Offshore banking is relevant for a very long time. It steadily maintains its position in the global market-space and constantly expands available services. Today, offshore banking establishments offer deposit accounts, currencies exchange, payment transfers, lending, investing, management of clients’ funds, etc. Below we’ll try to look at this niche in more detail and get closer to revealing the secrets of establishing a banking institution in an offshore.
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Introduction to Offshore Banking Licenses
Typically, offshore banking establishments provide simple and reliable admission to the largest and most appealing jurisdictions from the point of view of minimizing taxation. It’s at the stage of business-licensing that many enterprises encounter difficulties, since each jurisdiction puts forward its own norms and standards for the licensee, and there’re differences in the procedure.
Offshore banking establishments are legally-approved structures being able to be registered by legal entities or individuals for achieving financial security, stability and freedom, and facilitate international banking operations. Plenty of business-projects and individuals benefit from owning such banking facilities. Key privilege of getting this kind of permit is unlimited financial freedom and security, the ability to increase your income using funds from offshore organizations. When a firm is registered, the investor looks in advance for ways to return investments through tax planning, reliable savings of funds, asset protection and other benefits that offshore banks provide. Tax planning or asset protection, which is often provided by onshore banking establishments, is much less efficient compared to benefits entrepreneurs get using their own banks.
Key goals set for offshore banking institutions by their owners are as next-mentioned.
- Optimization of monetary means flows.
- Possibility of tax planning for both banking structures and firms.
- Strict confidentiality of banking operations.
- Avoidance of excessive regulation of banking activities by the Central or National Banks of many jurisdictions.
- 100% reliability of storing funds and making investments through their own organization.
Steps and Requirements for Offshore Banking Licenses
We might be sure in next-mentioned: process for getting this type of permit varies depending on the chosen market-space for conducting business-activities. Nevertheless, there’re a few common phases all entrepreneurs go through. For obtaining an offshore banking license, you need to meet next-mentioned.
- Select the jurisdiction where to launch an organization. It depends on your goals, capabilities and the market-space you’ll mainly work in.
- Preliminary stage. Entrepreneurs need to hire a registered agent for helping to launch a new banking establishment (in most countries it cannot be done directly), ask questions to banking experts and regulative representatives, determine a list of documentation and hold meetings with industry and government representatives.
- Collecting documentation and submitting an application. You collect a complete package of necessary documentation and submit them along with the application.
- Verification of documentation and application. Agent and the responsible authority check all needed. Processing period depends on chosen jurisdiction, and on whether you’ve collected all the necessary documentation and whether you’ve made any mistakes. If something is missing, you’ll be asked to send extra or make corrections.
Regulative authorities make a decision: provide a permit or refuse based on all the data and documentation provided.
For obtaining an offshore banking license next-mentioned are needed from the directors and shareholders:
- a detailed business-plan;
- CV of each UBO and director;
- confirmation of the residential address;
- a copy of the latest audit, if any;
- provide certified copies of passports and certificates of no criminal history;
- original bank references for all key persons.
Registrars may claim any extra data. Sometimes, it’s needed to make a certified translation.
Benefits and challenges of offshore banking License
Getting a permit has plenty of privileges, particularly next-mentioned:
- improving the firm’s image;
- legal management of financial flows;
- provision of credit lines and loans;
- issue of bonds;
- convenient access to banking information and financial markets;
- opening flexible banking accounts.
Challenges may include those rules and norms being needed to be followed. At the preliminary and application stages, you’ll be asked plenty of questions. Regulative authorities will ask about the source of funds for financing fixed capital (incl. attracting third-party investors), model of financing and making a profit you chose, etc.
- Specific list of products and services you’re going to spread: deposits, loans, etc.
- Employees: how many people will be needed, how many people make decisions on a day-to-day basis, etc.
The easiest way to convince a registration agent or regulator that your intentions are serious is to draw up a well-developed business-plan including general indicators and operation strategies for several years ahead. Absence of a business-plan may raise suspicions of your incompetence or malicious intent.
Global Impact of Offshore Banking Regulations on the Financial Industry
Industry underwent significant modifications from the point of financial industry regulations. It’s primarily because of International Tax Norms, CRS-standards and FATCA.
In 2013, these establishments faced the BEPS-plan set by global regulative authorities. Around the same time, unrest began around the black list, additionally the active work of the tax services made its contribution. Naturally, the laws had to be reshaped to suit the norms covering international financial operations, which led to almost complete deoffshorization and a lack of confidentiality (sometimes conditional).
Not only island territories, previously recognized as unreliable, fell into the category of offshores. Today, including European countries, each of which has a separate special territory and privileges for international companies, offers to take advantage of low and even zero tax rates.
In 2023, offshore jurisdictions won’t longer be exclusion zones accepting capital from worldwide. Now these are quite prestigious spaces where optimal conditions are created for business-activities and international corporations launching, incl. financial ones. Future trends in offshore banking are in the progressive trustful nature of these zones.
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Article’s author is Denys Chernyshov – founder and CEO of the globally-famous organization Eternity Law International