What is an Offshore Private Bank?

An offshore private bank is a banking facility for high-wealth investors that is headquartered in a country other than the investor's homeland. These banks often cater to wealthy clients by opening offshore operations in areas that have extremely favorable tax policies, known as tax havens. Customers at an offshore private bank are generally given far more personal account services and have access to a much wider range of investment and account options than the general public.

Most of the best known offshore private bank operations exist in island nations. Popular locations include many of the Caribbean islands, such as Barbados, the Bahamas, and the British Virgin Islands. Cyprus and the Channel Islands are also popular locations. Offshore private bank operations do not actually have to be “offshore” on an island, however; throughout banking history, the landlocked country of Switzerland has been a haven for private banking.

Joining an offshore private bank usually requires a minimum balance deposit. While less discretionary private operations may allow customers to deposit $1,000 US Dollars (USD) as an initial fund, some of the most exclusive offshore banks may require an entry deposit of up to anywhere between $50,000-$1,000,000 USD. Some banks traditionally require an introduction from a recognized professional or current client before accepting a new member.

In return for a major investment with an offshore private bank, the company will extend a variety of services to a client. In addition to total financial management, including trust creations, investing services, and the best available interest rates, some offshore private banks may work as vaults for the storage of artwork, jewels, and other precious items. Many throw a variety of perks into the deal, such as VIP lounge access in airports, numerous discounts, and even concierge-like assistance for landing tickets or reservations at hotspots around the globe.

The appeal of a private offshore bank, in addition to favorable tax rates and perks, is the high level of secrecy traditionally employed. Unfortunately, many financial experts suggest that this makes many private banking groups at least passive contributors to a variety of criminal activities, including organized crime; drug, arms, and black market trafficking; money laundering, and high levels of business fraud. Offshore accounts also seem to play an important part in tax evasion, meaning that some countries may choose to frequently audit the activities of those known to be offshore account holders. Opening an account with an offshore private bank is not technically illegal in most regions, but it becomes extremely important to understand taxation law in both the home and offshore banking country in order to avoid possible tax violations.