The term offshore banking is closely linked to concepts like international finance and tax planning. Anyone who has ever complained about the high rate of taxes in one’s country knows the benefits of transferring one’s money to an offshore bank to save on taxes. Basically, offshore banking refers to banks that are located far from the country of residence of the depositor. Typically offshore banks are located in low tax jurisdictions or in countries which levy no taxes at all.

The main benefits that offshore accounts afford the depositor include low or no taxes, easy access to their deposit, and complete privacy – to the extent that offshore banks do not have to divulge account information to the tax authorities in other countries. This however, does not mean that that the offshore bank authorities are under any legal obligation to the depositor to withhold such information from the other authorities. In fact, it is this aspect of bank confidentiality which has drawn much bad press in the post September 11th phase; especially when there have been calls for greater transparency in financial dealings worldwide. The advocates of offshore banking have however criticized this move saying that the security measures are in fact, motivated by interests of domestic banks, which feel threatened by the offshore ones.

In the minds of the layperson, the term offshore banking often generates a slew of negative images like money laundering, international crime syndicates, and mafia bosses and today, even with international terror outfits. But in reality offshore banks in the Cayman Islands, Bermuda, Channel Islands, and Luxembourg, as well as other locations are not getting rich conducting business with criminals. Rather the true scenario is the exact opposite, most offshore banking nations are actually characterized by honest courts and competent administration having a healthy respect for international law. Majority portions of the money deposited in offshore accounts happen to be institutional with very little belonging to private individuals since it is more difficult for individuals to open accounts than institutions.

A most important element of offshore banking is the advantage of asset protection that it provides to the depositor. For someone living in a politically and economically unstable country, having offshore accounts is a great way to protect one’s assets. Most offshore banks are situated in politically, socially, and economically safe havens and thereby, provide the added benefit of asset protection to their clients. For anyone who fears that war, a political coup, or economic crisis can lead to one’s assets being frozen or seized can consider offshore banks that may afford one much better protection.