Monday, 18 July 2016

Should we drop the "offshore" in Offshore banking?

Offshore banking
Offshore Banking

The 'hype' surrounding Panama Paper leaks has practically ended.  Just google for Panama Paper leaks, go to the News section, and pay close attention to the dates – you'll see what we mean.

The lack of news surrounding offshore structures doesn't mean there's no aftermath: The damage has been done, and changes are made by the Governments of the world.

What we can learn from all the hype is this: There will be tighter control over offshore companies and bank accounts, but offshore structures will remain.

Let's just say that offshore company formation and banking have gone mainstream – partly thanks to the media coverages.  One thing for sure, there's one unstoppable trend that will continue to emerge, regardless of the laws and regulations concerning offshore banking: Internationalization.

Internationalization vs. Globalization

We've heard so much about globalization, but internationalization is a wave of the future that shouldn't be overlooked.  Both are often used interchangeably, but in reality, both are totally different.  Knowing the difference is important – so bear with us; please read on.

First thing first, let's take a brief look at the difference between globalization and internationalization.

Globalization is essentially a global economic integration, which allows free trade and free capital mobility.  National economic boundaries are erased, and interregional trades are highly encouraged.  However, due to the complexity of global issues – climate changes, limited resources, and other social issues – makes it more an ideal condition than a reality.

Internationalization, on the other hand, is an emerging trend of the future that shows the increasing significance of international trade, relations, treaties and alliances among nations of the world.  Today, internationalization is actualized at a personal level.  Not only relationship between countries, but it's also a relationship between citizens of the countries – in the form of B2B and B2C – even C2C (peer-to-peer).

So, indeed, both globalization and internationalization are quite different: Globalization wants one, global economy, while internationalization wants every jurisdiction and even person to be self-sufficient and trade according to what they have and need to improve the economy of each and every of them.  In other words, internationalization is a response to globalization.

Asset internationalization trends

The impact is of internationalization trend is widespread: A consumer in, say, Malaysia can now make a purchase with a business in France via technology (The Internet, mobile apps, etc.)  A business in the UK can now trade with another business in China (e.g. Importing goods.)

Offshore banking is one of the “products” that's being “traded.” Not only a bank serves local clients, but it also serves overseas clients.  Not only that, the increased mobility of people for individual and business purposes make offshore banking – and company formation – a convenience solution that offers plenty of upsides.

Unfortunately, Governments of the world want to regulate this due to the misuse of the offshore structures, at the expense of those who do asset protection in the right way.  Governments like the U.S., adopt global taxation policy which means that any income that you make from any jurisdictions will be taxed accordingly.  In similar fashion, other big countries – including the EU – want to have more control over what a company or a person do with their assets.

Through the push of regulations li1ke FATCA, AEOI, and so on, the idea of self-sufficiency seems not longer considered as important.

However, as we mentioned above, the media has shed some light on offshore banking and everything that's related to it, including internationalization.  Along with the growing significance of Bitcoin and other cryptocurrencies, interationalization is something that will continue to becoming more and more prevalent – regardless of the control imposed on the financial products, services and policies that are allowing for the trend. 

Should we drop “offshore” in “offshore banking”?

Carrying the label “offshore” turns out to be more disadvantageous today than ever.

By definition, it means “made, situated, or conducting business abroad, especially in order to take advantage of lower costs or less stringent regulation.” (source)  It's an accurate explanation of the word.  However, today, offshore seems to mean “iIllegally and unethically made, situated, or conducting business abroad, especially...” You get the point. 

You see, an offshore bank account is just that - a bank account.  An offshore company is just that – a company.  Those structures are just the same as the structures we have in our home country.  Being located in a more stable politically and economically jurisdiction, as well as more asset-friendly laws and regulations than your country of residence doesn't mean that everything-offshore should be outlawed.

The idea of internationalization is to be resourceful and take benefit offered by particular jurisdictions to secure your assets, for one reason only: Because you can, legally.  That's all.

Here's a nice way to describe it: Imagine that you're craving for a burger.  Joint A is 5 minutes walk from your home, and Joint B is across the street, 10 minutes away.  Joint B tastes better and costs cheaper than Joint A.  An additional 5 minutes walk to a better value for money burger is worth doing to some people.  If you won't do it, deciding to eat at Joint A because it's closer to you, then just do so – but it doesn't make sense to stop people from going to Joint B.  Both are burger joints, and every person's taste is different.

That's the whole idea of getting your assets offshored.  It (should be) a personal choice, and it can be as legal and ethical as you can be onshore. 


Should we drop “offshore” in “offshore banking? To us, it doesn't matter much; but “I want to open a bank account in Zurich” sounds better than “I want to open an offshore bank account in Zurich.” The former does sound a bit more ethical than the latter.

But here's what more important: The internationalization of your assets. You should be able to choose to establish a business, bank your money or invest your assets anywhere in the world.

You can now travel to anywhere in the world - legally; your assets should be able to do so, too, don't you think?