Starting an offshore bank account in an overseas jurisdiction gives you many advantages over domestic banks. Banking systems are not made equal and if you live in a country whose government is in debt, with a banking system that carries low capital reserves and engages in risky investment practices your assets might be exposed to unnecessary risk.
Opening an offshore account leverages your risk by spreading your capital across countries, in different currencies, and in multiple accounts. This ensures that in the face of any calamity your assets will be secure.
Here are five reasons why you should start looking at an overseas account.
1. Increased liquidity
Offshore banks in favorable jurisdictions generally have much better liquid ratios than your domestic bank. Keeping a large proportion of your deposits on hand ensures that the bank won’t over-extend themselves and be caught with little cash reserves.
Having high capital reserves is important should an economy start to crash, or a bank loses many of its investments, and customers are wanting to withdraw their assets.
2. Currency diversification
It is possible to hold multiple currencies in the same account. This has many practical benefits.
Diversification is an important aspect of any financial strategy. It gives you much greater asset security as you are protected from currency depreciations by spreading your capital across several denominations. It also hedges your risk which would otherwise be completely tied to the stability of one currency.
3. Asset protection
Keeping your assets in a foreign offshore account effectively helps keep them out of reach of unlawful creditors and grievous parties.
If your domestic accounts are frozen or your assets are seized by a local court you will still have access to your assets via your offshore account.
If a legal suit is brought against you with a local court order and with a push of a button the banks can freeze all of your assets leaving you without any access to your funds should you need to defend yourself in court?
Gone are the days of anonymous offshore bank accounts. In this age, total secrecy and anonymity ais much more difficult (but still possible). This is mostly true for citizens of the United States who are bound by FATCA (which is a tax information-sharing agreement) that effectively requires American citizens and institutions that serve them to report foreign holdings and accounts.
That being said, many offshore banking jurisdictions still offer much greater levels of privacy than domestic banks as account privacy is strictly maintained by overseas banks. It is usually the country where you reside that requires account reporting and tax statements, not the offshore jurisdiction.
Opening an account in the name of an offshore company does help to separates you from the account and the assets is held. Though CFC laws require individuals to report overseas accounts nominee directors and IBC/Trust combinations have been successfully used to increase privacy and are still effective in certain jurisdictions.
5. Higher interest rates
Most countries in the EU and the US have abysmally low-interest rates. American banks have interest rates that have been hovering around 1-2% in the last few years with Germany and Japan rates have been dipping below zero. This means that if you leave your assets in a local German bank you would actually lose money. If you add negative interest rates together with inflation that is a significant loss.
An alternative is to find banks and a country overseas that has higher interest rates. A country like Belize, Brazil or Georgia, which offer rates between 6-9%! Though these countries often have higher inflation rates, they are still offset by the high rates which still usually give a sold 3-5% return.
Opening an offshore account is the best way to protect your assets in times of uncertainty. Whether you are looking to secure your wealth, maximize your returns, or increase your level of privacy; the right offshore account can provide exactly what you need. With the right support and guidance, it is simple, easy, and a completely legal way to create your offshore diversification plan.