What are Offshore bank accounts

Offshore Bank Accounts

Jersey is one of the places in the world which provides Offshore Bank accounts. Offshore Bank accounts are accounts that are located in a bank outside the persons’ country of residence. These are countries which typically have a low tax jurisdiction that provides financial and legal advantages. Many people are aware of the offshore swiss bank account.

There has been a strong appeal to have the law of anonymity reviewed especially since the world is faced with the threat of drug trafficking and terrorism. Apart from Jersey which falls under the Channel Islands (that is Sark and Herm) other countries which offer these services include Bahamas, Seychelles, Switzerland and many others.

Disadvantages of offshore bank accounts

Due to the privacy and anonymity these accounts have the following disadvantages

1. Many leaders especially in developing countries, have taken advantage of these offshore accounts and siphoned cash from their countries. this actions have led to the detriment of the economic development.
2. Offshore bank accounts have made it easy for money laundering.   Illegal dealings, for example, corruption, drug trafficking and even funding of terrorist activities have been encouraging.
3. Offshore bank accounts deny income to countries in terms of tax to be charged on interest paid for these investments, especially in the developing economies.

  The advantages of offshore bank accounts

1. Offshore Bank accounts  offer greater privacy and anonymity which the depositor enjoys, that is ‘top secret’ on any account activities. Therefore the amount of ones wealth never raises eyebrows and they are protected from ‘witch hunting’.
2. Offshore Bank accounts have very low or no taxation charges on the interest paid to the account holders.
3. Offshore Bank accounts holders can easily access their deposits, especially with the currently improved communication technology.
4. Offshore Bank accounts leads to tremendous growth in investment due to high interest rate paid and the same is not taxed.
5. Deposits made to Offshore Bank accounts are protected against local political instability or even financial instability.

Offshore accounts are tremendously beneficial investment to honest investors who have acquired their wealth in transparent manner and not through fraud or embezzlement. Investors should actually take advantage of these accounts provided their wealth is not ill gotten otherwise the full force of the law will soon catch up with them. countries can now follow up on monies they have investigated and proved to be fraudulent.

This new developments on offshore bank accounts visibility has reduced the advantages of privacy and anonymity.

Offshore banking is where you place your funds in another country. In other words, offshore Swiss bank account is held by someone who is not a Swiss national. That means holding an offshore Swiss bank account when one is banking in kenya as a Kenyan citizen.

The term off shore was derived from the islands around the English Channel, where money would be banked ‘off shore’ from England. This term now encompasses all banks account holders outside the depositors’ country of residence, including offshore Swiss bank account holders.

Why an Offshore Swiss bank account?

Ranked number one as a private banking centre, many wealthy people want to have an  offshore Swiss bank account. Statistical estimate show that around 35% of all the worlds’ private in held in Switzerland. There has been a marked change from the traditional small sized private accounts to more competitive large clients. This means that the fight against economic Crimes like antimony laundering has been stepped up.

Since Offshore banking was also associated with criminal activities and tax evasion, it is under pressure to adopt international banking regulations especially on cooperation and information sharing.

The Switzerland Federal Banking Commission (FBC), which regulates the banking law under which the offshore Swiss bank account falls, was amended under pressure from the European Union. If you hold an off shore Swiss bank account, information on your account can be shared during investigations. The investigations that are especially considered are money laundering, criminal matters and indirect taxes on Customs, VAT and tobacco levies.

The advocates for off shore banking have argued that big banks, especially in developed countries, fear the competition from the developing countries where most of these off shore accounts are held.

Services offered with an offshore Swiss bank account

An Offshore Swiss bank account mainly offers the same services as a domestic bank account or bank. The difference is mainly that the anonymity of the account holder is higher with an off shore account.

Services that are usually on offer are;

• Deposit taking

• savings

• Credit facilities

• Foreign exchange

• Trade finance and letters of credit services

• Wealthy management

Different banks with offshore Swiss account holders may offer other services not mentioned above.

Some of the advantages of having an off shore Swiss bank account

• Privacy at a higher level especially due to the Swiss banking Act of 1934

• Tax havens mainly because tax is usually lower than in the local country

• Access to funds is made easier and faster

• The is a feeling of security especially for off shore Swiss account holders from countries that are not politically and financially stable

Some disadvantages of having an off shore Swiss bank account

• Due to the policy on refund due to bank collapse, history has shown that off shore bank account may be riskier. The depositor compensation schemes do not cover this risk well in terms of their foreign depositors

• There is stigma associated with off shore bank accounts. They have been accused of associations with money laundering and organised crimes. There has been no concrete proof on this and legislation has been changing to adopt to international requirements

• Some of the holders of off shore Swiss bank account may find it physically impossible to visit their bank. The advances in technology have reduced this disadvantage and accounts are opened online or by phone.

• The off shore Swiss account may be available more easily to private bankers or those with higher income brackets. This may shut out some small savers

As long as there are banks, the offshore Swiss bank account has a future, though the advantages and disadvantages of such an account will be guided by new legislation.