Offshore Banking

Offshore Banking Details
Offshore bank accounts are accounts used by depositors who do not live in the country where the bank account is located. Offshore banking is often used in order to pay lower taxes, or in some cases, no taxes at all. In addition to financial advantages, these accounts also provide legal benefits, protecting the depositors money from political instability.

The popular conception of an offshore bank is of tax havens in places like the Cayman islands. The term "offshore bank account" can refer to any bank, in any locale, including the famous Swiss banks. Often seen as a service utilized by organized crime, offshore bank accounts are typically looked down upon, even by those who are not involved with any criminal activities.

Offshore accounts are typically known by number, with no name attached to the account, ensuring privacy and anonymity for the depositor. In addition, offshore banks are not required to report income to the authorities, as they are protected by the bank secrecy law, a law which makes it illegal for the bank to report customer information to the authorities. The bank secrecy law is only nullified if a criminal complaint is filed with the bank, requiring the bank to share customer information.

There are several advantages and disadvantages to offshore bank accounts, some of which are listed here.

Advantages

1) An offshore bank account can provide a level of security for the depositor, should they live in a politically unstable country.
2) Many offshore banks can provide higher interest rates, when compared to the depositors home country.
3) Offshore banks may be able to provide services that many other banks can not, such as anonymous bank accounts (the depositor is a number, rather than a name). 
 
Disadvantages
1) Offshore accounts are not immune to financial insecurity, as was demonstrated in the world bank crisis of 2008, where all but one bank caused depositors to lose money.
2) An offshore account requires expensive travel costs to visit the location, as they are often located a significant distance from the depositors location.

3) Maintaining an offshore account can be costly, requiring a certain amount of currency in the account at all times, as well as minimum deposit numbers.

Offshore banking can be very beneficial to those who are wealthy, or those who make above average incomes. Individuals who are part of the middle class can also benefit from offshore tax havens, albeit far less than those who are wealthy. The only benefit an individual from the middle class would see from an oversea bank account would be lower taxation rates.

Other advantages of offshore banks include potentially lower rate loans, which are based on the risk associated with the loan taker. Higher rate loans may also exist, depending on where they money is going to be invested. Disadvantages to offshore accounts is that they tend to be viewed as a glamorous way to deposit currency, and are often seen as the perfect solution to every financial problem. This is rarely the case.
Before you become serious about creating an offshore bank account, you must first weigh the advantages and disadvantages. You may benefit greatly from an offshore account, or you may not see enough benefits to warrant the effort of opening one. 
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