Offshore Banking Guide on Finding the Perfect Entity for Your Business


Offshore banking is most commonly associated with financial issues and sophistication. It is considered a financial service aimed at wealthy people who can afford hiring professionals to handle their financial needs. This is only a misconception though.

The truth is anyone can open an offshore bank account – basically, a bank account abroad – with only a few documents and a few hours. Obviously, each jurisdiction or bank has specific requirements, so you need to do your homework upfront.


The concept of offshore banking​


People or business managers involved with offshore banks do it in a completely different country. This is what offshore banking actually implies. With these thoughts in mind, offshore banks are often international banks. However, you can also deal with a local bank if you go to the respective country yourself.

As long as it is established in another country but your own jurisdiction, it can be considered offshore.

Certain countries are more popular for offshore entrepreneurs because they approach an open economy style. They encourage foreign investments and keep taxes low in order to bring money over. This is why places like Switzerland, the Cayman Islands, or the Bahamas are often seen as offshore havens.

Offshore banking is associated with high-net-worth people because of the recent scandals that involve celebrities. While indeed, lots of wealthy people rely on offshore banking, everyday individuals can do the exact same thing.

To help you get an idea, you are banking offshore if you are Canadian and have a bank account in the USA. On the same note, Brits with bank accounts in Ireland are also banking offshore. It is all about a different jurisdiction.

Offshore banking is sometimes associated with negative issues because some people use the idea for illicit purposes – such as hiding money to avoid paying taxes. But then, offshore banking does not have to be illegal.

You can get an offshore bank account to run a business abroad, invest or spend quality time there.

On the same note, you can bank in a country with good tax treatment – lower taxes for the government, more money in your pocket. This is not illegal, yet some see it as an unethical issue. Each country has its own laws, so it makes sense to find the most favorable ones for your circumstances.


General requirements for offshore banking​

Rules are not too different from your home country. Opening an account in Hong Kong is similar to opening an account in Malta. You will have to provide personal details, IDs, your address, citizenship, job, and so on.

Your passport is the most important document because it is an international act, and it confirms your identity. Each bank may require specific documents – such as proof of address. Verifying your residence will affect the taxation, hence the necessity of this check.


You will normally need to show a utility bill.​

Some banks are specialized in foreigners, so they will not require such documents.

Some banks may ask for original documents. Some others will require notarized copies to ensure they are authentic. Many times, a stamp is more than enough – the apostilles stamp that is commonly used internationally.


Extra verification in the process​

Additional requirements may kick in based on the country you choose. Even tax havens have introduced extra requirements in order to prevent money laundering activities or tax-related fraud – they are still open to foreigners, but they try to provide illegal activities.

For instance, some offshore banks will require financial documents from your current bank. They look for a good relationship, as well as the source of money and monthly balances. You will normally have to provide extracts over the past year.

Then, some banks may want to know more about your needs. Why do you want an offshore bank account? They want to know more about the transactions you are about to make. It may sound like they care too much, but offshore banks are under constant pressure to prevent illegal activities.

The source of money is the most important aspect. For example, if you claim that the bank account will take your monthly salary, a few payslips will do. Interested in an investment? Your income will be verified then.

In terms of business – such as real estate, you will need to provide contracts and other similar documents. If you want to store some money over an insurance contract, you might be asked for an insurance letter.


Using an offshore bank account​

Funds are normally transferred through wire transfers. You will pay fees for such transfers, so make sure you choose the best deal if you plan to make wire transfers on a regular basis. Withdrawing money goes in the same direction.

You will most likely have a debit card that allows access to your funds all over the world – again, there might be fees for withdrawals. Checks are not that common, but they are not desired either, as you may face issues in other countries.


Considerations in choosing the best offshore bank​

There are a few general things to remember when about to decide on an offshore bank.

Former colonies come with a twist​

Banks established in former colonies – such as Commonwealth territories – make a good choice for EU and UK citizens. But then, there are a few things to pay attention to. No matter what you choose, it has to be in line with the local economy.

For example, you find the Bahamas a great choice. But then, you would not use the country for gambling purposes. You would not register such a business there. Instead, you should choose something based on tourism – it is just easier.


Opt for banks with good relationships​

Choosing a less known bank that only locals know about may not always be a good idea. Instead, you might want to do your homework and choose a bank that partners with your current bank. Banks with good relationships will make your venture easier.

For example, if you currently live in the UK, you may try to find a bank that is partnered with HSBC or Lloyds, rather than a small local bank. Your transition will be much easier when two banks are related, especially if you have a good relationship with your current bank.


Extra considerations could drag you down​

There are lots of considerations if you choose a physical bank for your offshore venture. There are specific packages aimed at foreigners, and they come with specific costs and fees, depending on what you need.

You will need to go through a bunch of KYC procedures as well. Whether you want to find a bank within the EU or maybe Hong Kong, you must be aware of all the requirements, or you may end up stuck here or there.


A nominee could help​

In some countries, one of the shareholders or directors must be local. They must have local residence and nationality. In this case, you may need to find a theoretical nominee – someone who gets 1% of the business or a similar percentage, only to obey the rules.

There are more rules that could affect the outcome – a legal team might be better than trying to do everything yourself. Such requirements may also have a few loopholes that you have no clue about – hence the necessity of an expert.


Go for a subsidiary​

This option is often overlooked, but it makes sense. In the attempt to diversify assets or lower tax, lots of business people choose completely different local banks. Subsidiary banks could be better because even if they have a connection with your current bank, they follow the local rules.

Imagine living in the UK and going to Hong Kong and struggling with a bank – find a subsidiary for a British bank, and your job will be easier. The parent company is in control of the subsidiary, so your path will be smoother.

On the same note, you can access different markets without struggling too much – at least in terms of documentation. However, keep in mind that local laws will still affect the final outcome, hence the necessity of some research.


A second passport will make it easy​

Dual citizenship is a plus if you want to move to another country or conduct business there. The second passport must be in your name. You are basically recognized as local, even if you live abroad – opening an account is a piece of cake then.

This option is more suitable for low figure amounts though.


Conclusion

Bottom line, there is nothing wrong with offshore banking, but you need to do everything by the book. Deciding on the perfect jurisdiction has a different priority – your business entity, rather than the banking process.

The bank must complement the jurisdiction, which needs stability, little to no volatility, security, and political balance. A country with a negative history is likely to have issues again, so it might be wise to avoid such places.

The actual bank should be international, but this is not a general rule. Opt for a bank supported by the local central bank, one with historical value or perhaps one with solid relationships with other international banks in your country.