Offshore banks are banks that are located outside a country other than the account holder’s country of residence. Moreover, offshore banks are specifically licensed by their jurisdictional authority(ies) to offer offshore banking services. Offshore banks are known for the wide range of benefits they offer account holders vis–à–vis retail bank accounts. This has made them popular both amongst high networth individuals and businesses that operate internationally.
Let us check out seven important pointers you need to consider before you open an offshore bank account:
1. Consider your needs – Before you choose an offshore jurisdiction and an offshore bank, you will need to consider your requirements as objectively as possible.
Do you need to make international payments or have accounts in different currencies?
Do you live outside your home country?
Do you move regularly between different countries?
Are you looking for an economically stable home for your money?
Are you thinking of retiring abroad?
Consider not just your current needs but also your possible future requirements. Moreover, an offshore bank account is usually associated with minimum deposit/assets under management requirements that are much higher vis–à–vis retail bank accounts. Keep all the above in mind before you go in for an offshore bank account.
2. Consider the offshore bank’s jurisdiction – Your offshore banking jurisdiction should fulfill certain important criteria:
▪ A history of political, economic and regulatory stability including stable tax and inheritance structures.
▪ An established pool of private bankers, wealth managers and legal and financial specialists and service providers who have experience catering to the needs (including international needs) of high net individuals.
▪ Zero / low rates of direct and indirect taxes (whether on income, capital gains, assets, transactions, consumption or otherwise).
▪ The presence or absence of double taxation agreements (DTA) or tax information exchange agreements between the jurisdiction you are considering and other countries, especially your home country, could possibly influence your decision. You may either want to take advantage of these agreements or avoid them.
Basically, you are looking at a jurisdiction that has a fairly long record of political/economic stability and of offering offshore banking services. Typical destinations include Singapore, Switzerland, Isle of Man etc.
3. Consider the bank – Check out the various banks offering offshore services in your chosen jurisdiction. You may favour a brand whose name you are familiar with or you may be looking for a bank that offers you the specific features and benefits that you are looking for.
Whatever bank you decide on, the bank must have experience with and value international clients. Banks that have mainly local business may not have the expertise that is required in today’s highly complex regulatory environment for international banking. Global banks like Citibank, HSBC, Standard Chartered Bank etc. have presence in several countries and the international expertise that you are looking for. They can also help you with opening an offshore account from the comfort of your home.
Service levels, banking and support channels, customer service languages are also important factors to take into consideration before you decide upon a bank.
4. Consider the products/services bouquet offered – Your offshore bank should be able to offer you a suite of products and services that can help you effectively and efficiently manage your international holdings, optimize your tax outgoings, protect your assets from creditors, estranged spouses or other family members, achieve orderly, controlled and structured transfer of assets to younger generations of your family and ensure continued ownership of businesses without fragmentation between multiple owners.
5. Consider world-wide availability/accessibility of products and services – Determine the global availability and accessibility of your offshore bank’s products and services through the following sample questions:
▪ Do you have access to global markets and a global range of products and services (depending upon your country’s regulations)?
▪ Do your bank’s products (debit cards, credit cards etc) have global validity and acceptance?
▪ Do you get world-wide product and customer support?
▪ How about “anytime” transactional access to your bank account from anywhere across the globe?
6. Consider the bank’s fee structure – Your offshore bank may charge you fees on a flat fee model; this could be a percentage like one percent of your total assets under management. This fee covers all transactional, custody and advisory costs. Alternatively, there may be different fee structures for different products; under this model, advisory, discretionary management services and managed funds may charge the highest fees.
You should take the time to understand your bank’s fee structure in detail including going through all bank documents. Also, get your relationship manager to explain in detail the fees that are applicable to your context.
7. Consider privacy, security and confidentiality – The proliferation of digital banking channels like Internet and mobile banking have given customers
“anytime, anywhere” convenience. While you will need to practice good security habits, also ensure that your offshore bank also offers security measures like:
▪ Multiple security layers that include the use of login usernames and passwords, security devices, instantly generated passcodes that are delivered through SMS or email etc.
▪ Application of additional security layers to all financial and important non-financial transactions.
▪ Instant alerts through SMS / email on execution of a wide variety of financial and non-financial transactions.
TYour offshore bank should also offer you greater levels of data confidentiality and customer privacy that is available with a standard retail bank.