Offshore Bank Accounts

OFFSHORE BANK ACCOUNTS are often associated with the darker side of major finance. Their high degree of confidentiality offers an ideal opportunity for tax evaders, arms and drug traffickers, terrorists, and corrupt politicians. Although most offshore banks offer a variety of legal services, many of these institutions have been tarnished as corrupt. These institutions are magnets for people wishing to profit from money laundering, fraud, corruption and tax evasion. The appeal is bank secrecy, which offers animosity to its clients. Offshore banking is a blue chip multi-billion dollar industry and involves international banks, major investment firms, and accounting firms. The special private banking services they provide allow big savings for big-money clients, who take advantage of the bank's discretion. Many of these clients fall in the $50 million to $100 million dollar range of assets, which allows for full advantage of overseas laws.

Offshore banking also offers an attraction for investors who want to diversify their portfolios and reduce their vulnerability in the face of domestic disturbances. They offer commercial services, such as loans, and foreign currency trades, investment and tax consulting; however, they often charge much higher interest on accounts than conventional banks. There are approximately 55 offshore zones, the largest being Switzerland. Five major clusters for offshore finance are the Caribbean, Europe, the Middle East, Southeast Asia, and the South Pacific.

The amount of money that moves about in offshore banking is staggering. According to information gathered by Lynch & Gemini Consulting, as of 2000, one-third of the money of the wealthiest individuals may now be held in offshore accounts. The amount of money being moved in and out of offshore accounts could be as high as $6 trillion. Experts think it is possible that one half of the world's money flows through these accounts. The International Monetary Fund (IMF) claims that up to $1.5 trillion in illicit money is laundered through offshore accounts each year, with an additional $5 billion in laundered drug money.

The United States and Europe both face the continuing and substantial loss of tax revenue due to hidden funds and many countries are now asking that reforms be made and enforced. A growing number of offshore banks specifically target professional people who can handle a minimum deposit of $80,000 or more. The IRS estimates that at least $100 billion in funds obtained through legal sources are placed in offshore accounts for the purpose of tax evasion.

Great secrecy is maintained concerning offshore accounts. Privacy is strictly upheld and account information cannot be divulged. Its non-regulated system of banking is allowed to interact with standard banks, which only serves to further their popularity. With the advent of electronic communications, monies can now be immediately transferred, making attempts to track the funds increasingly difficult. Funds can be transferred an infinite amount of times, and checkpoint areas can be rendered useless when transactions take place in person. By changing jurisdictions, it is easy to cause confusion over tax and fund amount issues.