The safety of offshore banking
Before deciding where to bank offshore, you may first need to address any concerns you have about the safety of offshore banking. After all, making sure your savings are secure is very important, and trusting someone else with your money is not easy.
If you do have safety concerns, these are not necessarily unfounded. Offshore banking has been associated with dubious practices like tax evasion and money laundering in the not too distant past. This has been exacerbated by the privacy which some countries like Switzerland and Singapore offer their banking clients. In these countries, bank secrecy is a legal entitlement, and banks cannot disclose details of account holders and their assets, except in extreme circumstances. It is not hard to see the attraction for some less than trustworthy depositors.
Many banks and governments have moved forward in recent years to ensure all money upon which tax is due is declared, and new anti-money laundering rules have been introduced. The vast majority of individuals who open an account overseas are using it for legitimate reasons and it is highly beneficial for the global expat.
One of the many benefits of offshore banking is that offshore centres are often considered to be more politically and economically stable, with the risk of your money being confiscated or frozen considerably reduced.
The Greek banking crisis of 2013, in which depositors lost any savings over €100,000, as well as the Icelandic banking crisis of 2008, where some savers lost millions, are cautionary reminders to be careful which banks and countries we trust with our money.
So how do you know which bank is most suitable for you?
Different banks will offer different banking centres, and each jurisdiction will have a different level of investor compensation. You should discuss this thoroughly with a knowledgeable and transparent financial advisor to determine what is best for your situation.
Here are some examples of investor savings compensations levels:
The Financial Services Compensation Scheme (FSCS) covers individual savers and investors up to £85,000.
Isle of Man
The Authorised Collective Investment Scheme’s Compensation Scheme (ACISCS) will pay out 100% of the first £30,000, 90% of the next £20,000, to a maximum compensation amount of £48,000. The Isle of Man is perhaps one of the most recognised and trusted offshore centres.
The Investor Compensation Company will cover each individual up to HK$150,000 (around £12,000).
One of the best pieces of financial advice you should always remember is not to put all of your eggs in one basket. Spreading your savings and investments around is always a good idea to consider.
This blog has been taken from our free eBook, which you can read here, The Expat Guide to Offshore Banking.
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