If you have read our article about the 6 reasons to open an offshore bank account, you may be interested in an offshore account. Let’s now answer one last concern: is offshore banking legal?
What is legal
First important reminder: an offshore bank is nothing more than a bank located outside the account holder’s country of residence.
And there is nothing illegal about that. What’s important here is the reason to open an offshore account: it’s not illegal if it is done for legitimate reasons. Here are two examples of legitimate reasons:
- Expats who work abroad need to open an offshore account to have access to funds in the new country they live in.
- People living in politically unstable countries may need an offshore account because they fear losing their investments.
Thus, using the services of a bank outside your home country is not illegal. Moreover, it is generally very straightforward to open an offshore bank account and the whole process can be done remotely.
What is not legal
It’s is illegal to create an offshore bank account if it’s done with the intent of tax evasion or money laundering. And, even if some jurisdictions still refuse to exchange information with other countries in order to “protect” non-residents who open a bank account in their country, these jurisdictions are under fire. Indeed, within the frame of international financial regulation, offshore banks are required to fulfil so-called Know Your Client due diligence, and scrutinise all transactions.
Another completely illegal practise is to hide your real identity to avoid declaring an offshore account. An offshore account must be declared to the holder’s home country for tax reasons.
So, to respond to the question “is offshore banking legal?”, we can summarize and say: offshore banking is not illegal, but hiding it is!