5 Facts you May not Know about Offshore Banking

There are too many myths that are circulating in the web about offshore banking – a bit too many in such a way that there are articles that are tirelessly debunking them. We have done so in the past (look here, here, and here.)

In this article, we are going to debunk more myths by suggesting five things that you might not know about offshore banking; five facts to show you that offshore banks are not as bad, shady and untrusted as you think (although the mainstream media will always tell you the otherwise).

Without further adieu, here are 5 facts about offshore banking you might never know:

1. Some Offshore banks don't lend your money to borrowers

Did you know that in a fractional reserve banking model followed by most banks, the funds that you deposited are actually no longer your property, but the banks'? That's why your deposit account is a liability in the bank's balance sheet.

To make matters more “interesting”, your bank is legally authorized to lend out your money. That's right, our good ol' banks are allowed to lend at 1:10 ratio, say $90 for every $100 that you have in your account. The $10 is kept just in case you withdraw your funds. And when someone borrow that money ($90) and put it in an account, the bank will again take $81 and leave $9 in the account to follow the 10% minimum rule (here's the elaborate explanation about the system.) Worse in reality than the theory, your bank is actually creating $1,000 out of $100 following the same ratio!

Yes, I know what you were thinking: Your bank makes money out of thin air. One big question: What if your country is in bad shape, economically and politically, and you'd like to take all of your money? Well, sadly, you can't. Your bank doesn't have all of them; your bank lends your money to borrowers, remember?

That's exactly what happen with Greece and other countries in turmoils. “Your” funds are locked by your banks – for one obvious reason: They don't have your money; not now, at least.

If you think those are bad, well, yes - they are bad. People just don't aware of the facts.

On the flipside, this is something that you and many other people may not know about most offshore banks: They don't loan out your funds to make money. Instead, they make money by charging transactional fees, as well as monthly fees to clients.

Indeed, that could mean that your costs are higher if you do a lot of transactions. But think about it: If their revenue is from your transactions, then they will do their best in serving you, as well as offering you lucrative long term investing opportunities, such as precious metal investing, real estate investing, and so on.

2. You can invest in global markets

Fancy investing and trading? Well, while your local banks will direct your funds on their own financial products, offshore banks let you access foreign stock exchanges and other investment vehicles - without the intervention of brokers, if you want.

What kind of investment vehicles can you choose? Nearly everything: Stocks, bonds, precious metals, real estates, and so on. Need help? No problem: You can access a dedicated wealth manager to look after your investments, as well as offering recommendations based on your asset size, risk tolerance and other factors.

3. You don't need a lot of money to open an account

Unlike the typical misconception we've heard from those who are interested in offshore banking, opening an offshore bank account doesn't have to be expensive.

Indeed, there are offshore private banks, such as those in Liechtenstein, that require you to deposit a minimum of 350,000 USD/EUR/CHF. Some others have moderate requirements, such as offshore banks in Switzerland, which requires a minimum of 10,000 USD/EUR/CHF as the initial deposit. However, there are banks - typically public banks - allow you to open an account for less than USD 1,000. Offshore banking services in St. Vincent and Cyprus, for example, has a minimum opening deposit requirement of only USD 500.

4. You can open and manage your account remotely

Many people think that offshore banking is impractical because the banks are located outside their countries, in such a way that it requires some amount of travel for opening a bank account. While some offshore banks require you to be physically present, there are many offshore banks that allow you to open an account remotely.

What you need to do is using services like ours (most offshore banks are only accepting new clients from authorized agents), and submitting the required documents and other requirements. The whole process can take anywhere between three days to three weeks, depending on the approval process that differs from one bank to another.

Managing your account also can be done remotely, usually via phone, fax, and the Internet. There is no need for your physical presence in making any transactions, investing and other financial decisions.

5. Offshore banks are stronger than their onshore banks

Perhaps this is what most people don't know about offshore banks: They are typically stronger than the 'conventional' banks, due to several factors, including minimal Government intervention, more stable jurisdiction, and stricter banking rules.

Indeed, unlike banks in the US and other developed countries that can get away from legal issues due to their 'mishaps', in some offshore jurisdictions, bankers can go to jail for their failure in managing clients' money properly. Moreover, offshore banks are typically stricter in term of requirements for opening a bank account than their onshore counterparts.

How so? Consider this: Opening a bank account onshore may only require your ID and proof of address. But opening a bank account offshore may require various documents, such as passport copy, proof of address, CV/resume, reference letter, bank statements, and so on. The requirements alone can show you that offshore banks choose their clients carefully, more than your local banks.


There is a strong need to set the facts straight when it comes to offshore banking. The illegal activities, allegations, regulations, and other lingering issues have overshadowed the truth about offshore banking.

The five things mentioned in this article are just a few of many facts people should know about offshore banking. If you need more facts or any other information, please let us know.