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The word bank was borrowed in Middle English from Middle French banque, from Old Italian banca, from Old High German banc, bank "bench, counter". Benches were used as desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.

A bank is a financial intermediary and appears in several related basic forms:

a central bank issues money on behalf of a government, and regulates the money supply a commercial bank accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses on the world's open financial markets. a savings bank, also known as a building society in Britain is only allowed to borrow and save from members of a financial cooperative

Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The current sets of global bank capital standards are called Basel II. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In Iceland banks had very light regulation prior to the 2008 collapse.

Meaning and Origin of Offshore Banking

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include:

greater privacy (bank secrecy) low or no taxation (i.e. tax havens) easy access to deposits (at least in terms of regulation) protection against local political or financial instability

While the term originates from the Channel Islands being "offshore" from the United Kingdom, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location, including Swiss banks and those of other landlocked nations such as Luxembourg and Andorra. The term offshore banking has been inspired from the fact that these banks are mostly located in the island nationsoffshore. However, with numerous exceptions to the fact, like countries like Switzerland, Luxembourg etc, this term is now used in global context as well. Offshore banking has often been associated with the underground economy and organized crime, via tax evasion and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest. Except for certain persons who meet fairly complex requirements, the personal income tax of many countries makes no distinction between interest earned in local banks and those earned abroad. Persons subject to US income tax, for example, are required to declare on penalty of perjury, any offshore bank accountswhich may or may not be numbered bank accountsthey may have.

Although offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal. Following September 11, 2001, there have been many calls for more regulation on international finance, in particular concerning offshore banks, tax havens, and clearing houses such as Clearstream, based in Luxembourg, being possible crossroads for major illegal money flows. Defenders of offshore banking have criticised these attempts at regulation. They claim the process is prompted, not by security and financial concerns, but by the desire of domestic banks and tax agencies to access the money held in offshore accounts. They cite the fact that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, suggesting that Organisation for Economic Co-operation and Development (OECD) countries are trying to stamp out competition. Offshore banking is one of the most sought after banking solutions in today's world. Offshore banking denotes the banking options opted by an individual outside the country of residence. Offshore banking is blessed with a number of features. The most significant ones are: Offers higher level of privacy as opposed to the local banks No taxation Protection against financial insecurities and instabilities in the local economy Less restrictive regulations

Easy access deposits

Except for the developed nations that offer for complete financial stability, individuals from the various undeveloped countries that are surrounded with instability may opt to resort to offshore banking for better steadiness in assets and resources Offshore banks offer better rate of interest Offers features that banks in the domestic realm may not possess like unspecified bank account etc Offers investment opportunities far greater and better in variety and quality than the ones available locally Exceptionally preferable for international workers

Offshore Banking -Development, Appearance

Many economists argued that offshore banking sector represented the new beginning of the international capitalism. They traced the evolution of the offshore banking sector to the development of transnational corporations. In this context the evolution of the international banking came as a response to the modern phenomenon of capital which obviously goes beyond national borders. At the same time the rapid growth and boom of the technology sector gave a great incentive and facilitated the creation of the international offshore banking area. This permitted global access of world market information and subsequently its management and control.

Under the traditional national and international sectors there were several constraints which gave the possibility for offshore activity to grow. These are: the extension of national tax bases; intermittent fiscal and monetary instabilities; the existence of foreign exchange controls and fluctuations; limiting cross-border controls; conservative banking laws and regulations with regard to foreign and domestic industrial entry, systems of supervision and liquidity requirements, constraints on the issue of foreign and domestic bonds, the admission of securities to capital markets, stock exchange, insurance regulations ; company laws which restricted business. Also it has to be mentioned from the international perspective there was a lack of coherent set of international fiscal principles and laws in which transnational company could operate across border. The evolution of the offshore banking center is described from the perspective of its tax and banking functions. More recently, however, other constraints onshore have served as an incentive element which pushed for offshore investment and have emphasized the importance of that investment. These include: the need to provide for what is seen as the vulnerability of professionals and investors to creditors; the desire to avoid onshore laws and regulations which mandate the reservation of assets to spouses and heirs; the need for savings and investment vehicle for ordinary persons. Offshore banking center came with innovative solutions to all these constraints that were mentioned above. Let us refer for example to taxation. There are 3 models of offshore banking centers from the perspective of taxation: with zero-tax (here even residents do not pay taxes); with low-tax; tax at normal rates but exemption or other preferential treatment is granted to non-resident investors or investment for certain categories of income.

Notwithstanding the fact that the above categories refers only to tax aspects of offshore banking activity, it clearly shows the scope of such centers.

Advantages of offshore banking

Access to politically and economically stable nations: Offshore banks can sometimes provide access to politically and economically stable jurisdictions. This will be an advantage for residents in areas where there is risk of political turmoil, who fear their assets may be frozen, seized or disappear (see the corralito for example, during the 2001 Argentine economic crisis). However it is often argued that developed countries with regulated banking systems offer the same advantages in terms of stability. Lower cost base with high returns:

Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Advocates of offshore banking often characterise government regulation as a form of tax on domestic banks, reducing interest rates on deposits.

Growth of developing countries: Offshore finance is one of the few industries, along with tourism, in which geographically remote island nations can competitively engage. It can help developing countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world.

Tax free income: Interest is generally paid by offshore banks without tax being deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed, or who feel that they can illegally evade tax by hiding the interest income.

Financially engineered banking services: Some offshore banks offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.

Other advantages: Offshore banking is often linked to other structures, such as offshore companies, trusts or foundations, which may have specific tax advantages for some individuals.

Many advocates of offshore banking also assert that the creation of tax and banking competition is an advantage of the industry, arguing with Charles Tiebout that tax competition allows people to choose an appropriate balance of services and taxes. Critics of the industry, however, claim this competition as a disadvantage, arguing that it encourages a "race to the bottom" in which governments in developed countries are pressured to deregulate their own banking systems in an attempt to prevent the offshoring of capital.

Disadvantages of offshore banking

Financial security: Offshore bank accounts are less financially secure. In a banking crisis which swept the world in 2008 the only savers who lost money were those who had deposited their funds in offshore branches of Icelandic banks such as Kaupthing Singer & Friedlander. Those who had deposited with the same banks onshore received all of their money back. In 2009 The Isle of Man authorities were keen to point out that 90% of the claimants were paid, although this only referred to the number of people who had received money from their depositor compensation scheme and not the amount of money refunded. In reality only 40% of depositor funds had been repaid 24.8% in September 2009 and 15.2% in December 2009. Both offshore and onshore banking centres often have depositor compensation schemes. For example The Isle of Man compensation scheme guarantees 50,000 of net deposits per individual depositor or 20,000 for most other categories of depositor and point out that potential depositors should be aware that any deposits over that

amount are at risk. However only offshore centres such as the Isle of Man have refused to compensate depositors 100% of their funds following Bank collapses. Onshore depositors have been refunded in full regardless of what the compensation limit of that country has stated thus banking offshore is historically riskier than banking onshore.

Associated with underground economy: Offshore banking has been associated in the past with the underground economy and organized crime, through money laundering. Following September 11, 2001, offshore banks and tax havens, along with clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other state or non-state actors. However, offshore banking is a legitimate financial exercise undertaken by many expatriate and international workers.

The jurisdictions are at remote places: Offshore jurisdictions are often remote, and therefore costly to visit, so physical access and access to information can be difficult. Yet in a world with global telecommunications this is rarely a problem for customers. Accounts can be set up online, by phone or by mail.

Accessible mostly to higher income group: Offshore private banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. However, simple savings accounts can be opened by anyone and maintained with scale fees equivalent to their onshore counterparts. The tax burden

in developed countries thus falls disproportionately on middle-income groups. Historically, tax cuts have tended to result in a higher proportion of the tax take being paid by high-income groups, as previously sheltered income is brought back into the mainstream economy. The Laffer curve demonstrates this tendency.

Offshore bank accounts are sometimes touted as the solution to every legal, financial and asset protection strategy but this is often much more exaggerated than the reality. European Savings Tax Directive

In their efforts to stamp down on cross border interest payments EU governments agreed to the introduction of the Savings Tax Directive in the form of the European Union withholding tax in July 2005. A complex measure, it forced EU resident savers depositing money in any country other than the one they are resident in to choose between forfeiting tax at the point of payment, or allowing notification by the offshore banks to tax authorities in their country of residence. This tax affects any cross border interest payment to an individual resident in the EU. Furthermore the rate of tax deducted at source will rise in 2008 and again in 2011, making disclosure increasingly attractive. Savers' choice of action is complex; tax authorities are not prevented from enquiring into accounts previously held by savers which were not then disclosed.

Banking services
It is possible to obtain the full spectrum of financial services from offshore banks, including

Acceptance of Deposits

Major types

Checking accounts: A deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts. Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return. Money market account: A deposit account with a relatively high rate of interest, and short notice (or no notice) required for withdrawals. In the United States, it is a style of instant access deposit subject to federal savings account regulations, such as a monthly transaction limit. Time deposit: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.


Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be

financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment.[1] Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower. Credit does not necessarily require money. The credit concept can be applied in barter economies as well, based on the direct exchange of goods and services (Ingham 2004 p.12-19). However, in modern societies credit is usually denominated by a unit of account. Unlike money, credit itself cannot act as a unit of account. Movements of financial capital are normally dependent on either credit or equity transfers. Credit is in turn dependent on the reputation or creditworthiness of the entity which takes responsibility for the funds. Credit is also traded in financial markets. The purest form is the credit default swap market, which is essentially a traded market in credit insurance. A credit default swap represents the price at which two parties exchange this risk the protection "seller" takes the risk of default of the credit in return for a payment, commonly denoted in basis points (one basis point is 1/100 of a percent) of the notional amount to be referenced, while the protection "buyer" pays this premium and in the case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the par amount (that is, is made whole).

Wire- and Electronic Funds Transfers

Electronic money (also known as e-currency, e-money, electronic cash, electronic currency, digital money, digital cash, digital currency, cyber currency) refers to money or scrip which is only exchanged electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT), direct deposit, digital gold currency and virtual currency are all examples of electronic

money. Also, it is a collective term for financial cryptography and technologies enabling it. While electronic money has been an interesting problem for cryptography (see for example the work of David Chaum and Markus Jakobsson), to date, the use of e-money has been relatively low-scale. One rare success has been Hong Kong's Octopus card system, which started as a transit payment system and has grown into a widely used electronic money system. London Transport's Oyster card system remains essentially a contactless pre-paid travelcard. Two other cities have implemented functioning electronic money systems. Very similar to Hong Kong's Octopus card, Singapore has an electronic money program for its public transportation system (commuter trains, bus, etc.), based on the same type of (FeliCa) system. The Netherlands has also implemented a nationwide electronic money system known as Chipknip for general purpose, as well as OV-Chipkaart for transit fare collection. In Belgium, a payment service company, Proton, owned by 60 Belgian banks issuing stored value cards, was developed in 1995.[1] A number of electronic money systems use contactless payment transfer in order to facilitate easy payment and give the payee more confidence in not letting go of their electronic wallet during the transaction.

Foreign Exchange

The foreign exchange market (forex, FX, or currency market) is a global, worldwide decentralized over-the-counter financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.

The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries. In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.

Letters of Credit and Trade Finance

A standard, commercial letter of credit (LC) is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking. The letter of credit can also be payment for a transaction, meaning that redeeming the letter of credit pays an exporter. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. In such cases, the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits applies (UCP 600 being the latest version).[2] They are also used in the land development process to ensure that approved public facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended

or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common to giros and Traveler's cheques. Typically, the documents a beneficiary has to present in order to receive payment include a commercial invoice, bill of lading, and documents proving the shipment were insured against loss or damage in transit.

Investment management and Investment custody

Investment management is the professional management of various securities (shares, bonds and other securities) and assets (e.g., real estate) in order to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations, charities, educational establishments etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or exchange-traded funds). The term asset management is often used to refer to the investment management of collective investments, (not necessarily) while the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called "private banking". The provision of 'investment management services' includes elements of financial statement analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of yuan, dollars, euro, pounds and yen. Coming under the remit of financial services many of the world's largest companies

are at least in part investment managers and employ millions of staff and create billions in revenue.

Trustee services

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. The body sometimes has a different name, such as board of governors, board of managers, board of regents, board of trustees, board of visitors, or executive board. It is often simply referred to as "the board." A board's activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization's bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet. In an organization with voting members, e.g., a professional society, the board acts on behalf of, and is subordinate to, the organization's full assembly, which usually chooses the members of the board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management of the corporation. In a non-stock corporation with no general voting membership, e.g., a university, the board is the supreme governing body of the institution; its members are sometimes chosen by the board itself.

Corporate Administration

Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more

people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources. Because organizations can be viewed as systems, management can also be defined as human action, including design, to facilitate the production of useful outcomes from a system. This view opens the opportunity to 'manage' oneself, a pre-requisite to attempting to manage others. Not every bank provides each service. Banks tend to polarise between retail services and private banking services. Retail services tend to be low cost and undifferentiated, whereas private banking services tend to bring a personalised suite of services to the client. not every banks provides each of these services. Banks tend to polarize between retail service and private banking services. Retail service tends to be low cost and undifferentiated; where as private banking services tend to bring a personalized suit of services to the client. Offshore banking is an important part of international financial system. Experts believe that as much as half the words capital flows through offshore centers. Tax havens have 1.2 per cent of the world population and hold 26 per cent of the worlds wealth, including 31 per cent of the net profits of the United States multinationals. The international monitory fund (IMF) has said that between $600 billions and $1.5 trillion of illicit money is laundered annually, equal to 2 to 5 per cent of global economic output. Today, offshore where most of the words drug money is allegedly laundered, estimated at up to $500bilion a year, more than the total income of the worlds poorest 20 per cent.

In the twenty first century, regulation of offshore banking is allegedly improving, although critics maintain it remains largely

Statistics concerning offshore banking

Offshore banking is an important part of the international financial system. Experts believe that as much as half the world's capital flows through offshore centers. Tax havens have 1.2% of the world's population and hold 26% of the world's wealth, including 31% of the net profits of United States multinationals. According to Merrill Lynch and Gemini Consulting's World Wealth Report for 2000, one third of the wealth of the world's high net-worth individualsnearly $6 trillion out of $17.5 trillionmay now be held offshore. Some $3 trillion is in deposits in tax haven banks and the rest is in securities held by international business companies (IBCs) and trusts. The IMF has said that between $600 billion and $1.5 trillion of illicit money is laundered annually, equal to 2% to 5% of global economic output. Today, offshore is where most of the world's drug money is allegedly laundered, estimated at up to $500 billion a year, more than the total income of the world's poorest 20%. Add the proceeds of tax evasion and the figure skyrockets to $1 trillion. Another few hundred billion come from fraud and corruption. "These offshore centers awash in money are the hub of a colossal, underground network of crime, fraud, and corruption" commented Lucy Komisar quoting these statistics.[1] Among offshore banks, Swiss banks hold an estimated 35% of the world's private and institutional funds (or 3 trillion Swiss francs), and the Cayman Islands (1.9 trillion US dollars in deposits) are the fifth largest banking centre globally in terms of deposits.[4] However, recent data by the Swiss National Bank show that the assets held by

foreign persons in Swiss bank accounts declined by 28.1% between January 2008 and November 2009.

Terrorist Finance Tracking Program

A series of articles published on June 23, 2006, by The New York Times, The Wall Street Journal and The Los Angeles Times revealed that the United States government, specifically the Treasury Department and the CIA, had a program to access the SWIFT transaction database after the September 11th attacks (see the Terrorist Finance Tracking Program) rendering offshore banking for privacy severely compromised.

Regulation of offshore banks

In the 21st century, regulation of offshore banking is allegedly increasing, although critics maintain it remains largely insufficient. The quality of the regulation is monitored by supra-national bodies such as the International Monetary Fund (IMF). Banks are generally required to maintain capital adequacy in accordance with international standards. They must report at least quarterly to the regulator on the current state of the business. Since the late 1990s, especially following September 11, 2001, there have been a number of initiatives to increase the transparency of offshore banking, although critics such as the Association for the Taxation of Financial Transactions for the Aid of Citizens

(ATTAC) non-governmental organization (NGO) maintain that they have been insufficient. A few examples of these are:

The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers are required, by good faith, to report suspicion of money laundering to the local police authority, regardless of banking secrecy rules. There is more international co-operation between police authorities. In the US the Internal Revenue Service (IRS) introduced Qualifying Intermediary requirements, which mean that the names of the recipients of US-source investment income are passed to the IRS. Following 9/11 the US introduced the USA PATRIOT Act, which authorises the US authorities to seize the assets of a bank, where it is believed that the bank holds assets for a suspected criminal. Similar measures have been introduced in some other countries. The European Union has introduced sharing of information between certain jurisdictions, and enforced this in respect of certain controlled centres, such as the UK Offshore Islands, so that tax information is able to be shared in respect of interest.

Joseph Stiglitz, 2001 Nobel laureate for economics and former World Bank Chief Economist, told to reporter Lucy Komisar, investigating on the Clearstream scandal: "You ask why, if there's an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur. It's not an accident; it could have been shut down at any time. If you said the US, the UK, the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks

regulations, these banks could not exist. They only exist because they engage in transactions with standard banks." In the 1970s through the 1990s it was possible to own your own personal offshore bank; mobster Meyer Lansky had done this to launder his casino money. Changes in offshore banking regulation in the 1990s in the form of "due diligence" (a legal construct) make offshore bank creation really only possible for medium to large multinational corporations that may be family owned or run.

Importance of offshore banking

Offshore banking has now become an important segment of the international financial system. Offshore banking is simply a practice of working with an offshore bank. An offshore bank refers to a bank located outside the country where the depositor lives. Usually, these banks may be located in such a jurisdiction with substantial financial as well as legal advantages. Offshore banks provide a continuum of services in connection with financial management, such as, deposit taking, money transmissions, creation of provision of foreign exchange, trade finance, credit facilities, investment and fund management, corporate administration, and trustee services.

Creation of a bank account with an offshore bank is great alternative particularly for those who have to travel frequently or someone whose career changes a lot. People prefer offshore banking for a myriad of other purposes such as expansion of your business, tax-free investment, and anonymity with regard to financial matters, asset protection, and estate planning. A specialty of offshore banking is that an account can be opened with an offshore bank simply as a saving account. Account can also be opened to carry out main business functions. Apart from these, through an offshore bank, you can even make investments and take loans. This type of banking has now been legally used by many individuals and corporations worldwide. Offshore banking is usually preferred by people falling under three categories, such as, high net worth individuals, expatriates, and business owners. High net worth individuals are usually people with a non-refundable income in excess of one million US dollars. Included in the expatriates are people residing oversees away from their country for employment purposes or any other reasons. Business owners are usually those people who own business and whose shares are owned by family members or any other close people. Nowadays, many of the corporate clients including multi national corporations, large industrial as well as trading companies, shipping companies, and banking corporations, are also getting attracted to the benefits offered by offshore banking. One of the prime benefits of offshore banking is that it provides access to economically as well as politically stable jurisdictions. This proves to be advantageous to such people whose residing area has risks of political disorders. There are certain offshore banks that function with low cost base, which in turn can offer higher interest rates to the depositors when compared to their home

country. Another great benefit is that it is a great way for developing countries to enhance their economic growth, since offshore banking allows redistributing finance from the developed economies to the developing economies. Perhaps the most prominent of the offshore banking is tax benefits, i.e., most of the offshore banks makes payment of interest without deducting the tax. This is highly beneficial to individuals who do not make tax payment on worldwide income or who do not make payment until the tax return is agreed. Further, many of the services rendered by the offered by offshore banks many not be available from banks located in home country. Offshore banking is usually associated with formations including offshore trusts, offshore foundations, and offshore companies, which in turn may provide some kind of benefits in the form of tax as well as asset protection. As a healthy competition is seen in the industry of offshore banking regarding tax benefits, it enables to choose the most appropriate facility offering tax advantages. In addition, offshore banking allows you to easily move your assets, if you want to join an employment or spend long periods outside your home country. Other significant benefits of offshore banking are: Since it provides a broad range of features, offshore banking can provide you absolute safety and security - As offshore banks are mostly located in a jurisdiction with sound economic and political condition, it provides stability - Many of the offshore banking facilities assure privacy and

confidentiality - Above all, offshore banking system provides flexibility, ie, it provides flexible structure to business owners and expatriates requiring global access to their fund In order to acquire the full benefits above mentioned, it is recommended to review or examine your decision of opening an account with an offshore bank. Primarily, it must be checked whether the offshore bank you have chosen is located in such a jurisdiction that can meet your requirements. The next to be considered is that whether the chosen offshore bank renders all the services it mentions. Despite any challenge, setting up an offshore bank account is considered a wise decision.

Benefits of Offshore Banking for Corporations

Offshore banking has been around for many years. It is synonymous with illegal activities like tax evasion and money laundering. The growth of offshore financial havens like Bermuda, Seychelles, Isle of Man and the Dominican Republic was fuelled by illegal transactions. However the offshore banking industry has started to change because companies have realized the potential of legal offshore banking services. The growth of reputable financial hubs like Hong Kong, Singapore and New Zealand as offshore banking centers have contributed to cleaning the reputation of the service. The banking industry itself is credited with tightening rules and regulations on what is acceptable behavior for banks dealing in offshore banking services. Besides that account opening

procedures are now more transparent and it is difficult to hide illegal activities from the surveillance of international regulators. Companies are now beginning to appreciate offshore banking services because it offers numerous advantages such as:

There are multiple currencies allowed in offshore accounts making it more efficient for companies dealing with on a multinational basis. Offshore banking pays out higher interest rates as the interest is exempted from tax. International banking has become a legitimate and secure way for individuals and companies to make tax efficient financial transactions internationally. Companies can spread out their financial transactions so that they can diversify their tax rates. A lot of companies are using multiple subsidiaries to lower their tax obligations in one country. Offshore banking provides opportunities for good investments especially during economic downturns as offshore regulations may make it a more stable economic situation compared to the companys main country of residence.

Opening an offshore bank account for corporations is not a difficult process and there are many local companies and legal services in these havens to make the process even easier. With an offshore bank account, there can be efficiency in the transfer of funds for companies with multinational branches and dealings. It is essential to find a good offshore banking provider as this make the whole process even more efficient. Many international banking groups have subsidiaries in reputable offshore financial havens so the companies do not even have to change bankers when engaging in such opportunities.

If you have a company and is still undecided about offshore banking services, then you might want to research more about the matter or seek professional advice. There is plenty of information available on the subject in the internet while consulting a lawyer well versed in international financial operations would be the best in terms of professional advice.

Offshore banking centers

The development of the concept of offshore banking center is one of the most important legal, social and economic phenomena. This has occurred thanks to a lot of modern factors such as development in technology and communication, the spectacular growth in transnational companies and of course the development of transnational banking. Actually, nowadays the offshore banking activity is seen as the most dynamic sectors of financial activity. However, the well known concept offshore banking brings some negative connotation as well and an image of unethical, illegal or even criminal activity. This is a very narrow view in relation to what offshore banking activity represents in its entirety because it transcends such illegal activities as tax evasion or money laundering. In contrast, many offshore banking centers ensure

compliance with international norms and practices. The creation of offshore banking sector is the result of the laws and represents a legitimate phenomenon in itself. The demand for offshore banking services is determined by several factors. Offshore banking centers aim to supply the demand of increase revenue. They take advantage of what in modern times it is called financial sector which goes beyond criminality, illegality and financial abuse or fraud. Today offshore banking centers aim at facilitating taxation for investors, use of modern and sophisticated banking, dynamic investment and mutual funds. Moreover, offshore banking centers view the principle of confidentiality in banking issues as an essential and crucial element which deserves to be protected and guaranteed. At the same time let us not forget that in many parts of the world the offshore banking sector is the main contributor to economic development and growth in the jurisdiction were it exists. The offshore banking sector developed step by step. The basic structure of tax havens elevated to such sophisticated entity as offshore financial center with multiple financial services, including offshore banking. The movement of banking institutions offshore resulted in a huge scale offshore bank deposits. This resulted in the creation of a big network of onshore external financial centers and onshore-related offshore finance centers. The development of such a big network was primarily possible due to rapid development of telecommunications and air travel. Thus, the offshore banking sector is rightly seen as one of the most dynamic sector. This sector is using heavily in its activity the rapid development of modern technologies and at the same advances it. In terms of offshore banking centres, in terms of total deposits, the global market is dominated by two key jurisdictions: Switzerland and the Cayman Islands, although numerous other offshore jurisdictions also provide offshore banking to a greater or lesser

degree. In particular, Jersey, Guernsey and the Isle of Man are known for their well regulated banking infrastructure. Some offshore jurisdictions have steered their financial sectors away from offshore banking, as difficult to properly regulate and liable to give rise to financial scandal.

Offshore banking centers offer the following benefits: Exemption from minimum reserve requirements. Freedom from control on interest rates. Low or non-existent taxes and levies.

Weakened Bank Secrecy Since starting to survey offshore jurisdictions on April 2, 2009, the Organization for Economic Cooperation and Development ((OECD)) at the forefront of a crackdown on tax evasion, won't object to governments using stolen bank data to track down tax cheats in offshore centers. The recent sharing of confidential UBS bank details about 285 clients suspected of willful tax evasion by the United States Internal Revenue Service was ruled a violation of both Swiss law and the countrys constitution by a Swiss federal administrative court. Nevertheless, OECD has removed 18 countries, including Switzerland, Liechtenstein and Luxembourg, from a so-called "grey list" of nations that did not offer sufficient tax transparency, and has re-categorized them as white list nations. Countries that do not comply may face sanctions. A notable exception is Panama, whose canal is currently needed by all Western nations, provides it with a unique type of immunity to

international pressure. Given the enlargement of the canal to accommodate larger shipping, it is unlikely in the foreseeable future that Panama would likely succumb to international pressure toward transparency.

List of offshore financial centres

Offshore financial centres include:

Antigua and Barbuda Bahamas Barbados Belize Bermuda British Virgin Islands Cayman Islands Channel Islands (Jersey, Guernsey, Alderney, Sark and Herm) Cook Islands Cyprus Dominica Gibraltar is no longer an offshore centre since 30 June 2006. No new Exempt Company certificates are being issued from that date. Ghana Hong Kong Isle of Man Labuan, Malaysia Liechtenstein Luxembourg Malta Macau Mauritius Monaco

Montserrat Nauru New Zealand Panama Saint Kitts and Nevis Seychelles Singapore Switzerland Turks and Caicos Islands

The following are designated as offshore financial centres by the IMF, the FSF and recently Ministry of Finance (Brazil):

Alderney American Samoa Andorra Anguilla Antigua Aruba Bahamas Bahrain Barbados Belize Bermuda British Virgin Islands Brunei Cayman Islands Cook Islands Costa Rica Curaao Cyprus Denmark Djibouti Dominica

French Polynesia Gibraltar Grenada Guernsey Hong Kong Isle of Man Israel Japan Jersey Kiribati Lebanon Liechtenstein Luxembourg Macau Malaysia Labuan Maldives Malta Marshall Islands Mauritius Micronesia Monaco Montserrat Nauru Netherlands Bonaire Sint Eustatius Saba Niue Northern Mariana Islands Oman Palau Panama Philippines Pitcairn Islands

Portugal Samoa Saint Helena, Ascension and Tristan da Cunha San Marino Seychelles Singapore Sint Maarten Solomon Islands St Kitts and Nevis St Lucia St Vincent and the Grenadines Swaziland Switzerland Thailand Tonga Turks and Caicos Islands United Arab Emirates United Kingdom o London United States o Alaska o Delaware o Nevada o New York o Wyoming


ONE of the significant features of the Exim Policy is the proposal to permit offshore banking units (or overseas banking units) in Special Economic Zones (SEZs). Offshore banking refers to the international banking business involving non-resident foreign

currency-denominated assets and liabilities. It refers to the banking operations that cover only non-residents, and does not include domestic banking. An offshore banking centre is a place where deliberate attempt is made to attract international banking by offering many concessions in the form of taxes and levies imposed at lower rates. A more important relaxation is the exemption of the offshore banks from restrictions on operations. Offshore banking units in these centres can carry on their activities with international enterprises or investors without conflicting with the domestic fiscal and monetary policy. Entry is relatively easy, especially for large international banks, in contrast to the situation in neighbouring countries that may strictly limit or prohibit the entry of foreign banks. Licence fees are generally low. Close proximity to the important loan outlets or deposit sources; for instance, Bahrain is an offshore base for petro-dollars. Offshore banking is an extension of the euro-currency concept to the East, which provides a link between euro-currency markets and the final borrowers. They provide essential time zone links that are truly world-wide, and ensure that the market operates 24 hours a day. While offshore banking is an integral part of the euro-market, what distinguishes it from the mainstream euro market is that it was specially set up by host countries to promote international banking. Offshore banking units are branches of international banks or other subsidiaries or affiliates. They do not carry retail business, but generally provide wholesale banking services project financing, syndicated loans, issue of short-term and medium term instruments, such as negotiable certificates of deposits and capital

notes as well as merchant banking activities in foreign currency denominated bonds and equity shares. The deals are mostly between banks or with large borrowers or multinational corporations. MNCs prefer transacting in offshore financial centres because of certain apparent advantages: Avoidance of high tax incidence; freedom from exchange control; maintenance of secrecy of deals due to non-interference from government and regulatory authorities; and deferring tax by floating subsidiary units in such centres and delaying their remittance of profits to the parent company, when it would be taxed.

Participation of the Indian banks

Few Indian banks, such as State Bank of India, Indian Overseas Bank, Bank of India and Bank of Baroda, have set up offshore banking units for deposit taking and final lending at Bahrain, Hong Kong, Colombo, Cayman Islands, and so on. Indian Bank, Bank of Baroda and Union Bank of India jointly floated a deposit taking company, IBU International Finance, in Hong Kong for both offshore and onshore banking. The benefits for the Indian banks from these ventures are: Sizeable profits as these ventures involve relatively low operating With multi-currency deposit bases, the banks would be able to serve better the needs of their customers who have set up joint ventures abroad in the form of foreign currency finance. The banks would strengthen the country's balance of payments through repatriation of profits from the venture.

Offshore banking centre in India

Financial experts have been pleading to establish an offshore banking centre in India. Geographically, India provides distinct advantages in attracting offshore banking units, because it has a stable economic and political performance, a vast market, technical manpower that could find employment in these centers. Another

advantage is that the Indian market would open a little before the Tokyo market closes, and close before New York opens, thus providing a vital time link for international money market dealers. In an era where many Indian corporations are functioning abroad and many corporations are granted permission to seek overseas finance, establishing an offshore unit will help tap the resources: Exporters would benefit in terms of finer margins on loans and better foreign exchange rates available via an offshore banking unit. The benefits of multi-currency operations which, to an extent, minimize currency fluctuation risk, will be an added advantage. Salaries paid by offshore banks and local expenditure incurred by them contribute to the economy's welfare. For smaller countries, the benefit would be greater. For a larger country such as India, however, this may not form a significant portion of the total income. India may earn revenue in the form of licence fees, profit taxes imposed on the banks operating in the area. It may also get the benefit of banks' funds in the form of capital and liquidity requirements. the country can gain improved access to the international capital markets. the domestic financial system may become more efficient through increased competition and exposure of the domestic banks to the practices of offshore banks. Offshore banking centers will provide opportunities to train the local staff which will, in turn, contribute to faster economic growth. Offshore banking units would help channelize non-resident Indian investments. Setting up offshore banking centers would trigger enforced development of more advanced communication facilities a must for their functioning.

But establishing offshore centers also comes with a price: The supervision and regulation of offshore banks may involve substantial costs. Encouraging offshore banking may result in the diminution in autonomy of domestic monetary policy, since it is difficult to draw a line always between the offshore and onshore operations, particularly in the absence of exchange control. Offshore banking provides scope for tax evasion by residents. For instance, in Hong Kong, it was found that residents place deposits with offshore banks and take loans of the same amount. The interest on loan would be a deductible expenditure for taxation, while the income from interest on deposits is not taxed. Offshore banks may prove to be harmful competitors to the local banks and may inhibit their growth. For long, Mumbai was considered suitable for establishing offshore banking here. The city has all the requirements goods infrastructure in the form of telecommunications and services, abundant and well-trained manpower and presence of many international banks, both Indian and foreign, already engaged in international banking. The Sodhani Committee on Foreign Exchange Reforms (1996) has recommended allowing Indian banks and financial As against the general recommendation of permitting offshore banking units only at Mumbai, the present proposal is to permit them at Special Economic Zones. This is a wise move since both offshore banking centres and SEZs have many things in common as regards administration and purpose. The establishment of offshore centres in India was foreseen when the Foreign Exchange Regulation Act (FERA) was replaced by the Foreign Exchange Management Act, 1999 (FEMA). Article 10 of FEMA included offshore banking units as one of the authorities to whom the RBI could delegate

powers for dealing in foreign exchange. The question is: Will these offshore banking units fulfill Mr Maran's cherished goals? The RBI is expected to bring out regulations regarding setting up these units in India. A lot depends on how far these regulations are liberal and pragmatic.

What are the benefits of offshore banking?

Offshore banking services provide wide range of benefits and opens up distinct opportunities. Opening such an account provides a powerful tool for keeping money secure and making it exempted from taxes. Using an offshore bank account provides opportunities that are not available to domestic banking users. The most important of those are bank secrecy / confidentiality and exemption from taxes on gains. Income generated in form of interest on deposits is not taxed by the income tax. Customers also get possibility to invest globally. Perhaps the most important benefit that offshore banking provides is that the account is strictly private. The confidentiality of all operations conducted through the account is protected by the

legislation. The account is protected from creditors, tax authorities and other interested parties. It is to some extent a defense tool.

How do I get an offshore bank account?

Very easily. Open an HSBC Offshore Bank Account in Sterling, US dollars or Euros in minutes Why to go offshore? According to the offshore financier Terry Neal companies and individuals decide to move to offshore jurisdictions in order to get a better protection, benefit from offshore banking privacy, enjoy the tax-free economic environment and reduce risks and costs. Terry Neal enumerates and analyzes several motivating factors for going offshore. For instance, an owner of an offshore company gets the opportunity to invest in global securities including top performing funds not available to citizens of the country, where the investor resides. For example, U.S. persons are restricted, not by law, but by virtually all of the worlds top performing offshore mutual funds, from participating in their collective investment. In developing countries, where the financial markets are underdeveloped they provide few investment opportunities; therefore it is natural that local investors seek such opportunities elsewhere. On the other hand, offshore banking account owners get access to full set of banking products that may not be available in their countries and may not appear there for several decades.

Can I avoid taxes with offshore banking?

Most offshore banking centers are at the same time tax havens (low or no tax jurisdictions). Some offshore jurisdictions exempt all incomes from all taxes, while others exempt only those incomes that were generated by sources outside the jurisdiction. Although offshore banking centers do not tax your incomes, your home country may be taxing foreign generated income. So you must check your countrys legislation: if your countries authorities do not tax income generated from foreign sources, then your offshore incomes shall not be taxed, but if they do (like US does), you should report them, otherwise it will be considered as tax evasion.

Is offshore banking legal? It is legal; nobody will come and arrest you for having offshore bank account, or for being a shareholder of an offshore company, or for making an offshore investment. It is absolutely legal service provided by a licensed financial institution that licensed in full compliance with the legislation of a tax haven. Is offshore banking safe and secure? Offshore jurisdictions are politically stable countries with strong economies and developed financial sector. Financial sector is tightly regulated to eliminate risk of bank failures and ensure a good image of a jurisdiction making offshore banking highly secure.

Is my information kept anonymous and confidential? Most financial institutions in offshore banking centers provide anonymity to their clients. Generally bank secrecy is ensured by a countrys legislation. Degree of bank secrecy varies from one jurisdiction to another; therefore if you are interested primarily in

bank secrecy, you should check the legislation first to be sure to what extent your personal information is protected

Which one is the best tax haven? What country is the best option? It depends. It depends what exactly you are looking for. If it is bank secrecy, then Panama may be a good choice. If you are resident of UK and want to go offshore, then you may want to choose services provided by Channel Islands (Jersey, Guernsey, and Isle of Man). The answer varies according to your priorities. We provide here description for major tax havens, so it is up to you which one to choose.

Which banks provide offshore bank accounts? Offshore bank accounts are provided by both local banks operating at offshore banking centers and also by reputable international banking institutions, such as HSBC and Barclays. Actually you can open an HSBC Offshore Bank Account in Sterling, US dollars or Euros in minutes.

Is offshore banking really linked with criminal affairs and criminal financing? Despite the fact that offshore banking provides bank secrecy, high degrees of privacy and confidentiality, this sector is strictly regulated and supervised business and this leaves very small space for criminal affairs. Opening an offshore bank account is not as simple as it may seem at the first sight. There are a few organizations like Financial Action Task Force (FATF), Basel Committee and the Offshore Group of Banking Supervisors

(OGBS) that impose strict regulations on offshore banking sector of a tax haven. Tax havens that do not comply with the regulations imposed by these organizations risk to see themselves in a black list. This makes it almost impossible to transfer funds banking institutions from jurisdiction that is in the black list. Such approach makes tax haven authorities interested in to reduce or completely eliminate illegal transaction and makes very hard for criminals to engage in money laundering. So it is very important that the bank your choice has good reputation and is incorporated in a tax haven that has good reputation