The term “offshore banking” simply means “using the banking services of banks in foreign countries”. Nothing more. For people whose nation is an island, “offshore” is synonymous to “foreign” – and that’s the origin of the word.
What is the difference between a US manufacturer buying parts from a subcontractor in China, and that same manufacturer using a bank in Panama?
There is none. It is a matter of International competition, taking advantage of the global market place. Everyone has a right to do that, whether or not governments like it – which they don’t.
The reason of course is that governments control their citizens through controlling the banks. But they cannot control banks in foreign jurisdictions, unless there is an International treaty behind it. There are quite a few of those treaties, and many of them are entered into under terms of plain extortion from a bigger country (typically the USA) against a smaller country, who is threatened with all kinds of financial disasters (such as blocking the country’s use of US dollars in international trade) if it doesn’t comply. Those “treaties” are called all kinds of names, but their purpose is only one: to stop a bigger country’s citizens from reducing their taxes through the use of foreign banks.
So, what can foreign banks offer, which you cannot obtain from your local bank?
Well, it all depends on where you live, but some very typical areas that attract a huge number of International bank clients include these:
– Privacy! Regardless the International bullying, there are still banks around that insist on protecting their clients’ privacy, also against snoopy inquiries from other governments’ tax agencies. Privacy is privacy – and you either have it or you don’t.
– Favorable investment opportunities that often are 2 to 5 times as favorable as the most favorable ones you can obtain from, for instance, a greedy US bank.
– Security! Very few foreign banks are allowed to “print money on demand” to a level of 25 times the bank’s own assets, as the case is in the USA! This means that the risk of the foreign bank collapsing and your investment disappearing is significantly less than it is for those who keep their money in a US bank…
– On-line services! Since foreign banks rely of foreign customers, they have to make banking easy, through well-managed on-line services, since physical contact with the customer is not possible. This is not at all a standard for banks that rely primarily on customers visiting their local branch.
– Seriously smaller fees for the same services. North American and European banks are without any comparison so rich and arrogant that they believe they can charge their customers all kinds of exuberant fees that seriously exceed the value of the service, as proven by offshore banks that typically charge less than half, and sometimes as little as 1/10! And they still prosper…
These advantages are so obvious that one would be stupid to ignore them.