Offshore bank accounts are effective vehicles that help you manage business finances with ease. In today’s article, let’s clarify 6 benefits of offshore bank accounts that you cannot find in domestic banking systems.
1. Opportunities In Overseas Investments And International Markets
Many international and offshore funds generate much higher returns through Private Hedge Funds and investment portfolios not readily available to domestic corporate account holders. Offshore investment accounts open up investments in multiple jurisdictions, regional as well as developing markets.
Spreading investments in different countries and global currencies allow you to play global markets and capitalize on regional trends. When a domestic economy enters a financial recession, having offshore funds spreads your risk. Spreading your assets liberates you from being dependent on the financial continuity of one country and having access to different markets greatly enhances your future financial stability.
2. Banking In Economic And Political Stable Countries
There is a lot of political and economic uncertainty in the world. Countries governed by dictators or corrupt autocratic regimes face huge uncertainties that make financial security untenable.
At any given moment, entire savings could be seized, bank accounts could be frozen, investments could be taken just for being a political opponent, high-profile individual, or even an outspoken critic. One does not have to look very far across the world headlines to see that corrupt regimes are still at large. Living in a moderate to high-risk environment, it is common sense that one would want to have a nest egg stored in a different location for safekeeping. Even in more ‘democratic’ countries that might not be directly threatening there are still economic and financial uncertainties that one would want to be well prepared for.
3. Foreign Banks Might Have A Safer Banking System
It is important to make sure your assets are stored in a sound banking jurisdiction. Putting your wealth in a secure, and more importantly, time-tested banking system is extremely important.
To prevent yourself from going down with the ship its important to have your assets spread across different banking institutions, so that if one defaults you have a plan B. Many banks failed in Cyprus and Greece these last few years showing the already growing cracks in many institutions, as well as in banking systems in Argentina, Venezuela, Hungary, Italy, and Poland all were hit hard by the global financial uncertainty.
The US, despite its global economic superiority, has a very unsound banking system. The US only comes in at 23, 35 and 50, among the safest banks in the world, and those banks were only small agricultural banks. The larger commercial banks didn’t even come close to cracking the top 100.
Foreign banks are the much safer alternative. For one, they require higher capital reserves than many banks in the US and UK. While many banks in the UK and US require roughly only 5% reserves, many international banks in countries like Belize and the Cayman Islands have a much higher capital reserve ratio – on average 20% and 25% respectively.
4. Overseas Accounts Allows You To Hold Multiple Currencies
Domestic accounts usually hold all of your assets in a single currency. If your entire savings is in a single currency, especially if you live in a country where there are: capital controls (Greece), a fluctuating currency (Argentina) or economic uncertainties, having your assets in multiple currencies is something you can not do without.
Holding all your assets in one currency, is not advisable, especially if your accounts are in a currency that is volatile. While many domestic accounts limit your ability in holding other currency denominations, accounts in Hong Kong or Singapore, for example, allow you to have upwards of a dozen currencies to chose from all in just one account.
5. Foreign Accounts Gives You Greater Asset Protection
It pays to have well-protected finances. And this is not to defraud the government or hide your wealth for tax evasion, it is for asset security. Conspiracy theories aside, the fact that it’s possible of being frozen out of your bank accounts at the touch of a button because some court says you are under investigation- is scary.
Money and assets that are kept offshore are much harder to seize because foreign governments do not have any jurisdiction and therefore can not force banks to do anything. Local courts and governments that control them only have limited influence.
6. Extra Layer Of Privacy And Confidentiality
Anonymous offshore bank accounts are no longer a thing. However, there are still many layers of security and privacy that can be used to protect your name. You still can retain much higher levels of privacy than in domestic banks, as many jurisdictions have secrecy laws that require non-disclosure, but not if there is a criminal investigation or if you are suspected of tax evasion.
Opening an offshore bank account held by an offshore company prevents your name from being directly affiliated with the assets. Using nominee directors can also be used to create another layer of security that removes your name from the paperwork. Though this still does not make you completely anonymous it can provide layers of security and privacy that would otherwise not be possible.
Above all, one important note for anyone interested in offshore banking is that it is 100% legal. There are certain misconceptions that link this type of banking to criminal behavior, money laundering and illegal tax evasion.
By appropriately utilizing the benefits of offshore bank accounts, investors, SMEs, and startups with legitimate purposes can definitely make offshore banking become a powerful tool for their business growth.