Offshore Banking Will Change How You Look At Banks
Understanding the concept of offshore banking can change the way you look at banking. The term offshore banking has two definitions, which we'll term 'legal' and 'functional' for the purposes of this article. Since the differences and definitions of offshore banking have been so badly blurred and confused by almost everyone, it is necessary to define them separately and then explain how and why the confusion exists. Only by understanding both definitions of offshore banking, their relationship and their differences can an investor truly make a decision based on facts rather than speculation and assumption. In the legal community (lawyers, governments), offshore banking refers to a bank licensed to do business only outside the jurisdiction in which it is incorporated and licensed. This means that a bank holding an offshore banking license may engage in many of the activities including but not limited to savings, checking and loans normally carried out by any other bank. However this offshore bank cannot offer or provide these services to the residents of the particular jurisdiction that the offshore bank is incorporated and licensed in.
To the general public, an offshore bank is any bank outside the investor's country of domicile. For example, a US resident maintaining any type of account in a bank in Canada would class that bank as offshore. Any time you have money deposited or invested within a bank in a country outside the country in which you live and work, you are considered to be banking offshore even if that bank is only across an imaginary borderline - such as the one between the US and Canada. You might think that a bank is a bank, no matter what its structure - offshore bank, offshore licensed bank, or domestic bank. In reality, it makes no difference how a bank is actually set up and structured, where it is licensed or where it does business, since all banks generally use the same channels to facilitate the movement of money. Because all banks are indirectly connected through their correspondent and inter-bank relationships, in theory there should be no real confusion arising from bank transactions, regardless of jurisdiction. The confusion associated with offshore banking is only a matter of legal jurisdiction, arising from the fact that no country can impose their laws within another country without the first country's consent and cooperation. The confusion surrounding offshore banking is also its beauty. Due to the wide variety of laws around the world, what is considered illegal in one country may be entirely legal in another. While a country can investigate anyone residing within their country for violating their laws, that same country would have no legal right to investigate someone in another country without first obtaining the consent and cooperation of the country in which the investigation is to be conducted. Then, even if permission is granted, the investigation can only be conducted under the laws of the country in which the investigation is to take place. To give you an example, the US cannot investigate anything in Canada, without first obtaining the consent and cooperation of the Canadian government - who would be totally within their international rights to refuse, or to not cooperate with the investigation. Countries will normally not offer assistance to another country without the establishment of a specific treaty or agreement, especially when the country is enforcing or investigating an offshore crime. Offshore banking is an elusive concept, but one that is well worth your time to understand fully: without that understanding of offshore banking, navigating offshore investment waters can be far more challenging - and far less rewarding.
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