Anonymous banking

Offshore banking has many advantages and one of the most important ones is definitely greater amount of privacy. In 1934 Swiss Banking Act codified bank secrecy into a law. Under the principles of bank secrecy, privacy is statutorily enforced, with Swiss law strictly limiting any information shared with third parties, including tax authorities, foreign governments or even Swiss authorities, except when requested by a Swiss judge’s subpoena.

However, anonymous banking is not strictly true as a term as all Swiss bank accounts, including numbered bank accounts, are linked to an identified invidual under Swiss banking law. This law only permits a bank to share information with others in cases of severe criminal acts, such as identifying a terrorist’s bank account. Besides Switzerland there are also other countries where such laws exist. Tax havens such as Cayman Islands and Panama also have more strict privacy laws than other countries and are perfect for offshore bank accounts.

U.S also has a bank secrecy act but according to that financial institutions must assist government agencies to detect and prevent money laundering. Financial institutions must keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 per day and report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. This means that financial institutions are obligated by law to monitor your business.

Tax havens

The U.S National Bureau of Economic Research suggests that roughly 15% of countries in the world are tax havens. These countries are mostly small and affluent.

This is a list of countries that are considered to be tax havens:

Andorra(no personal income tax), Anguilla, Anjouan, Antigua and Barbuda, Aruba, Bahamas(no personal income and capital gains tax), Barbados, Belize, Bermuda, Bosnia and Herzegovina, British Virgin Islands(largest offshore jurisdiction in the world by volume of incorporations), Campione d’Italia, Cayman Islands, Channel Islands, Cook Islands, Cyprus, Hong Kong, Ireland, Isle of Man, Labuan, Liechtenstein, Luxembourg, Macau, Malta, Mauritius, Macedonia, Monaco, Nauru(no taxes besides airport departure tax), Nevis, New Zealand, Norfolk Island, Panama, Russia(13% income tax), Samoa, San Marino, Sark, Seychelles, Singapore, St Kitts and Nevis, St Vincent and the Grenadines, Switzerland, Turks and Caicos Islands, UK(flat levy of £30,000 on their non-UK income), following U.S states – Delaware, Nevada and Wyoming, United Arab Emirates, United States Virgin Islands.

Tax havens’ main advantages are said to be in the areas of personal residency, asset holding, trading and other business activities. Some offshore banks operate with lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention. Interest is generally paid by offshore banks without tax being deducted, there are banking services like lower or higher rate loans based on risk and investment opportunities not available elsewhere.

Protection against local political and financial instability

This is a great advantage for residents in areas where there is a risk of political turmoil. People who fear that their assets may be frozen, seized or disappear, often use offshore banks for financial stability. Developed countries with regulated banking systems offer the same advantages in terms of political and economical stability though.