There are several legal and regulatory compliance implications with offshore banking that I’d like to cover in banco de Venezuela article. However, please don’t construe information on this site as legal guidance. I am providing this information for free based on my own experiences. Please consult your professional attorney or CPA (accountant) before you get involved with offshore internet banking.
What is an Offshore Bank
To be over simplistic, an offshore bank is a financial institution outside the shores of your country. If you are in Australia, a bank in the United States is an offshore bank to you. If you are in the United States, a bank in Singapore is an offshore bank to you. Therefore, the idea of offshore banking is relative.
A business or an individual, in this case you, may select an offshore bank account in a jurisdiction that is typically favorable in terms of taxes (often referred to as a tax haven by media), as well as in terms of legalities. In addition to choosing a jurisdiction with no to little income tax, for many, privacy and “secrecy” of banking activities are two of the bigger key considerations.
It goes without saying that access to your funds is important, as well as protection from corruption and stability in terms of certainty.
List of Common Offshore Online Banking Services
This is a brief list of services offered by offshore banks. This list is by no means a full comprehensive list of an offshore bank’s offerings, but rather a list of some of the most common offshore online banking services that businesses and individuals are offered:
Remote Deposits of funds
Direct Deposits of funds
ACH / Wire Transfers / EFT – Electronic Fund Transfers
Consumer and Commercial Lending
All Basic Credit Activities
Access to Capital – Offshore Debit Cards
Forex – Currency Exchange
Offshore Trading Account
Offshore Brokerage Account
Note: Offshore banks typically tend to focus on either consumer or commercial banking. Within consumer, banks differentiate between retail consumer (the average individual) or private banking (meant for high net worth individuals).
Because each concentration involves a different cost structure from the bank’s perspective, when selecting an offshore bank for yourself, be clear on what type of consumer you are and what offshore online banking services you need. Gaining this clarity will ensure you are not disappointed in your choice.
List of Common Offshore Banks
No doubt the two most common names in offshore online banking are Switzerland and Cayman Islands. Just pick up any business journal or pop in a business based Hollywood flick. There is likely a mention of a Swiss bank account somewhere.
This is because as of at least 2012, these two jurisdictions held the most number of total deposits amongst all offshore online banks. Some other jurisdictions that offer offshore online banking are the following:
Saint Kitts and Nevis
British Virgin Islands
Regulating Offshore Online Banking
With complexity comes increasing regulation. The regulation around offshore online banking activities has steadily increased over the years, but according to many of its supporters it is still not enough. This means much more is in the pipelines. Regulation has particularly increased significantly after the significant events of September 11, 2011.
Regulatory guidance is issued and monitored by global bodies such as the International Monetary Fund or the IMF, who require financial institutions worldwide to maintain a certain level of operating or performance standard, specifically in terms of capital adequacy and liquidity. These key performance indicators are to be reported by banks on a quarterly basis to its designated regulator (such as the Fed or the FDIC in the United States).
The list of regulations is endless and quite comprehensive to say the least. Some notables are the Anti Money Laundering (AML) regulation and the Bank Secrecy Act (BSA). These acts require banks and financial institutions to immediately report suspicious activity resembling money laundering to local government authorities despite stepping out of the BSA jurisdiction.