Your Offshore Guide

BANKING

A Dutch scientist who spends his life travelling around war zones is perhaps not a typical offshore banking client, but it indicates the growing breed of busy professionals who now use offshore banking services.

The above example of a client at the Royal Bank of Scotland International (RBSI) in Jersey highlights the need to use a banking operation specifically geared to dealing with the needs of international customers through world-wide access to cash, multi-currency account facilities and international money transmission.

Although not impossible, it would be difficult to get the same level of service through an onshore bank branch. Apart from the level of services, there is also the additional advantage of the tax-free climate offshore centres enjoy. However, with the majority of offshore centres offering banking facilities, the choice can be overwhelming. Luxembourg, the Cayman Islands, Jersey and Guernsey are among those offshore centres with developed offshore banking systems.

The good news is that the majority of onshore banks now have some sort of offshore presence, which means getting access to information should be fairly easy.

For example,
47 of the 50 largest banks in the world operate in some form from the Grand Cayman.
As many banks will have a presence in several offshore centres, the choice of centre will depend on your current domestic banking arrangements and time zone.

Confidentiality of banking arrangements is a further consideration. Offshore centres have come under attack from both the US and Europe to enact specific legislation enabling government authorities to scrutinise banking records in an effort to stamp out international money-laundering operations.

Many centres, including most recently the Cayman Islands, have now adopted anti-money-laundering legislation, which means they will co-operate with international authorities on narcotics-related crime. Far from being the death knell for offshore centres, co-operation on criminal activities is seen as a way for an offshore centre to enhance its reputation as a legitimate base for offshore financial operations. And while such mutual legal assistance treaties are seen as an effective way of keeping organised crime at bay, legislation does not include banks breaking the confidentiality code on tax offences.

The official line is that offshore banks are not out to help customers evade the tax authorities but at the same they are not here to help the Inland Revenue find out about people. The only time a bank account would become accessible to anyone but the client would be through a court order made by local courts under the money-laundering act, otherwise a client's account remains confidential. Both Jersey and the Caymans operate severe penalties for banks breaking the code of client confidentiality. In the Caymans, for example, this is dealt with through the Confidential Relationships (Preservation) Law.

That said, authorities worldwide continue to put pressure on offshore centres to co-operate on exchange of tax information. Switzerland's banking secrecy has already been pierced on crimes related to tax fraud. In order to stave off unwelcome advances from tax authorities, offshore banks are installing their own mechanisms to guard against unwelcome customers. Reputable offshore banks will only open an account upon receipt of a reference from the depositor's home banker and will not accept large sums in cash. Picture signature identification and a statement on the source of funds are other regulations banks now have to abide by.

Within these guidelines, opening an offshore account is a simple enough procedure. Generally, this can be done through the bank's worldwide network.

For example, RBSI clients can open an account through one of the branches dotted around the world such as the UK, Jersey, Guernsey, Isle of Man, Gibraltar, Singapore, Hong Kong and Nassau.

The onset of telephone banking and the Internet has made the process even easier, particularly for clients in the Far East who may use a European offshore banking centre. With no time zone restrictions and new technological advances through the internet set to make the process of opening an offshore bank account even easier, choice is now likely to focus on quality of services offered, minimum investment levels and charges. These vary considerably.

For example,
Cayman-based Altajir Bank offers a popular call account accepting deposits of as little as US$1000.RBSI's Jersey banking services start with a minimum deposit of US$5000 which gives access to a range of currencies. An integral part of RBSI's services is access to investment and private banking services. This service is particularly geared to the growing number of financially aware clients who want a service that is halfway between advisory and discretionary.

Access to RBSI's private banking services requires a minimum of US$250,000. On the investment side US$100,000 minimum investment will get you a personal investment manager and access to a choice of funds from outside fund managers. Charges are negotiable but are in the region of 0.25% per annum management fee and fund charges of between 1-2%.

Offshore banking also caters for the more financially sophisticated client. For clients with a portfolio of shares, Guinness Mahon Bank in Guernsey offers a collaterised lending service to gear further investment. This type of service has increased in popularity when returns from stockmarkets have been good.

Basically, the client gets the upside in the increase in value of the portfolio less the costs. The maximum loan will vary depending on the portfolio held. For example, Guinness Mahon will lend up to 80% of the value of a good gilt fund but only 40-50% for an emerging market fund.

Banking in different currencies is now a major feature of offshore banking. All the major currencies are normally featured as are European, Australasian,

South African and Asian currencies. However, the Middle Eastern and Eastern European currencies are increasingly on offer. The currency and chequeing facilities offered by offshore banks allow clients to handle their funds, for the most part, without charges. Access is also provided to clients' funds by the provision of card services and their settlement. Larger sums may be placed on fixed-term or notice deposits in many of these currencies for one month to one year to earn potentially high rates of interest.

The benefit of the multi-currency approach is that it can be tailored to fit the client's requirements.

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