What is Offshore Banking?
Offshore Banking refers to offshore banking, usually on small islands. In general, offshore banking, which is also said to be a tax haven (no tax), is described as a bank that is outside the regulations and laws, aiming to apply the funds created outside the country for those who have deposits. Offshore banking is also known as a free bank.
Offshore Banking, which attracted a lot of attention especially after Wikileaks documents, was wondered by everyone. Even the interest in this banking system has increased. Because businesses are looking for no or less tax payment methods.
Offshore Banking History
If we look at the historical development of the offshore bank; With the year 1960, off-shore banking, which is also used in financial transactions, emerged. It has progressed with this release. Another factor enabling these banks to progress was the political change that occurred with the implementation of the liberal economy. After these years, tax obligations, audits and some restrictive regulations have occurred. In particular, international capitals have begun to be directed towards places where offshore banking is present, which are regions where these restrictions do not exist.
Huge increases in oil wages, especially in the 1970s, and oil exporting countries have experienced great increases in the funds they received. This situation has also increased the importance of offshore banks.
Coastal banks (offshore banks) were the regions where the tax burden was too low. These banks generally also provide the facilities provided by other banks to provide credit, debit card issuance and funds. In addition to the high interest rates it provides, it also gives refuge to those who receive money, although not in all cases. Those who earn unfair money with no tax are sent to offshore banks without complying with the law, keeping them away from audits.
In countries where there are no taxes and very low taxes, much attention is paid to privacy. These banks (shore banks) do not share the information of their customers with anyone. This secrecy they have made increases the abuse of the system.
Differences Between Banks and Offshore Banks
There is a functional difference between banks that make offshore deposit management and the banks we know. The differences between these two banking systems are as follows:
- Whichever country has an offshore bank, it does not buy an outside currency other than the currency of the rate.
- Generally, it does business with institutions and people who are present and do not live or are not there.
- They are not responsible for controls, restrictions and laws coming to other banks.
- There has been a strict application against keeping secrets.
- The realization of offshore bank transactions offers two transactions: registration and functional centers.
Registration centers, which are established in terms of performing transactions, are known as the places where financial transactions that develop with different centers other than their own transactions are located in the accounting records. Registration centers are also known as the place where tax advantage is created. There are no foreign exchange (money purchase and sales) audits and tax audits in registration centers.
Functional centers, another process introduced for the realization of transactions, appear as the places where it has carried out international capital transactions.
Transactions applied by coastal banks; long-term, trust and short-term transactions. Long-term transactions of at least 5 to 10 years are transactions consisting of issue bonds and loan bonds.
Trust transactions, one of the transactions mentioned above; These are known as contracts signed for the purpose of valuation of the conditions determined by the income of this person, such as protection, storage, operation and management of real estate assets and securities that do not belong to a person.
Some offshore banks have different banking systems, although they are not nearly the same in the short term. The most common centers of offshore banks (shore banks); It is shown as Liechtenstein, Cayman, Bahamas, Panoma, Hong Kong, Luxembourg, Bermuda, Switzerland, and Bahrain.
On the other hand, it is seen that off-shore banks are also applied in money laundering. If we look at what money laundering means in general; Although this transaction is seen as an accusation, it fulfills the period of time spent by entering the legal economic activities of the money obtained from illegal economic activities.
The reason for investments in offshore banks is that there is almost no risk of black money coming out. The funds created can easily reach the financial system. Almost two trillion dollars of money laundering is wanted all over the world.
Offshore banks that provide assurance, attach importance to confidentiality, provide tax convenience, and provide interest and credit advantage are among the important reasons why people and companies prefer.
Offshore Account Opening
After all these explanations, the question of “How to open an offshore account” comes to everyone’s mind. If you want to open an account in the offshore bank, also known as the coastal bank, there are certain conditions according to the country in which you want to open an account. The first of these conditions; The other, which does not need to enter the country where it is located; states that you must be in the country. If it is an offshore bank that does not need to enter that country, what those banks want; It is required to have a CV, a reference letter to be taken at the bank, its passport to be approved, and a three-month residence document of the place where it is located. To give an example to such a place; Mauritius wants these. Panama explains that you must be in the country.
The services offered by banks and Offshore banks have an annual operating fee. Operating fees vary according to countries and banks. Although these fees change, they are approximately 250 Euros a year.