Opening an offshore bank account - what you should know

There are a lot of misconceptions about offshore bank accounts. Many people think they’re only for multinational companies or millionaires, or are used to avoid paying tax.

But in actual fact, offshore accounts can be a legal and cost-effective way for businesses of all sizes to manage financial commitments in other countries.

In this guide, we’ll bust some myths around offshore bank accounts, and explain what they actually are. Plus, the benefits of opening one and how to go about it. We’ll also cover an alternative for international banking - the Wise Business multi-currency account.

But first, let’s cover the basics.

What is an offshore bank account?

In its simplest terms, an offshore account is just a bank account you hold in a country you don’t live in. Businesses use them to manage funds in countries they trade in, so they can make and receive payments in multiple currencies¹.

For example, a business owner based in Singapore wanting to trade in Malaysia may want to open an offshore account there, so they can send and receive payments in Malaysian Ringgit (MYR).

You can also hold savings and investments in offshore accounts. They’re also useful for people who make or receive international payments regularly.

Is it legal to have an offshore account?

Offshore banking itself isn’t illegal, although it’s true that the term has often been associated with tax evasion, money laundering and other shady activities.

It’s perfectly legal to put your money in a bank account in another country, provided you follow the rules and regulations of both your home country and the country you’re banking in².

What is against the law is using your offshore account to evade taxation, hide wealth or hold money acquired through illegal practices.

The benefits of an offshore account

There are many potential advantages for business owners considering opening an offshore account. These include¹:

• The option to operate accounts in multiple currencies. This can minimise the costs involved with currency conversion - in some cases, you may be able to reserve currency prices in advance.
• Higher interest rates and lower taxes compared to domestic accounts.
• The opportunity to diversify investments, spreading them (and the risk) across assets in various countries.
• More privacy. Depending where you choose to open your offshore account, you may benefit from a higher level of privacy than when banking in your home country. For example, through confidentiality agreements.
• The option to keep your money in a central and secure location, while still connected to your local bank accounts.
• Flexibility when moving abroad (or moving your business abroad). Offshore accounts help you to prepare for a move by opening an account in advance, and let you keep the same account every time you move.
• Access to international financial and investment advice.

Are there any downsides?

There are some potential drawbacks with offshore bank accounts, meaning it’s worth taking the time to decide if they’re the right option for you. These include²:

• High initial deposits. Some accounts also require you to keep a minimum amount of money in order to avoid extra fees
• Less protection under deposit guarantee schemes. In Singapore, bank account holders have protection of up to S$75,000 per account as part of the Singapore Deposit Insurance Scheme³. Offshore accounts may not offer this protection for your money.
• Higher costs. Offshore accounts often have higher transaction and admin fees compared to ordinary domestic accounts. We’ll look at these in more detail in a moment.

How to open an offshore bank account

Step 1 - Finding an offshore account

The first thing to do is to find an offshore account. Some countries and banks are known for their attractive offshore banking services, such as²:

• BNP Paribas, BPCE and Credit Agricole in France
• Commerzbank and Deutsche Bank in Germany
• Bank Delen and KBC Bank in Belgium
• BCGE, BCN and Vontobel in Switzerland
• ABN AMRO, ING and Rabobank in the Netherlands
• Abu Dhabi Bank in the UAE
• Barclays, HSBC and Lloyds in the UK
• Wells Fargo in the US.

If there’s a particular country or currency you want to trade in, you may have to go bank to bank to see which offer offshore accounts. You can also look into non-bank providers, like the Wise Business account.

Step 2 - Opening your offshore account

The process of opening an offshore bank account is pretty similar to opening an ordinary domestic account. You’ll usually need to provide²:

• Full personal details, plus all the necessary company information (including registration number) for your business
• Passport or valid photo ID
• Proof of address
• Proof of income.

You might also be asked for other documentation for anti-fraud purposes, such as statements and references from your existing bank showing that your finances are in order and above board.

In many cases, you can open offshore bank accounts online², although some banks may require you to visit in person to verify your identity.

Are there any costs with offshore accounts?

There are some costs involved with offshore accounts, meaning it’s wise to do some research before opening one.

The first thing to check is the minimum initial deposit. This can be very high, depending on the bank and account. For example, if you’re a Singaporean business owner wanting to open an offshore account in the UK with Barclays Bank, you’ll need to deposit at least £100,000⁴.

There may also be charges for dropping below a certain minimum balance threshold. For example, with Barclays, you’ll be charged £40 GBP a month if your balance falls below £100,000⁴.

Transaction fees

Another key charge to check is for transfers and day-to-day banking transfers. To use our Barclays example again, its international bank account charges at least £15 GBP to send an international transfer, and £6 GBP to receive one⁴.

You should also find out whether the bank charges for withdrawals, using your debit card or closing your account.

Need an international account? Try Wise

If you’d like a quicker and more convenient way to manage your business finances across international borders, choose Wise Business.

Open a Wise Business multi-currency account online and for a one time fee of 54 SGD - you’ll get access to local account details in 9 worldwide currencies, including SGD, MYR, USD, AUD, EUR and more. It's like having multiple bank accounts in one, so you can send and receive money like a local business right from Singapore or wherever you are.

Plus, you can convert and hold 50+ currencies at once, and pay invoices in 70+ countries - all with low fees and the real, mid-market exchange rate.

There’s also Wise Business Visa debit card, perfect for covering your expenses in 200+ countries with no foreign transaction fees.

Learn more about Wise Business

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Sources used for this article:

1. HSBC - What is offshore banking?
2. Expatica - offshore bank accounts
3. SDIC
4. Barclays rates and fees

Sources checked on 27.06.2022.