The term 'Offshore Account' is included in the Banking edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Check for lowest price here...
Offshore accounts are accounts that you have in a bank that is located in another country. The term originally came from banks and accounts that were found in the Channel Islands, which were literally off shore from Great Britain. Interestingly enough, the majority of offshore banks and offshore accounts are still found on islands to this day.
Individuals and businesses might use offshore accounts for a variety of purposes. The popular conception of offshore accounts is that spies and criminals utilize them as places to store their cash. In fact, most offshore accounts are completely legitimate. People and even businesses have them as places to deposit their money, make investments, or use as trading accounts. When they are used as trading accounts, the person utilizes them to place online trades in stock markets.
Offshore accounts can also be employed to hide assets from governments and taxes, even though this is not the case for most such offshore accounts. A number of offshore banking accounts exist, such as HSBC Offshore Banking in Gibralter, Barclays Offshore Banking in the island of Jersey, and Griffon Bank in the island of Dominica in the Caribbean. These accounts provide all types of services for the banking needs of people and businesses, one of which is Internet banking.
Among the advantages of offshore accounts is privacy. Offshore banking institutions keep offshore account information secret. Such banks are forbidden to declare this information concerning the status of the account or any of its particulars to any individual or entity who is not the account holder. The only exception to this is when offshore banks believe the holder of an offshore account may be using the account for illegal purposes like drug trafficking, support of terrorism, or criminal money laundering.
Another good reason for putting your money into an offshore bank account is because they typically offer better interest on money. It is a well known fact that offshore banks provide better interest rates for their customers. Such rates depend on the location and the offshore bank in question. Reasons for higher interest rates have to do with the lower operating costs in these islands or other locations, as well as the higher interest rates in the prosperous countries where they are based.
Tax advantages prove to be another motivating factor for offshore banking and having offshore accounts. A number of countries will provide tax benefits to investors who are foreigners in order to attract their money. While this is different for every location too, many offshore banks and their hosting countries will not levy taxes on investment returns and interest earned in such offshore accounts.