Offshore Banking Myths
It is a sad fact that the common perception of offshore bank accounts is locations to store drug money, illicit earnings from crime, white linen suits, action-packed movies and sensationalised tabloid stories. Unfortunately for many, this warped view of offshore and anonymous banking is what has made many entrepreneurs and business professionals falter when the suggestion of banking offshore has been mentioned. Sadly, instead of understanding immediately the benefits of offshore asset protection and banking tax havens, they have avoided investing offshore so that they are not associated with this.
Fortunately, in today’s markets and contemporary thinking, this dodgy, unpleasant view of offshore banks is becoming rather dated and obsolete. This is offshore banking myth number 1.
The simple truth is that tax havens, also known as offshore financial centres (or OFC’s), were founded for the purpose of providing offshore asset protection, asset growth and lower taxation (Read the history of offshore banking). Additionally, these offshore banking institutions pride themselves in offering an excellent service and superb discretion for individuals and companies, whether large or small, from all over the world. Although not as glamorous or as exotic as portrayed on celluloid, offshore banks and offshore financial centres can present tangible solutions to a variety of situations. These include:
- Asset protection from impending legal action.
- Throwing off the burden of taxation in the domiciled
- Protection from political turmoil
- Shielding from economic instability
Moreover, an offshore bank account can also offer asset protection from situations such as divorce, poor market conditions and extraneous legal action, which is so often a reality and feature of everyday life.
Offshore Bank Accounts, Money Laundering and Other Criminal Activity
It would be clearly untrue to say that no illicit funds find their way into Offshore Bank Accounts: if there is a loophole through which the criminal mind will slide, then it will take full advantage. Although the OFC’s have desperately tried to rid themselves of the stigma of money laundering and hiding criminal gains, there are cases where this is exactly the case. Criminals will take advantage of legal structures to protect assets, the same as regular, law-abiding citizens. However, it is interesting to note that it is the case that precisely those financial centres thought to be least likely to fall prey to the (legal) depositing of illegal money have, indeed, been found to have had vast sums of criminal gains pass through them. It is surprising to note that the United States, in fact, has been found to have had an estimated half ($300 billion!) of all the money laundered within the world pass through one or more of its states. Of course, the United States is not the only jurisdiction that has been subjected to this illegal activity: the UK and Germany, in particular, have also fallen prey to this criminal dealing.
So, although the OFC’s or tax havens are, in fact, perceived to be the home of criminal underworld financing, the reality is that it is actually the high-tax jurisdictions – like the US – which have the vast majority of these funds laundered through its territories, with the offshore financial centres, although not exempt from this, represent a much smaller percentage overall. This is offshore banking myth number 2.
Naturally, as one would expect, these superpowers are very keen to suppress this information as they are highly embarrassed by these figures and are not averse to the OFC’s taking the blame for this transiting of illegal monies.