What are the Different Types of Offshore Banking Services?

The different type of offshore banking services include asset protection, setting up corporations, corporate administration, trade finance, securities custody and foreign currency exchanges.  Offshore banking services also include the full range of traditional banking services that could be found at a local bank.  Services such as accepting deposits, providing debit cards, extending credit, electronic fund transfers, loans, internet banking, providing safe deposit boxes, trustee services and savings accounts can be found at offshore banking institutions.  

Offshore banking services will vary based on the type of offshore bank selected and the laws of the jurisdiction where the bank is situated.  Offshore banks are located throughout the world, in countries such as Panama, Austria, Liechtenstein and Denmark, to name a few.  Even if a bank is in a landlocked nation, the financial industry still might classify it as an offshore bank because of the unique services and benefits it offers.  

The size of an offshore bank also will influence the types of services it provides to customers.  Some offshore banks are small community banks, others are regional, and others are global.  Each will have unique advantages and disadvantages.  The quality of offshore banking services also will differ. Experts in finance and investing can help individuals select the right type of offshore bank for their specific needs.

One misunderstood service an offshore bank provides is a high degree of confidentiality.  The level of privacy an offshore bank provides will vary, depending on its jurisdiction.  Only the nation where an offshore bank is located will be entitled to regulate it.  Many of these nations have light regulations, which enable offshore banking services to offer assurances of confidentiality or non-disclosure of customer identities.

One unique service offered by certain offshore banks is holding securities on behalf of a customer.  The securities are then traded and held in the bank’s name.  The bank will keep its assets separate from the assets of customers.  Segregation of assets ensures that customers will realize the benefit of interest earned from the investments.  This service helps to ensure a customer’s privacy and minimize his or her tax burden. 

Asset protection is another unique benefit offered in the portfolio of offshore banking services.  Offshore banks are not necessarily obligated to disclose the identity of their customers.  This allows for the protection of assets.  Further, offshore banks help customers establish corporations to further shield assets from litigation.

Even a court order will not obligate an offshore bank to release information to a nation that lacks jurisdiction over the bank.  Only a treaty between the nations may require disclosure of the identities of bank customers.  In this event, offshore banks will provide notice to the customer prior to making any disclosure.  

By contrast, banks situated in the United States can be legally obligated to freeze assets of account holders without notice to a customer.  In some circumstances, certain governmental agencies can require U.S. banks to freeze assets without obtaining a court order.  Unlike offshore banking services, U.S. banks are obligated to report certain banking transactions of their customers to the government without notice to the customer.