When the term offshore banking is mentioned, many people associate it with a lot of financial sophistication. However, this is not always true. In fact, an average person can open and run an offshore bank account with great ease.
Every offshore bank in a foreign country has its own set of rules. You will, therefore, need to carry some research to find out the institution that is ideal for your situation. Based on the common offshore banking hubs like The Channel Island, the Cayman and Hong Kong, here is what you should expect.
The common requirements for opening an offshore account
The premises of opening an account in an offshore bank are similar to opening a conventional bank account back home. The foreign bank will demand personal info such as name, address, date of birth, occupation, and citizenship.
The bank will ask you to verify the personal details by providing copies of documents such as a driving license or another document. In addition, you will be required to verify residency by providing a utility bill that captures your exact place of residence.
Because of the many identification documents required, additional authentication might be required. In some cases, a notarized copy of some documents might be demanded. Some offshore banks ask for an apostilles stamp issued by your government back at home.
More documentation that might be required
In many cases, additional requirements are outlined on top of the common documentation. These requirements are mainly targeted at discouraging tax fraud, money laundering, drug related money, and other legal activities.
- Financial referenced documents from the current bank.
- The nature of transactions that the account holder is anticipating.
Selecting the right currency for the offshore bank account
Offshore banks provide account holders with the option of picking the preferred currency. This is a great advantage because users can pick alternative currencies if the home currency is expected to fluctuate.
Ensure to understand the main consequences of working in a different currency. For example, some currencies might help you earn interest on deposits. However, you might need to change currencies when depositing and withdrawing cash. This could result in significant expenses and even tax liability in some states.
Depositing and withdrawing from an offshore bank account
Deposits in most offshore bank accounts are mainly done using electronic transfers. However, many local electronic transfers that people are used to, rarely work with offshore banks. The best alternative is a wire transfer that involves using the local bank and specifying your account in the foreign jurisdiction. The wire transfer is charged based on the rates set by the local bank.
On withdrawals, many offshore banks provide a number of ways to optimize convenience of clients. Some provide normal ATM/debit cards that can be used globally. You will need to carefully review the fees for using the ATM because some options can be really expensive. To cut these costs, it is advisable to withdraw large amounts as opposed to regularly visiting the ATM.
One way of enjoying a smooth line of depositing and withdrawing cash is maintaining two accounts; one at home and another offshore. This will give you some credibility because the transactions will mainly be bank-to-bank. Besides, cash will be relayed to the domestic account for easier, direct, and easy access.