore bank account:
It is increasingly important to present your own proof of address so that banks are able to confirm your domicile to comply with tax obligations and off course a string of other due diligence reasons such as OECD compliance, counterterrorism and much more. This requirement is typically satisfied by presenting a utility bill not older than 90 days. This is submitted along with the usual requirements such as your name, date of birth, citizenship, passport and job details (according to Investopia). There are off course offshore banks nowadays that don’t require the physical presence of people, for example in countries like Belize, Dubai, Mauritius, Seychelles, St. Vincent and other locations – (according to Caye International Bank in Belize).
On Where to open your offshore bank account:
Picking a country to open your offshore account needs to be considered against a range of criteria, for example their tax rate, banking privacy, facilities, interest rates and off course your personal circumstances and even treaties that your country of residence may have.
There will be continued global tensions, so be prepared to choose a country that is suitably located: “Regardless of whether we’ll see global GDP growth exceeding 3% in 2020, investors should be prepared for volatility due to flashpoints in The Middle East and Asia, as well as Brexit and the US/ China Trade War”. (Luigi Wewege featured in the Jerusalem Post)
At this point in time, Belize is among the top offshore banking jurisdictions. Switzerland may not be that attractive to Europeans anymore, but it is still benefiting from the fact that many investors fear the Middle East and Asia during times of tension.
Considering capital outflows: One indicator of where money is moving away from, is often capital outflows. By looking at where money is flowing to, it helps to understand where more financial stability can be found. For example, Australia, Hong Kong, Belgium, Chile, Latvia and even Ireland experienced major outflows in 2019 but Italy, Japan, Taiwan, Switzerland and Singapore had major inflows. Each country will off course have its own set of reasons for being on either side of the equation.
The benefits that an offshore bank account offers, must be present in the country where you open your account. These usually include “peace of mind… against political upheaval, increased personal freedom, living in the digital banking revolution, currency diversification, higher interest rates on deposits, easy access to medical care abroad…” (Luigi Wewege’s recent 2020 banking interview online). The question therefore has to be: can you achieve most or all of these benefits by opening an offshore bank account or not? If too many of these are missing in the location you’re evaluating, it becomes less attractive.
Choosing an offshore banking locale depends on the benefits and your circumstances. The top three countries in the world right now, are widely considered to be Belize, Singapore and Switzerland. The main reason people open these accounts is indeed asset diversification, but there are many more considerations such as privacy, risk, etc.