The basic definition of an offshore bank is, "a bank located outside the country of the residence of the depositor, typically in a low tax jurisdiction(or tax haven)that provides financial and legal advantages."

If only we could all be so lucky to have need of an offshore account to protect our fortune!

The biggest single advantage of an offshore account is the watertight privacy act, or bank secrecy. It was the Swiss who first adopted this principle.

Some other advantages include:

*less restrictive legal regulation
*low or no taxation
*easy access to deposits
*protection against local financial instability

I suppose most people think offshore banks are all small islands in the Caribbean somewhere, but in fact the term is figurative and refers to all banks regardless of location. For instance, landlocked countried such as Switzerland and Luxembourg.

Several years ago, I was visiting a girlfriend who lived near a hub for offshore banking and it was amazing to see all the 12 and 15 story Swiss banks that I had heard so much about over the years.

Even though offshore banks are a tax haven, it is still necessary for depositors from the U.S. for instance, to declare any offshore accounts they might have. It doesn't mean the U.S. government will be able to collect on your interest income, because offshore banks are under no obligation to report that income.

The events leading up to 9-11 caused quite a stir when it was discovered that funding for the terrorists was routed through offshore banking.

That is one of the several disadvantages of using offshore banking....

*they have been accused of helping various terrorist and organized crime groups.

*offshore jurisdictions are very remote.

*Offshore banking is a perk available only to the very rich.

Learn more about this author, Ray Fauteux.
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