An offshore bank account 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 some or all of For other uses, see Bank (disambiguation). ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ...

• strong privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)
• less restrictive legal regulation
• 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 "offshore" from Britain, 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 (Switzerland, Luxembourg and Andorra in particular are landlocked). Privacy is the ability of an individual or group to keep their lives and personal affairs out of public view, or to control the flow of information about themselves. ... Bank secrecy (or bank privacy) is a legal principle under which banks are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise. ... 1934 (MCMXXXIV) was a common year starting on Monday (link will take you to calendar). ... Swiss banks are world-renowned for their stability, privacy and protection of clients. ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ... Bank deposits are the large part of the money supply. They come in different types depending on withdrawal restrictions. ... The Channel Islands are a group of islands off the coast of Normandy, France, in the English Channel. ...

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^[1], the personal income tax of many countries^[2] 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 accounts—which may or may not be numbered bank accounts—they 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 accused of being a crossroads for major illegal money flows. This box:      The underground economy or shadow economy consists of all commerce that is not taxed. ... Organized crime is crime carried out systematically by formal criminal organizations. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... An income tax is a tax levied on the financial income of persons, corporations or other legal entities. ... Interest is the rent paid to borrow money. ... An income tax is a tax levied on the financial income of persons, corporations or other legal entities. ... Taxation in the United States is a complex system which may involve payment to at least four different levels of government. ... Perjury is the act of lying or making verifiably false statements on a material matter under oath or affirmation in a court of law or in any of various sworn statements in writing. ... ... Numbered bank accounts are offered by Swiss banks to the majority of their clients. ... Bank secrecy (or bank privacy) is a legal principle under which banks are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ... A sequential look at United Flight 175 crashing into the south tower of the World Trade Center The September 11, 2001 attacks (often referred to as 9/11—pronounced nine eleven or nine one one) consisted of a series of coordinated terrorist[1] suicide attacks upon the United States, predominantly... In banking and finance, clearing denotes all activities from the time a transaction is made until it is finally settled (see settlement). ... Clearstream Banking S.A. (CB) is the clearing division of Deutsche Börse, based in Luxembourg. ...

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 argue that offshore banking offers a competitive threat to the banking and taxation systems in developed countries, and that OECD countries are trying to stamp out competition. The Organization for Economic Co-operation and Development (OECD) is an international organization of those developed countries that accept the principles of representative democracy and a free market economy. ...

Advantages of offshore banking

• Offshore banks provide access to politically and economically stable jurisdictions. This may be an advantage for those resident in areas where there is a 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, developed countries with regulated banking systems offer the same advantages in terms of stability.

• 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 governement intervention. Advocates of offshore banking often characterise government regulation as a form of tax on domestic banks, reducing interest rates on deposits.

• Offshore finance is one of the few industries, along with tourism, that geographically remote island nations can competitively engage in. 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.

• Interest is generally paid by offshore banks without tax 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.

• 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.

• 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.

Corralito was the informal name for the economic measures taken in Argentina during 2001 by economy minister Domingo Cavallo in order to stop the draining of bank accounts. ... The Argentine economic crisis was part of the situation that affected Argentinas economy during the late 1990s and early 2000s. ... An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring his consumption, by lending to the borrower. ... Tourists at Oahu island, Hawaii Tourism is the act of travel for predominantly recreational or leisure purposes, and also refers to the provision of services in support of this act. ... In economics and marketing, a service is the non-material equivalent of a good. ... An offshore company is one which does not conduct substantial business in its country of incorporation. ... An offshore trust is simply a conventional trust that is formed under the laws of an offshore jurisdiction. ... An offshore foundation is simply a conventional foundation that is formed under the laws of an offshore jurisdiction, such as Liechtenstein or Panama. ... Tax competition is a governmental strategy of attracting foreign direct investment and high value human resources by minimizing the overall taxation level. ... In government regulation, a race to the bottom is a theoretical phenomenon which occurs when competition between nations or states (over investment capital, for example) leads to the progressive dismantling of regulatory standards. ...

Disadvantages of offshore banking

• Offshore banking has been associated 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.

• The existence of offshore banking encourages tax evasion, by providing tax evaders with an attractive place to deposit their hidden income.

• Offshore jurisdictions are often remote, so physical access and access to information can be difficult. Yet in a world with global telecommunications this is rarely a problem. Accounts can be set up online, by phone or by mail.

• Developing countries can suffer due to the speed at which money can be transferred in and out of their economy as "hot money". This "Hot money" is aided by offshore accounts, and can increase problems in financial disturbance.

• Offshore banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts. 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 [2]. The Laffer curve demonstrates this tendency.

This box:      The underground economy or shadow economy consists of all commerce that is not taxed. ... Organized crime is crime carried out systematically by formal criminal organizations. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... A sequential look at United Flight 175 crashing into the south tower of the World Trade Center The September 11, 2001 attacks (often referred to as 9/11—pronounced nine eleven or nine one one) consisted of a series of coordinated terrorist[1] suicide attacks upon the United States, predominantly... Terrorist redirects here. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ... This article or section is in need of attention from an expert on the subject. ...

European Savings Tax Directive

In their efforts to stamp down on tax evasion 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 offshore banks 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. It is the intention of the EU authorities that offshore banks in an increasing number of jurisdictions should be affected.[3] The European Union withholding tax, more commonly known as the EU withholding tax is a withholding tax which is deducted from interest earned by European Union residents. ...

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: To meet Wikipedias quality standards, this article may require cleanup. ...

• deposit taking
• credit
• wire- and electronic funds transfers
• foreign exchange
• letters of credit and trade finance
• investment management and investment custody
• fund management
• trustee services
• corporate administration

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. A deposit account is an account at a banking institution that allows money to be held on behalf of the account holder. ... Credit as a financial term, used in such terms as credit card, refers to the granting of a loan and the creation of debt. ... A wire transfer is an electronic transfer of funds. ... Electronic money (also known as electronic cash, electronic currency, digital currency, digital money, scrip or digital cash) refers to money which is exchanged only electronically. ... Foreign exchange has several meanings: In telecommunications, Foreign exchange service is a type of network service. ... After a contract is concluded between buyer and seller, buyers bank supplies a letter of credit to seller. ... Investment management, the professional management of various securities (shares, bonds etc) and other assets (e. ... Institutional fund management is fund management conducted by large financial firms such as banks, insurance companies and major investment organisations (e. ... The word trustee is a legal term that refers to a holder of property on behalf of some other beneficiary. ... The term management characterizes the process of and/or the personnel leading and directing all or part of an organization (often a business) through the deployment and manipulation of resources (human, financial, material, intellectual or intangible). ... Drawing of a self-service store. ... Private banking is a term which covers both of the services which banks give to individuals usually with liquid wealth of above 1 million dollars, and also the division of that entity which does checking, savings, and loans for that clientele. ...

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 individuals”—nearly $6 trillion out of $17.5 trillion—may 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. A tax haven is a place where certain taxes are levied at a low rate or not at all. ... A multinational corporation (MNC) or multinational enterprise (MNE) or transnational corporation (TNC) or multinational organization (MNO) is a corporation or enterprise that manages production establishments or delivers services in at least two countries. ... Merrill Lynch & Co. ... Capgemini (Euronext: CAP) is one of the worlds largest information technology, consulting, outsourcing and professional services companies with sixty thousand staff operating out of more than thirty countries. ... This article is about the year 2000. ... Please wikify (format) this article as suggested in the Guide to layout and the Manual of Style. ... The term trust has several meanings: In sociology, trust is willing acceptance of one persons power to affect another. ...

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 are the fifth largest banking centre globally in terms of deposits. ^[3] These lollipops were found to contain heroin when inspected by the US DEA The illegal drug trade is a global black market activity consisting of production, distribution, packaging and sale of illegal psychoactive substances. ... Lucy Komisar is an investigative journalist. ... Swiss banks are world-renowned for their stability, privacy and protection of clients. ... The Swiss franc (ISO 4217: CHF or 756) is the currency of Switzerland and Liechtenstein. ...

Regulation of offshore banks

In the 21st century, regulation of offshore banking is allegedly improving, 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. The 21st century is the present century of the Gregorian calendar. ... The International Monetary Fund (IMF) is an international organization that oversees the global financial system by observing exchange rates and balance of payments, as well as offering financial and technical assistance when requested. ...

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: This article is about the year. ... This article is about the date September 11 in general. ... This article is about the year 2001. ... In the physical sciences, specifically in optics, a transparent physical object is one that can be seen through. ... Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC - Association pour la Taxation des Transactions pour lAide aux Citoyens) is an activist organization for the establishment of a tax on exchange transactions. ... The term non-governmental organization (NGO) is used in a variety of ways all over the world and, depending on the context in which it is used, can refer to many different types of organizations. ...

• 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: Anti-money laundering is a term mainly used in the finance and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. ... Bank secrecy (or bank privacy) is a legal principle under which banks are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise. ... The Internal Revenue Service (IRS) is the United States government agency that collects taxes and enforces the internal revenue laws. ... The date that commonly refers to the attacks on United States citizens on September 11, 2001 (see the September 11, 2001 Attacks). ... To meet Wikipedias quality standards, this article or section may require cleanup. ... Joseph Stiglitz (born February 9, 1943) is an American economist, author and winner of Nobel Prize for economics ( 2001). ... Look up Nobel in Wiktionary, the free dictionary. ... The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (in Swedish Sveriges Riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is a prize awarded each year for outstanding intellectual contributions in the field of economics. ... The position of World Bank Chief Economist is one of the most influential in economics. ... Clearstream Banking S.A. (CB) is the clearing division of Deutsche Börse, based in Luxembourg. ...

"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."^[1]

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. 1983 G-7 Economic Summit in Williamsburg, Virginia (left to right) Pierre Trudeau, Gaston Thorn, Helmut Kohl, François Mitterrand, Ronald Reagan, Yasuhiro Nakasone, Margaret Thatcher, Amintore Fanfani. ... The 1970s decade refers to the years from 1970 to 1979, inclusive. ... Germans dancing on the Berlin Wall in late 1989, the symbol of the cold war divide falls down as the world unites in the 1990s. ... This article may be confusing or unclear for some readers, and should be edited to rectify this. ... Mirage Hotel & Casino, Las Vegas The Las Vegas Strip has one of the worlds highest concentrations of casino resort hotels. ... Due diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. ... // Balancing scales are symbolic of how law mediates peoples interests For other senses of this word, see Law (disambiguation). ...

Offshore financial centres

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,^[4] 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.^[5] Whilst there is no precise definition of what amounts to an Offshore Financial Centre (or OFC), the term is usually meant to refer to low-tax, lightly regulated jurisdictions which specialise in providing the corporate and commercial infrastructure to facilitate the use of those jurisdictions for the formation of offshore...

List of offshore financial centres

Main article: List of offshore financial centres

Offshore financial centres include: The following are designated as offshore financial centres by the IMF or the FSF: Andorra Anguilla Antigua Aruba Aruba Bahamas Bahrain Barbados Barbados Belize Bermuda British Virgin Islands Cayman Islands Cook Islands Costa Rica Cyprus Djibouti Dominica Dublin Gibraltar Grenada Guam Guernsey Hong Kong Isle of Man Israel Japan Jersey...

• Bahamas
• Barbados
• Belize
• Bermuda
• British Virgin Islands
• Cayman Islands
• Channel Islands (Jersey and Guernsey)
• Cook Islands
• Dominica
• Gibraltar
• Hong Kong
• Isle of Man
• Labuan, Malaysia
• Liechtenstein
• Luxembourg
• Macau
• Mauritius
• Montserrat
• Nauru
• Panama
• Saint Kitts and Nevis
• Seychelles
• Singapore
• Switzerland
• Turks and Caicos Islands

The Channel Islands are a group of islands off the coast of Normandy, France, in the English Channel. ... Motto: Coordinates: Country Malaysia State Wilayah Persekutuan Made into Federal Territory 1984, October 19th Administered by Perbadanan Labuan Labuan Corporation Chairman Datuk Suhaili Abdul Rahman Area    - City 92 km² Population    - City (2000) 78,000 (est) Time zone MST (UTC+8) Not observed (UTC) Website: http://www. ...

See also

• Anonymous banking
• Corporate haven
• List of finance topics
• Private bank
• Swiss bank
• Tax haven
• Margolis Schemes

Anonymous banking is where the banks of certain countries are used for holding money or assets, based on the voluntary or statutory level of privacy the banks provide. ... A corporate haven is a jurisdiction with laws friendly to corporations thereby encouraging them to choose that jurisdiction as a legal domicile. ... What follows is a list of over 250 Wikipedia articles on finance topics. ... Private banks are banks which are not incorporated, and hence the entirety of their assets is available to meet the liabilities of the bank. ... Swiss banks are world-renowned for their stability, privacy and protection of clients. ... A tax haven is a place where certain taxes are levied at a low rate or not at all. ... Harry Margolis (November 17, 1919 - July 1987)[1]was a Saratoga, California tax attorney. ...

External links

• offshore bank account
• Commentary - Washington Times
• "Offshore accounts: No longer an easy option"
• Congressional Research Service (CRS) Reports regarding Offshore banking
• Offshore accounts - implications of the EU Savings Tax Directive

Footnotes

1. ^ Such as perpetual travelers
2. ^ For example, the United States, France and Malaysia. In other countries it makes no difference so long as you are resident and domiciled there (for example, the United Kingdom)
3. ^ Bank Introduction
4. ^ The most recent report of the Cayman Islands financial services regulator indicated that the jurisdiction had 570 licensed banks, holding US$1.26 billion in deposits.[1]
5. ^ For example, despite being the largest offshore jurisdiction by some distance in terms of number of incorporated offshore vehicles, the British Virgin Islands has only ever licensed 7 offshore banks. This compares against hundreds in Switzerland, the Cayman Islands and (3rd in number of total banking licences) the Bahamas.