Is offshore banking illegal? Myths busted.
[Estimated time to read: 3 minutes]
The world has been in frenzy since the Panama Papers were leaked – thousands of confidential documents detailing offshore accounts published, with the secrets of some of the world’s richest exposed. The media have been generous with calling out politicians as corrupt and business tycoons as evaders of tax. We cannot say for sure. But this brings into mind the question that most people are asking – are offshore accounts really illegal.
Offshore banking has managed to attract a bad name, particularly in recent years, as the rich and famous drag it through the mud with their tax evading antics. This, and years of Hollywood films, has helped create a few myths around the simple offshore bank. They’re only used by international playboys and crooks, right?
Here we dispel the myths about offshore banking and explain the simple truths behind this less-than-murky world that the media has made us believe.
Myth 1 – People only use offshore banks to evade tax
The media can probably take most of the credit for this myth. Where there has been a high profile case of tax evasion, more often than not, a big deal will be made out of the fact the cash was sheltered in an offshore location. The stark reality though is that the majority of people who use offshore accounts are normal people simply looking for a convenient way to access their cash while they live abroad. Using an offshore bank account can legitimately help lower your tax bill, but only through legal routes.
Myth 2 – Offshore banks are based in far flung dodgy corners of the world
There are of course banks based all over the world, and yes, some offshore banks are based in smaller exotic islands like the Caribbean. However, many are also based in less exotic places like the Isle of Man, Singapore or Switzerland which are well-run, highly regulated jurisdictions with first class reputations.
Myth 3 – You need to be loaded to open an offshore bank account
If you are impressed when you hear the words “I have a Swiss bank account”, then you needn’t be. The truth is that there are many different levels of offshore banking. Some banks will let you open an account with as little as $500, while there are some which won’t even say hello unless you have at least a million. In reality, most offshore banks are offering a private banking service, for which you would expect to pay more. But if you are looking for a long term partner with which to help build your future, most decent banks will be happy to talk.
Myth 4 – You need to visit the bank in person to open an account
The movies can take responsibility for this myth. The image of a man carrying a suitcase full of cash into the reception of a bank somewhere in the sun, probably wearing an Hawaiian shirt, can largely be blamed for many of these myths. As with all of them though, it’s simply not true and with Internet and telephone banking now the norm, the location of your high street bank, let alone your offshore bank, means less and less.
Of course Internet banking is perhaps not quite exciting enough for Hollywood and the time when Leonardo DiCaprio was playing Jordan Belfort in Wolf of Wall Street, mobile phones were still the size of a shoebox.
Myth 5 – Offshore banking is illegal
This is completely false. Unfortunately, offshore banking has garnered rather a bad name over the years and has become associated in people’s minds with murky dealings and illegal activity. The plain and simple truth though is that the vast majority of account holders, just like with a high street bank, are normal everyday people, who want to keep their money safe, such as expats who reside in unregulated jurisdictions. For some people, offshore banks also provide a wide choice of funds and investments that are not usually available in their home country or in the country where they are currently residing. To learn more about the benefits of offshore banking, click here.
If you would like to know more about the offshore private banking service we provide and how it can help you, complete the form below and download our Expat Guide to Offshore Banking.
Editor's note: This blog was originally published in July 2015 and has been updated.
About Joy Aquino
Joy Aquino served as a Marketing Associate for AES International before relocating to Germany.