Explain Offshore Saving Accounts

In addition to its sandy beaches, the Bahamas is an international center for offshore banking.

Some offshore banks offer checking account services, but many international bank accounts are demand deposit accounts (DDAs), often called "savings accounts" by North American banks. Account holders open offshore savings accounts for a number of reasons.

History

Offshore banking has been practiced for a long time. An offshore account is simply a bank account in a country other than the nation of the depositor's citizenship. Swiss banks are likely the best-known offshore banks, but any bank in a foreign country can open accounts according to local regulations.

Function

In some cases, banks may refuse to disclose assets to outside agencies, such as tax authorities in the depositor's nation of residence. As such, these accounts are sometimes used for tax evasion. In other cases, a depositor living in a country with a volatile currency may place savings in a country with stable currency, to avoid devaluation losses.

Geography

In Europe, Switzerland and the Channel Islands (U.K.) specialize in offshore banking. A number of Caribbean countries, including the Bahamas and the British Virgin Islands, specialize in banking services for foreign nationals.

Using Offshore Accounts

Offshore savings accounts operate like any other account. Money deposited into the account for safekeeping can later be withdrawn or transferred to another account. Some offshore banks do not keep information on depositors. A depositor has a numbered account and a password; anyone with that information can access funds in the account.