If you are an individual who have deposited funds in a bank which is located outside of your country, then you are considered as involved in offshore banking. Even though the term implies that these banks are located on islands, the fact is many offshore banks are found in onshore locations. This assumption probably arose because the term “offshore bank” first originated with banks that were established on the British Channel Islands.
Offshore banking is an investment strategy which some investors may prefer for the following reasons:
- An offshore bank account provides the same services as a domestic bank. Depositors do not need to go in personally to open an account.
- Offshore banks are often located in jurisdictions that offer low or no taxation. In other words, they are considered as tax havens for investors.
- For countries with unstable political condition, offshore banks offer a safer alternative for investors to invest as well as place their assets.
- Privacy is a huge factor which may encourage some investors to go into offshore banking. Legislation dictates that all operations conducted through the account are to be fully confidential.
- Offshore banking also gives investors the opportunity to invest globally which might not be possible if done through domestic banking