Offshore Banking

There’s something very exotic sounding about offshore banking. It conjures up visions of men in white suits checking into Caribbean hotels with suitcases full of cash. Since the release of the Panama papers, there is heightened suspicion about anything “offshore”.

However, for most expats an offshore bank account is just a simple, and perfectly legal tool to help manage their finances across different countries. As this post on the Common Reporting Standard discusses, the days of hiding money offshore are gone, and pretty much any institution where you open a financial account will require your tax ID number in order to report to your country of residence.

So do you really need an offshore bank account? Perhaps not. Most likely you have at least one account in your home country, and one in your current country of residence. People who have moved around a lot may also have accounts left over in other countries. There’s certainly no need to complicate things with unnecessary accounts.

For some people though, an offshore account may be helpful. Banks these days are coming under more and more pressure to track what people are doing with their money in order to comply with anti-money laundering regulations. In some cases the compliance burden is becoming so heavy that they simply refuse to make certain transactions. Typically these are “third party payments”. If you are trying to send larger sums of money to an account that is not in your own name, you will probably need to provide some kind supporting documentation explaining why you are making the transfer. Even then you may not be able to complete the transaction. I have come across several cases recently where banks in Japan refused to allow account holders to send money to a company overseas that they hold an investment account with. If it gets to the stage where local banks are preventing you from sending your own money to your own investment accounts, then an offshore account may be the right solution. That way you can send your money to your own account overseas, and from there transfer it on to your chosen destination.

Offshore accounts can also be useful when withdrawing money from overseas investments or receiving other payments from overseas. You may not want to bring the money back to Japan and have it converted to JPY for example. An offshore account allows you to keep it overseas, in the currency of your choice, until you need to use it.

Offshore accounts typically also offer online banking and credit / debit cards which allow you to shop and use ATM’s worldwide. This can come in handy when you travel, whether for business or pleasure. The application process typically involves completing an application form, including information on your personal financial situation, and submitting a copy of your ID and proof of residential address.

Although Caribbean islands do sound exotic, the best regulated locations for offshore accounts are the Isle of Man and Jersey. If you are looking to get started you could first check if your bank at home also offers an offshore account. HSBC and Lloyds are examples of big banks with an offshore presence. You could also talk to a financial adviser and find out if they have any recommendations.

I hope this helps you to get control of the current assets part of your balance sheet. Let me know if you have any questions.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.