Offshore Internet Banking Advantages and Disadvantages

The topic of offshore internet banking is a hot subject and is growing in popularity not only within the consumer banking community but also in the corporate or business banking industry.

The benefit of offshore online banking is that in addition to enabling you to access banking services that are not permitted by traditional and local brick and mortar firms, it allows you more flexibility and variety of your banking requirements. For example, if you frequently travel, offshore online banking gives the possibility of conducting business from any place, while also giving you access to the right currency that you require at any time that you require it.

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However, there are a few banks that provide internet or online banking services , as it costs the banks a significant amount of money. Making sophisticated and secure banking systems requires the efforts of many full time computer engineers, fully-fledged compliance and security departments, as well as heavy overhead to support the service on a regular basis.

Since there are so many factors that go into providing this service, the offshore internet banking services can differ from one financial institution to the next. Some have better systems and some have more work to complete. Much of this is due to the funds the bank has dedicated to this effort as well as amount and in terms of quality.

Opening an Offshore Bank Account

Before getting into more detail about this topic, I want to clarify that participating in offshore internet banking is not about avoiding taxes. It is about mitigating potential losses to capital to circumstances beyond your control. When you are considering a foreign country to open an account for a bank offshore, you should consider one that is stable politically and financially sound. Additionally, it is beneficial to select a jurisdiction with a high interest rate and has a low or no tax on income. Some of the most preferred jurisdictions over the years include Switzerland, Cayman Islands, Singapore, Hong Kong and the United Arab Emirates (UAE).

Setting up a personal bank account is typically a private process. If you’re interested in offshore internet banking there are methods to get started online without the need to travel at the local branch of your bank, saving a ton of time, money and mainly frustration.

One option is visiting a branch of a local bank in your state of residence, or the country you are from. A lot of banks that provide online banking have a multinational presence. There is a good chance that your selected bank has a local branch near where you live, even if it’s having their headquarters in an offshore region.

In other cases there are banks from abroad that may not have local branches close to where you live, but are willing and able to establish the account offshore for you through email, snail mail or fax, as well as telephone. There is typically a set of documents required by banks in order to be able to perform this process. So, you are able to open a foreign bank account through an offshore bank, without leaving your country, however, it might require some extra effort and, sometimes, the effort involved in contacting someone in another country.

The Advantages of Offshore Internet Banking

Here are some advantages of internet banking offshore that you should know about.

Protection from sovereign risk – as we have mentioned previously, parking funds at foreign banking accounts helps reduce the possibility of losing capital due to freeze or confiscation of funds by governments without any fault of your own. This risk is less of concern in a developed economy that has a strong banking system, such as the United States, but it is still a risk that is present.

Tax benefits – a lot of offshore countries have little or no tax consequences on earnings from interest or earned from business activities.

Higher Interest Rates. Since most offshore banks operate with low expenses, they are able to afford to provide higher rates of interest compared to bigger multinational names. In fact, in the developed economies like in Europe as well as North America, regulatory compliance demands are seen by many as taxation of banks, increasing expenses and lowering interest rates.

On Demand Access to Statements Online internet banking allows you immediate access to your bank statements, that allow you to see your transactions on a real time basis. This includes pending and past deposits and withdrawals. This means you can check your balance on your account at any time.

Money Management – With online banking from offshore, you can transfer funds between accounts across the globe in a matter of minutes. Offshore banks hold inventories of different currencies. They can also help you fulfill banking transactions across several countries. Automated payments can be scheduled to vendors to release automatically.

There are several other advantages of offshore internet banking. It is possible to create offshore trading accounts and establish offshore brokerage accounts to carry out investment and trading transactions (there can be tax advantages to this). Conducting transactions online is not necessarily free but it is also extremely efficient. The processing time is smaller. There are also streams of income that can be deposited straight into your bank account online in the offshore region.

From a perspective of personal finance in terms of personal finance, downloading the banking transactions from your online offshore bank account is easy and is done in a matter of minutes. Most online banking platforms are built to allow you to upload your data into personal or financial accounting software, or spreadsheets like Excel. Users can save a substantial amount of accountant’s fees using this feature. In addition, they will gain more in-depth knowledge of and management of their own finances.

For those seeking anonymity, offshore online bank accounts also allow you to conduct banking anonymously in accordance with bank secrecy rules.

The Disadvantages of Offshore Internet Banking

The mere fact of establishing an offshore bank account is a cause for the government to place more attention on your actions. There is no doubt that many utilize offshore internet banking to for illegal activities and avoid paying taxes. Some specific disadvantages of offshore internet banking that result from doing business with accounts in foreign banks are the following:

The ability to use the Internet The internet requires a certain level of internet savvy necessary to navigate your way through the offshore banking websites to ensure that you receive exactly what you need. This is a big reason why some seniors avoid banking online.

Deposit Timeline Since many banks lack the technology needed to collect deposits remotely so you could have difficulty in depositing your entire earnings. Although many banks have developed electronic scanning technology, others haven’t caught up. There’s no consistency, to say the least.

Security and Fraud Risks – because banking is conducted online, offshore internet banking exposes your business to the risk of network intrusion or breach. Since data is transferred electronically and stored in various databases, data breaches can result in private and sensitive information to be released into improper hands. But then again this isn’t any different than losing your check book, if you compare it to conventional brick-and-mortar banking.

Spam Mail – offshore online banking also means that you’ll receive emails from the foreign bank you have your offshore bank accounts with. Internet predators recognize this as an opportunity to fraud, or for stealing confidential and personal information. You may get an email in your inbox from what appears like a bank in a foreign country. However , it’s not. They are scam emails that ask for you to login and enter your personal information such as login and password.

Tips: Here are few tricks to make sure you don’t fall for phishing scams. First, when you receive mail from your bank, call the bank to confirm that they actually sent the email. Second, instead open the mail that they sent you visit the bank’s site directly and determine if you can conduct what’s asked of you on their site by you logging in directly, rather than clicking on a login link in an email message.

Third, in the event that you are to read the message and then click any link contained in the email for whatever reason, once the link takes you to a site where you are required to fill in personal details be sure to look for security symbols such as the https URL or padlock on the lower right hand corner of the browser. There are other security features as well that can be easily identified. Find out more information on this subject.

Financial Security – certain offshore bank locations are not extremely secure financially or stable. For example, during the economic crisis that hit the world in 2008, many savers lost funds deposited in offshore bank accounts in some destinations like Iceland. This isn’t meant to alarm anyone, as this situation is rare, and most of the time, those who have damages are compensated some manner over time. But, be aware that this inherent risk exists. Always look for deposit insurance. The larger the amount, the better.

Credibility through Association – as I’ve already mentioned, offshore online banking has negative connotations attached to it. It’s often associated to money-laundering, the use of illicit money, tax-free money, and funding of illegal causes. Bank accounts offshore at times are tied to crime rings and terrorists. What do these mean to you? While you can engage in offshore banking legally and legitimately, you must be aware that you will face greater scrutiny over you by the government.

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