Why We Need Offshore Banking Services to Exist

I don't know what you've heard from the media about offshore banking, but I'm almost sure that what you've heard are mostly lies – or at least misinformation. So, what's with our blunt statement?

The reasons simply this: The banking industries need to stay true to their services to customers. In reality, “true” doesn't mean the same thing to every person. To us, staying true means that you can have access to your money 24/7; staying true means that your money is fundamentally safe at the hands of trusted custodians (read: your banks). Unfortunately, not all banks are up to that standard.

No wonder people are starting to look for alternatives in securing their hard-earned money and assets. As keeping yours under your pillow is not idea, you should find other legitimate ways.

Offshore banks are just like your good ol' banks, with several exceptions, most notably: They are located “offshore” or in a jurisdiction that is different from your home country. This could mean that the banks are located 500 miles or 5,000 miles from your country of residence. If you are living in the United Kingdom, this could mean the Isle of Man or Puerto Rico.

Offshore banks offer different benefits from onshore banks, which often misused by customers for securing their assets for the wrong reasons (i.e. money laundering, tax evasion, etc.) This is the main reason why offshore banking is deemed as shady; the truth is far from that.

In fact, onshore banking services – even the banking industry in general – benefits from the existence of offshore banking. Here are 5 reasons why we need offshore banking services to exist:

1. Offshore banking keeps the banking industry honest...

... which means that mismanagement, mistreatment of customers' money will always get compared to offshore banking's stellar banking service. Let me explain.

Remember Greece's long queues in ATMs? The banks in Greece – as instructed by the Government – limited customers' access to their own money due to the Greeks' economic crisis. In some other case, your assets stored in your local bank's safe deposit box can also be frozen due to political/economic turmoils of your own country. This has happened time and time again, and chances are, it will happen again in the near future.

Banks in a stable offshore juristiction eliminates the potential lock up of your assets, offering you stellar services while their onshore counterparts can't due to the cumbersome laws and tight regulations. This will keep the banking industry in check because you, as a potential customer, can make an apple-to-apple comparison on the risks/rewards of each.

2. Offshore banking services offer diversity to the industry

Diversity means options, and options are great for customers: The investing opportunities, secrecy, tax benefits, and other perks.

For banks in certain jurisdictions, like Singapore, offshore banking is playing an important role in banking, because it supplements the onshore banking's revenues. Moreover, offshore banking serves the wealth management needs for high net worth individuals, which makes embracing both onshore's and offshore's uniqueness beneficial for the customers, and ultimately, the banking industry.

3. FATCA? What FATCA?

There is one major reason why people want to take their assets offshore: Asset protection. It's synonymous with offshore banking – for better or worse, legally or illegally. This is one of the main reasons why the Government wants to impose controls over it.

Major jurisdictions like the United States plans the implementation of a federal law, namely the Foreign Account Tax Compliance Act (FATCA), which require US citizens – including those who are living outside the US) to report their non-US financial accounts.

But why? Well, it's quite simple, really: The figures on offshore wealth is overwhelming. A report claimed that the 'super-riches' hide their wealth in offshore accounts, up to $32 trillion in value. Those are significant to the extent that regulators need to impose some controls that make even the most upright offshore bank account holders seem to do things illegally.

We agree that not all of those individuals are doing things legally. However, generalizing things are never the right thing to do.

Yet, in the midst of all the limitations, offshore banks prevail by putting much of their resources to comply with the laws and regulations (while some others chose to just refuse potential clients from the United States.) This form of 'perseverance' is exemplary, and an important factor that onshore banking services often don't have.

4. Offshore banks are fundamentally sounder than their onshore counterparts

Did you know that almost all the banking systems in the Western countries are not strong fundamentally? Furthermore, their adoption of fractional-reserve banking means that when things blow up (e.g. Lehman's) accessing your own money in your bank would be a major problem.

Offshore banks, in the other hand, don't use (much) your assets to make money (in the form of loan interest rates). Generally, they are more conservative than the Western countries' banks in leveraging their assets. Some offshore banks even don't lend your money out to borrowers, and survive only from the fees they receive from performing banking and investing activities for clients.

In other words, offshore banks are almost always more responsible than onshore banks.

5. How does gold-backed bank account sound to you?

When it seems like every bank in the Western countries is trying to compete in “who can lend savers' money the most?” game and only left out a tiny fraction of currencies at hand, just in case depositors need to withdraw their money, some offshore banking jurisdictions have clients' accounts that are backed by real assets, like gold and silver. You can even denominate your account in gold, instead of your typical currencies.

But that's just the tip of the iceberg on what an offshore bank can offer you: There are wealth of banking and investing products – such as trading in foreign currency exchanges, fully-dedicated wealth manager, and physical precious metal investing, to name a few – that makes onshore banking services a pale comparison to what offshore banks can offer clients.

Takeaway

We could go on and on with the reasons, but you get the point: We need offshore banking services to exist. And rightly so, we think that offshore banks will somehow find ways to thrive in the midst of the strangling regulations and policies, and eventually people who want to secure their assets will discover who, in reality, they can trust their assets with.

Want to learn more about offshore banking? Talk to us.