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Offshore Banking a Beginner’s Guide

Offshore Banking

Offshore banking means opening a bank account in a country where you do not reside. Reasons for opening offshore accounts include asset protection, business expansion, and, in some cases, tax reduction.

In a world of escalating lawsuits by those wishing to get their hands on your hard-earned money, offshore banking combined with an offshore asset protection trust is one of the most effective ways to protect your money, safeguard your assets, and help grow your wealth.

But first things first: is offshore banking legal?

Yes. According to Investopedia, offshore banking is perfectly legal, as long as you don’t try to hide money from the tax authorities. Some people think they can evade taxes by opening an offshore account. However, the Foreign Account Tax Compliance Act (FATCA) requires offshore banks to report balances and banking activities of American citizens to the IRS.

To be clear, offshore banking simply means that you’re opening a bank account in another country. Though, the whole process is much easier than you may think. Your chosen bank doesn’t even have to be “offshore,” which is great news for those doing business in Canada. Also, you don’t have to be wealthy to open an offshore account. Banks in other countries set their own account minimums. So you may be able to start an account with as little as a few thousand dollars.

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Basic Requirements for Opening an Offshore Bank Account

Similar to opening a bank account in your hometown, offshore banks will need your information. In addition to your name, address, and date of birth, offshore banks will also inquire about your citizenship and occupation. Documents that verify your personal information may include copies of your passport, driver’s license, or other government-issued identification documents. Banks will also want to verify your physical address for identification purposes, so you may need to present a utility bill.

Additional verification documents

In addition to identification and residency documents, offshore banks often require verification documents to weed out people who may be trying to open an account for nefarious reasons (money laundering, tax fraud, and the like).

First of all, they will want financial references showing that you’re in good standing with your current bank. They will need a reference letter from your current bank as evidence of a “satisfactory relationship”.

Secondly, many banks want to know what types of transactions will be taking place, where the money is coming from, and whether it was acquired legally. This is not to be nosey. It is because the bank may have thousands of clients. If one client has illicit funds going through the institution, the regulators can impose fines on the bank, revoke its license and/or jail the responsible employees.  

Source of Funds

The required verification documents will vary by situation. For example:

  • Are the funds are from your job? If so, provide a copy of a paystub from your employer.
  • If the funds are from investment income, provide information about your investments.
  • Are the funds are from business or real estate transactions? Then you can provide sales contracts or other relevant documents.
  • If the funds are from an insurance contract, provide a letter from the insurance company.
  • If the funds are from an inheritance, provide a letter from the executor of the estate.

Again, the banks ask these questions not because they are intrusive. They ask them because the regulations require such verification. When audited, if the do not have the required supporting documents they will suffer stiff fines. Multiple violations can result in loss of license. In other words, the person examining the documents will lose his or her job if they take shortcuts when opening your account. So, don’t expect them to make special exceptions.

Choose your currency

One of the benefits of offshore banking is the ability to choose the currency in which you want to hold the funds. This feature is especially valuable in order to ride the growth of strengthening currencies. Some people like to use the fluxuations between the foreign exchange rates as a means of investment growth.

A few things to keep in mind:

  • While you may benefit from earning interest on your deposits in a different currency, you may also have foreign tax liabilities.
  • If you need to exchange currencies to make deposits and withdrawals, you may end up paying exchange fees depending on the amount the institutions charges and the exchange rates.

Making the first deposit

The last requirement for opening an offshore bank account is to make the first deposit. Most offshore bank accounts are funded via wire transfer as domestic checks are generally not accepted in foreign jurisdictions. Almost all domestic and offshore banks charge fees for international wire transfers. The fees vary from bank to bank. A financial advisor can help you check for deals before choosing a bank and make sure all of your verification documents and paperwork are in order.
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Top 4 Reasons to Open an Offshore Bank Account

Now that you know the basics of opening an offshore bank account, here are four great reasons why you should!

Asset protection

According to the U.S. Financial Education Foundation (USFEF), the United States has over 1 million lawyers. Moreover, an estimated 40 million lawsuits are filed every year. While there is no such thing as 100% asset protection, an offshore bank account can protect your assets from being frozen by the lightning seizure of an aggressive attorney (summary powers can’t reach beyond the U.S.) and from frivolous lawsuits.  In this lawsuit-happy world, having an offshore bank account can help keep your money out of reach. This only works over the long haul, however, when you hold your account in an asset protection tool such an offshore LLC and/or asset protection trust.

Sounder banking systems

Not all banks are created equal. In fact, Global Finance’s most recent list of “The World’s Safest Banks” included only five U.S. banks (the highest position was #38). Of those listed, U.S. Bancorp (#49) is the only major player while the other four are small agriculture-based banks.

Banks in many Western countries only keep a fraction of cash on hand to meet customers’ withdrawal requests. So, should another Lehman-style event occur, you may have trouble accessing your funds. An offshore bank in a jurisdiction with low debt and a history of stability can help safeguard your savings and minimize your dependence on one financial institution.

Higher interest rates on deposits

Low interest rates on savings accounts are one of the most popular reasons many people turn to offshore banking. While the Fed has manipulated interest rates to near historic lows, some foreign banks offer interest rates of 7% or more. By looking for options outside of your home country, you can find banks that pay significantly higher interest rates than your local establishment.


It’s your money, so having more options on how to save it is always a good thing. An offshore bank account provides long-term flexibility, allowing you to:

  • Rent or buy property in a foreign country
  • Ensure access to medical care abroad
  • Diversify the risk in your portfolio by holding foreign currencies
  • Maintain your privacy on foreign accounts with an aggregate total of under $10,000

Peace of mind

The benefits of offshore banking can also give you much-needed peace of mind.  An offshore bank account makes you a hard target for frivolous lawsuits and protects you from unsound banks and the potential pitfalls (like bankruptcy or insolvency) of your home country’s government. 

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What to Look for in an Offshore Bank

So, what characteristics make for a good offshore bank? Let’s take a look!

Jurisdiction stability and quality

The first thing to consider when choosing an offshore bank is the quality of its jurisdiction. Some questions to consider:

  • Is the country economically and politically stable?
  • What kind of privacy or security laws are in place?
  • Is the jurisdiction pro-business?

Institution quality

The financials and reputation of a bank are key indicators in determining whether you should trust them with your money. Many banks keep less than 1% of deposits on hand while other banks may keep up to 24%. A financial professional can help provide insights on a bank’s overall reputation. Please fill out the consultation form on this page or use one of the phone numbers above.

Ease of use

If you are opening an offshore bank account, chances are that very few (if any) of your transactions will be handled in person. Therefore, you need a bank with policies and services that suits your international lifestyle. A premium offshore bank should offer a smooth process for opening an account, reliable online banking, affordable deposit minimums, and good customer service. Easy ATM use and low international transaction fees would be beneficial as well.

5 Best Offshore Banking Countries

While there are many options out there for offshore banking locations, these 5 countries stand out from the crowd.

Cayman Islands

The Cayman Islands are one of the best places to keep your financial integrity intact. Always a popular choice for offshore banking, the Cayman Islands have a known reputation for being a tax haven that offers little to no tax liability for foreign individuals and businesses. There are no taxes on capital gains, property, income, corporations, withholding, or payroll and no exchange control, which allows for the free transfer of funds in any currency both into and out of the islands. The Cayman Islands also has strong confidentiality clauses that protect the privacy of investors. Keep in mind, however, that the US taxes its citizens on worldwide income regardless of where the funds reside.


If you’re looking for maximum asset protection, then a Swiss bank is the best option. In Switzerland, banking services are incorporated as a type of economic specialization by law. In fact, the law forbids bankers from disclosing any information about your account without your consent. Switzerland is also considered one of the safest investments due to the country’s financially stable economic system. In addition, all banks are required to maintain a minimum capital level to ensure that clients are paid in full in the event of bank failure. 


Another stable, safe place to create an offshore bank account is Singapore. Setting up an account here is relatively easy (no trip abroad required, in most cases) and there are strict banking regulations to ensure strong protections for your wealth. Singapore is also known for providing easy access to highly qualified investment and financial managers to help ensure profitable investments. With a variety of wealth management services, a range of trading platforms, cutting edge technology, and the availability of accounts in many different currencies, Singapore may be the perfect place for your offshore bank account.


Let’s just say up front, Germany does enforce foreign judgments. So, you may want to look elsewhere if asset protection is your main goal. That said, widely considered one of the safest places in the world to keep your money, Germany offers superior financial services to its clients. In fact, Germany fills 3 of the top 5 spots on Global Finance’s most recent list of the world’s safest banks (#1, #3, and #4). Aided by the economic stability of the country, German banks are a secure destination for investments, providing financial stability and safety protocols not found in other countries. Some benefits include easy access to online banking and ATM services, low account opening and maintenance costs, and options for opening a Visa or MasterCard. 


When you open an offshore bank account in Belize, you can experience some of the best protection and investment perks available in the industry. For starters, every bank in Belize must maintain a 24% liquidity rate by law. In comparison, banks in the U.S. are only required to have liquidity rates of 5%. This means that, by that measure, Belizean banks are almost 4 times less likely to fail. Banks in Belize also have some of the highest interest rate averages in the world. There are no local taxes or exchange control restrictions on international accounts, and strong privacy protections.

Getting Started

Whether you want to diversify your portfolio, broaden your investment opportunities, or simply find a safe place to deposit your savings, offshore banking may be the perfect solution. Sifting through the multitude of options out there can seem daunting, so contact one of our experienced consultants to get the ball rolling. We’ll help you determine which offshore bank is right for you and walk you through the entire process to ensure the best results. We look forward to working with you, so please give us a call today.