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Advantages of offshore banking Offshore banks can sometimes provide access to politically and economically stab le jurisdictions.

This will be an advantage for residents in areas where there i s risk of political turmoil,who fear their assets may be frozen, seized or disap pear (see the corralito for example, during the 2001 Argentine economic crisis). However it is often argued that developed countries with regulated banking syst ems offer the same advantages in terms of stability. Some offshore banks may operate with a lower cost base and can provide higher in terest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Advocates of offshore banking often character ise government regulation as a form of tax on domestic banks, reducing interest rates on deposits. Offshore finance is one of the few industries, along with tourism, in which geog raphically remote island nations can competitively engage. It can help developin g countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world. Interest is generally paid by offshore banks without tax being deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do n ot pay tax until the tax return is agreed, or who feel that they can illegally e vade tax by hiding the interest income. Some offshore banks offer banking services that may not be available from domest ic banks such as anonymous bank accounts, higher or lower rate loans based on ri sk and investment opportunities not available elsewhere. Offshore banking is often linked to other structures, such as offshore companies , trusts or foundations, which may have specific tax advantages for some individ uals. Many advocates of offshore banking also assert that the creation of tax and bank ing competition is an advantage of the industry, arguing with Charles Tiebout th at tax competition allows people to choose an appropriate balance of services an d taxes. Critics of the industry, however, claim this competition as a disadvant age, arguing that it encourages a "race to the bottom" in which governments in d eveloped countries are pressured to deregulate their own banking systems in an a ttempt to prevent the offshoring of capital. [edit]Disadvantages of offshore banking Offshore bank accounts are less financially secure. In a banking crisis which sw ept the world in 2008 the only savers who lost money were those who had deposite d their funds in offshore branches of Icelandic banks such as Kaupthing Singer & Friedlander. Those who had deposited with the same banks onshore received all o f their money back. In 2009 The Isle of Man authorities were keen to point out t hat 90% of the claimants were paid,[3] although this only referred to the number of people who had received money from their depositor compensation scheme and n ot the amount of money refunded. In reality only 40% of depositor funds had been repaid 24.8% in September 2009 and 15.2% in December 2009.[4] Both offshore and onshore banking centres often have depositor compensation schemes. For example The Isle of Man compensation scheme[5] guarantees £50,000 of net deposits per indi vidual depositor or £20,000 for most other categories of depositor and point out t hat potential depositors should be aware that any deposits over that amount are at risk. However only offshore centres such as the Isle of Man have refused to c ompensate depositors 100% of their funds following Bank collapses. Onshore depos itors have been refunded in full regardless of what the compensation limit of th at country has stated[6] thus banking offshore is historically riskier than bank ing onshore. Offshore banking has been associated in the past with the underground economy an d organized crime, through money laundering.[7] Following September 11, 2001, of fshore banks and tax havens, along with clearing houses, have been accused of he lping various organized crime gangs, terrorist groups, and other state or non-st ate actors. However, offshore banking is a legitimate financial exercise underta ken by many expatriate and international workers.

Exp erts believe that as much as half the world's capital flows through offshore cen ters. offshor e is where most of the world's drug money is allegedly laundered. tax cuts ha ve tended to result in a higher proportion of the tax take being paid by high-in come groups. Yet in a world with globa l telecommunications this is rarely a problem for customers. [edit]Banking services It is possible to obtain the full spectrum of financial services from offshore b anks. However. whereas private banking services tend to bring a personalised suite of services to the client. A complex measure. Offshore bank accounts are sometimes touted as the solution to every legal. The IMF has said that between $600 billion and $1. so physi cal access and access to information can be difficult.Offshore jurisdictions are often remote.and electronic funds transfers Not every bank provides each service. because of the costs of establishing and maintaining offshore accounts. fina ncial and asset protection strategy but this is often much more exaggeration. or allowing notificati on by the offshore banks to tax authorities in their country of residence. including: Corporate administration Credit Deposit taking Foreign exchange Fund management Investment management and investment custody Letters of credit and trade finance Trustee services Wire.[8] The Laffer curve demonstrates this tendency.5 trillion of illicit money is laundered annually. Accor ding to Merrill Lynch and Gemini Consulting's World Wealth Report for 2000. Historically. Banks tend to polarise between retail serv ices and private banking services. . Tax havens have 1. by phone or by mail. simple savings accounts can be opened by anyone and maintained with scale fees equivalent to their onshore counterparts. Offshore private banking is usually more accessible to those on higher incomes. This tax affects any cross border interest payment to an individual resident in the E U. tax authorities are not prevented from enquiring into accounts previously he ld by savers which were not then disclosed. making disclosure increasingly attractive.2% of the world's population and hold 26% of the world's wealth. Savers' choice of action is compl ex. [edit]European Savings Tax Directive In their efforts to stamp down on cross border interest payments EU governments agreed to the introduction of the Savings Tax Directive in the form of the Europ ean Union withholding tax in July 2005. estimated at u p to $500 billion a year. Some $3 trillion is in deposits in tax haven banks and the rest is in securities held by international business compani es (IBCs) and trusts. The tax burden in developed countries thus falls disproportionately on middle-income groups. Furthermore the rate of tax deducted at source will rise in 2008 and again in 20 11. Today. including 31% of the net profits of United States multinationals. [edit]Statistics concerning offshore banking Offshore banking is an important part of the international financial system. more than the total income of the world's poorest 20%. Accounts can be set up online.5 trillion may now be held offshore. as previously sheltered income is brought back into the mainstream economy. one th ird of the wealth of the world's high net-worth individuals nearly $6 trillion out o f $17. and therefore costly to visit. equal to 2% to 5% of global economic output. Retail services tend to be low cost and undif ferentiated. it forced EU resident savers depositing money in any country other than the one they are resident in to choose between forfeiting tax at the point of payment.

If you said the US. told to reporter Lucy Komisar. which mean that the names of the recipients of US-source investmen t income are passed to the IRS. where it is believed that the bank hold s assets for a suspected criminal. The quality of the regul ation is monitored by supra-national bodies such as the International Monetary F und (IMF).[9] However. by good faith. investigating on the Clearstream scanda l: "You ask why. They must report at least quarterly to the regu lator on the current state of the business. "These offshore centers a wash in money are the hub of a colossal. regulation of offshore banking is allegedly increasing.1% between January 2008 and November 2009. and enforced this in respect of certain controlled centres. Since the late 1990s. 2006. fraud. by The New York Times. Similar measures have been introduced in some other countries. It's not an accident. the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks regula tions. Anoth er few hundred billion come from fraud and corruption. there have been a number of initiatives to increase the transparency of offshore banking. Changes i n offshore banking regulation in the 1990s in the form of "due diligence" (a leg . The Wall Street Journal and The Los Angeles Times revealed that the United States govern ment. an d corruption" commented Lucy Komisar quoting these statistics. Joseph Stiglitz. had a program to acce ss the SWIFT transaction database after the September 11th attacks (see the Terr orist Finance Tracking Program) rendering offshore banking for privacy severely compromised. [edit]Regulation of offshore banks In the 21st century. it could have been shut down at any time. mobster Meyer Lansky had done this to launder his casino money. Swiss banks hold an estimated 35% of the world's private and institution al funds (or 3 trillion Swiss francs). There is more international co-operation bet ween police authorities. 2001.[1] Among offshore banks. Banks are generally required to maintain capital adequacy in accordan ce with international standards. so that tax information is able to be shared in respect of interest. The European Union has introduced sharing of information between certain jurisdi ctions. which authorises the US au thorities to seize the assets of a bank. underground network of crime.[10] [edit]Terrorist Finance Tracking Program A series of articles published on June 23. althoug h critics such as the Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC) non-governmental organization (NGO) maintain that t hey have been insufficient. the UK. r egardless of banking secrecy rules. 2001 Nobel laureate for economics and former World Bank Chief E conomist. In the US the Internal Revenue Service (IRS) introduced Qualifying Intermediary requirements. alt hough critics maintain it remains largely insufficient. to report suspicion of money laundering to the local police authority. these banks could not exist. and the Cayman Islands (1. They only exist because they engage in trans actions with standard banks. Following 9/11 the US introduced the USA PATRIOT Act."[1] In the 1970s through the 1990s it was possible to own your own personal offshore bank.Add the proceeds of tax evasion and the figure skyrockets to $1 trillion. specifically the US Treasury Department and the CIA.9 trillion US d ollars in deposits) are the fifth largest banking centre globally in terms of de posits. especially following September 11. recent data by the Swiss National Bank show that the assets held by foreign persons in Swiss bank accounts declined by 28. A few examples of these are: The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers are required. such as the UK Offshore Islands. if there's an important role for a regulated banking system. do yo u allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur.

Liechtenstein and Luxembourg. [edit]Offshore financial centres In terms of offshore banking centres.[cit ation needed] Given the enlargement of the canal to accommodate larger shipping.[11] although numerous other offshore jurisdictions also provide offshore banking to a greater or lesser degree. Morgenthau. including Switzerland.[cita tion needed] Some offshore jurisdictions have steered their financial sectors aw ay from offshore banking. UPI Weakened Bank Secrecy Since starting to survey offshore jurisdictions on April 2. published by the New York Times. Jersey. and has re-categorized them as white list nations. in terms of total deposits. as difficult to properly regulate and liable to give r ise to financial scandal. it is unlikely in the foreseeable future that Panama would likely succumb to in ternational pressure toward transparency. whose canal is currently needed by all Western na tions.al construct) make offshore bank creation really only possible for medium to lar ge multinational corporations that may be family owned or run.[citation needed] .-based JPMo rgan Chase suspected fraud in a loan deal in 2012. A letter by the District Attorney of New York. including 40 of the world s top 50 banks.S. won't object to governments using stolen bank data to track down tax cheats in offshore centers. Guernsey and the Isle of Man are known for their well regulated banking infrastructure. the Organizati on for Economic Cooperation and Development ((OECD)) at the forefront of a crack down on tax evasion. from a so-called "grey list" of nations that did not offer sufficien t tax transparency.[12][citation needed] Little Protection for Criminals Bank secrecy affords little protection in cases of crime. Nevert heless.[citation ne eded] Countries that do not comply may face sanctions.[citation needed] The recent sharing of con fidential UBS bank details about 285 clients suspected of willful tax evasion by the United States Internal Revenue Service was ruled a violation of both Swiss law and the country s constitution by a Swiss federal administrative court. When U. the global mar ket is dominated by two key jurisdictions: Switzerland and the Cayman Islands.[citation needed] In particular. OECD has removed 18 countries. states that the Cayman Islands has 1. provides it with a unique type of immunity to international pressure.9 trillion United Stat es dollars on deposit in 281 banks. 2009. Robert M. authorities in Andorra froze a bank account held by a suspected swindler.A.[citation needed] A notable exception is Panama.