What is offshore banking? Brief overview

In broad sense people refer by offshore banking to the services that an individual receives from a bank outside his/her country of residence. For instance, if I live in The USA and have a deposit in a bank in UK, it can be said that I am offshore banking user.

In the narrower sense by offshore banking people mean services that an individual receives in offshore jurisdiction also referred as offshore banking center. Offshore jurisdictions are countries with low tax structure and their legislation ensures bank secrecy and privacy. There are number of offshore jurisdictions in the world like Madeira , Monaco, Belize, Guernsey, Panama , Bahamas, Antigua and Barbuda, Singapore , Bahrain, Seychelles, Isle of Man, Luxembourg , Malta, Jersey,  Switzerland, Cayman Islands,  Ireland, Gibraltar, Andorra , Hong Kong, Barbados,  Labuan, Anguilla, Bermuda.

Offshore banking is often associated with terrorism-financing, criminal activities and tax evasion, but this is the common mistake. It is a legal service provided by licensed financial institution of offshore jurisdiction. What can be illegal is actions of an individual using advantages of offshore banking for illegal and criminal affairs. For instance, if you have an offshore bank account and you receive an income on it, you have to report it to your country's tax department, if your countries legislation requires so. Otherwise you will avoid taxes that will be classified as tax evasion. In other words having offshore bank account is not illegal, but hiding taxes using such account is illegal and punishable.

Offshore bank account has several advantages. First of all it's bank secrecy - no one can access your personal information and your offshore bank has no right to provide information to third parties, unless there is a decision of local court. Usually such decisions are extremely difficult to acquire that makes your information unreachable.