What is offshore banking?
While the press may condemn the opaque nature of some offshore banking arrangements, such services do provide a valuable way for companies and individuals to hold their money and earn interest abroad in a politically and economically stable environment.
Offshore banking makes up a notable proportion of the international financial system, with some experts estimating that up to £3 trillion is currently being held in offshore accounts as deposits, with as much as half of the world’s capital flowing through these centres, such as in Switzerland, Hong Kong, and the Cayman Islands
Switzerland provides some of the most famous offshore banking services, holding an estimated 35% of the world’s private and institutional funds (around £2 trillion), with its financial services protected by bank secrecy laws which date back to the middle ages.
Alongside the privacy benefits of offshore banking, the low regulations in some territories means that the banks are able to offer higher interest rates than could be found locally, although increasingly competitive banking sectors around the world has reduced this benefit somewhat in recent years.
The offshore banking industry in some remote islands, such as the Caymans or British Virgin Islands often make up a large proportion of the country’s income, as it is a service which can be offered remotely relatively simply since the advent of the internet and online banking.
Opening an offshore bank account can be a complex affair, but companies like GWS offer a service where they can open accounts with a variety of banks in different jurisdictions for companies formed by the firm that comply with their legal restrictions.
While offshore services can save a company or individual money, they are not free to open and can cost several thousand pounds, so are generally only used by high net worth individuals or cash-rich companies such as Apple.
Photograph by Images of Money