By Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank
Even today, many people believe that offshore bank accounts are only for the rich. Those in the upper-class ranks can indeed benefit from establishing international accounts and depositing into them regularly.
You should also know that people with more modest incomes can also benefit from choosing to open one or more offshore bank accounts. If any of the following applies to you, then looking into accounts with the right offshore bank is something you should seriously consider.
People Who Want Resources for a Rainy Day
It’s always nice to have some money set aside for a rainy day. One way to do that is to set up an account for use in emergencies. While you want to access that account at will, you don’t want it to be one of the bank accounts you use for typical purposes.
This is where an international bank account can be helpful. Many of these accounts require a minimum deposit to become established. If you put in enough, the balance will generate some interest. In the best-case scenario, that interest would be enough to handle whatever emergency has arisen without depleting the remaining balance.
Anyone Who Likes the Idea of Competitive Interest Rates
Speaking of interest rates, did you know that some offshore locations offer better rates than what you can get from a domestic bank? For example, there are time deposit accounts that allow you to earn an impressive amount of interest if the balance is kept over a certain amount. Some offshore accounts like this one have a tier system for interest; as the balance reaches different levels, you qualify for higher interest rates. That’s a great way to make money and save, letting your money work for you.
Remember that you don’t have to start the account with more than the minimum deposit required. It’s always possible to start with a smaller balance and then gradually add to it until you reach a level that generates interest. For people of more modest means, this is often a great way to get started with offshore banking.
Those Who Plan on Living Abroad
You may have a dream of retiring to another country someday. Now is a great time to begin preparing for making that transition. If you establish accounts with an offshore bank now, it will be easier to ensure the process of transferring assets from your domestic accounts will be more straightforward.
Since you plan to visit that intended retirement location between now and when you make it your permanent home, it’s nice to know there are funds on hand if you need them.
Don’t forget that those who are preparing to be expats may receive certain tax benefits. Depending on your country of origin, those benefits may be based on confirming that you are an expat. Bank accounts that are located offshore and have local addresses attached to them can satisfy that requirement.
People Who Travel Internationally
Right now, the primary focus is on making sure you have an account complete with a debit card for use while traveling abroad. Depending on where you’re going, a card associated with an offshore account may work better than using the one related to a domestic bank account.
Why could this be the case? The exchange rate between the country you’re visiting and where the account is based may be more favorable. Perhaps the banking laws that apply to the country where your account resides is more favorable for some other reason. Whatever the combination of circumstances, you end up finding it advantageous to use your offshore debit card rather than withdraw from your domestic funds.
Anyone Who Wants to Build Nest Eggs for Retirement
In an uncertain world, setting aside money for the retirement years is a must. You’ll find that establishing an offshore savings account can help you with this goal. Depending on the terms that come with the account, it’s likely to be a better choice than depositing funds into a domestic savings account.
It’s not just the interest rate that may be more attractive. The fact that the account is based in another country may make you less tempted to withdraw the funds unless they are seriously needed. In this way, you protect yourself from falling into a pattern of making deposits and then withdrawing funds to pay for things that you don’t need. The result is that the money remains in the account, earns interest, and leaves you more financially comfortable when you retire.
Those Who Value Their Privacy
Privacy is another reason to consider opening an offshore account. The fact is that you don’t want everyone to know where you have your funds deposited. While the information will come to light should you die, there’s no reason why you have to share it now. You’ll find that an international bank is a great way to protect your privacy as well as your money.
International banks are known to be careful with information about depositors. You are free to designate authorized people to access your account. However, without your permission, there is little than can be done by others to gain information regarding your account other than through specific courts.
People Who Want to Reduce Their Tax Obligations Legally
Depending on domestic tax laws, the funds you place in offshore accounts may be subject to less taxation. In some cases, the money may not be taxed unless you choose to transfer it to a domestic bank account. Thanks to this measure, it may be possible to deposit up to a certain amount in your offshore account annually and reduce your tax burden.
Keep in mind that the offshore banks in many countries do provide limited information to domestic tax agencies. Do keep accurate records and report offshore funds by following the requirements of your country’s revenue agencies. Doing so ensures that you get to enjoy the benefits but do not create any issues that could make things difficult at home.
Anyone Who Wants to Protect Their Wealth from Political Risk
If the political climate at home is somewhat unstable, you may be wondering what would happen if things got worse. How would it affect your holdings or possibly the ability to make use of them? The money in your domestic accounts could indeed become difficult to utilize if things get worse. That won’t happen with your offshore accounts.
Even if there are problems with domestic banks, they won’t affect the funds found in your offshore bank accounts. They could end up being the means of keeping your head above water until things are more stable at home politically.
Those Who Want to Protect Assets in the Event of Domestic Legal Actions
While the political situation may not be a pressing concern, there’s another issue that you may want to consider. What would happen if someone sued you, and the judgment was not in your favor? What would happen to the financial assets held in domestic accounts? The most likely outcome is that the court would authorize the seizure of those balances to satisfy the judgment.
If that happens, the funds kept in your offshore savings, term deposit, or checking account cannot be automatically seized. You can use the balances in any way you see fit. That includes being able to support yourself while you re-establish your domestic accounts after the judgment is satisfied.
How to Open Your Offshore Bank AccountHow HHsdalfasd
Have you been thinking about establishing one or more offshore bank accounts? There is no better time than now to open an account.
Caye International Bank, located on Ambergris Caye island in Belize, offers a full range of banking services. We’ve been helping individuals and corporations with their financial needs for almost two decades.
Contact one of our financial service professionals today to discuss your many offshore banking options.
This is a Sponsored Feature.
Luigi Wewege is the Senior Vice President, and Head of Private Banking of Belize based Caye International Bank, a FinTech School Instructor and the published author of The Digital Banking Revolution – now in its third edition.
You can follow his posts on trends shaping the banking and financial services industry on Twitter: @luigiwewege
Bank of England’s Bailey sees pronounced lockdown hit in first-quarter
LONDON (Reuters) – Bank of England Governor Andrew Bailey said on Wednesday that the impact of lockdowns on Britain’s economy seemed to be diminishing but the impact of the current one would still be pronounced.
Bailey said the share of retail sales that had moved online rose sharply in 2020 as consumers and businesses adjusted to social distancing rules
“We’re expecting however, obviously, quite a pronounced effect in the first quarter because this lockdown is obviously again necessarily a severe one,” Bailey said in an online discussion organised by the BoE.
(Reporting by David Milliken; Writing by William Schomberg)
Open banking is helping to evolve the user experience
By Leon Muis, Chief Business Officer, Yolt Technology Services
Whilst the COVID-19 pandemic has slowed down the pace of life in most areas, it hasn’t slowed down innovation within the financial services sector, as providers look for ways to gain a competitive edge in the post-COVID landscape. We’ve seen faster and further movement towards online and digital services, and that’s brought new solutions and turbocharged development for open banking.
In January 2020, the number of customers using open banking in the UK passed one million for the first time – a milestone that took two years to achieve following the UK roll out from January 2018. And it was only nine months later in September 2020 whereby two million customers were using open banking-enabled products: This growth was not necessarily achieved “despite the disruption caused by COVID-19” as the Open Banking Implementation Entity suggests, though the pandemic has undoubtedly created obstacles, but perhaps in part was achieved because of it.
You don’t have to agree with the Chime chief executive that the pandemic has made traditional banking a “relic” to accept the fact that it has had a profound impact in consumer behaviour – not least because it’s also been noted by traditional banks. And it isn’t just banking. ONS figures show that the first lockdown alone saw average weekly online spending in the UK increase from £1.52bn to £2.47bn.
However, as reliance on online channels increases, so do customers’ expectations. Consumers now demand services that are instant, convenient, personal and smooth. Open banking – and, in time, open finance, on which the FCA recently ran a call for input – could play a significant role in meeting those expectations.
Open banking can help to achieve this goal by using application programme interfaces (APIs) to provide account information services (AIS) and for payment initiation services (PIS). It can also build on these by using data enrichment to create additional value from the data gathered through APIs.
The specific benefits these bring will vary widely between sectors and organisations benefiting businesses and consumers/individuals alike. As a result, they will transform the consumer experience.
To date, account information services (AIS) are the most developed and underpin much of the work on data enrichment. At a basic level, they are already enabling thousands of customers to gain a consolidated view of their finances using open banking apps, whether from their bank or a third-party developer.
More significantly, though, AIS present opportunities for banks and other businesses to gain a much clearer insight into their current and prospective customers. AIS is currently only applied to current accounts and credit cards, which means that firms can gain a good understanding of existing and prospective customers’ finance and activity. However, if API connections were expanded to also include things such as investments and pensions too, firms could get a fuller picture of their consumers’ financial footprints.
That could radically improve convenience for customers – simplifying affordability assessments for lending, for instance, but also enhancing services. Combined with data enrichment, AIS can give organisations much better insight into their customers’ behaviours and needs to select and tailor appropriate products and services to them – and offer them at the right time.
Payment initiation services (PIS), meanwhile, offer customers the opportunity to pay for goods and services directly from their accounts. Much of the benefit here could be felt by retailers, as using PIS can help a retailer save up to 80% of a credit card fee for every transaction. During a time of such economic uncertainty, being able to save potentially millions from transaction fees could be crucial to retailers making a strong recovery from the COVID-19 pandemic.
Plus, PIS also bring an increase in security, which should provide reassurance to consumers and, for some banks, new visibility of transactions previously made on third party credit cards. That could, again, increase their ability to understand their customers’ behaviours and react more quickly than their competitors to changing needs.
There is still a long way to go, of course, both in the development of services and the adoption by customers. In many cases, they go no further than regulations – available for current and some credit card accounts, but not for others and many savings accounts, for example.
Unsurprisingly, open finance development is less advanced. APIs are being used to connect to some banks to accelerate applications and decisions in principle, and in future could do much more – automating affordability and proof of funds checks, for example, to dramatically simplify the application process. Likewise, AIS for pensions and investment accounts, combined with data enrichment, could enhance understanding of customers and personalisation of services yet further. For now, though, it all remains some time away.
Future regulation may play a part in developing such services, but financial institutions would be wise not to wait until being forced to adapt. The competitive advantages of working with the available technology to enhance the customer experience and personalise offers and services already exists. As institutions take advantage of them, customers will come to expect the level of service it enables.
With coronavirus vaccines already being disributed and approved, the start of the end of the pandemic is in sight, but economic uncertainty and the recovery effort will remain much longer. As the recovery sets in, businesses will need to use all of the tools available to avoid being left behind.
‘Act big’ now to save economy, worry about debt later, Yellen says in Treasury testimony
By David Lawder and Andrea Shalal
WASHINGTON (Reuters) – Janet Yellen, U.S. President-elect Joe Biden’s nominee for Treasury Secretary, urged lawmakers on Tuesday to “act big” on coronavirus relief spending, arguing that the economic benefits far outweigh the risks of a higher debt burden.
In more than three hours of confirmation hearing testimony, the former Federal Reserve chair laid out a vision of a more muscular Treasury that would act aggressively to reduce economic inequality, fight climate change and counter China’s unfair trade and subsidy practices.
Taxes on corporations and the wealthy will eventually need to rise to help finance Biden’s ambitious plans for investing in infrastructure, research and development, and for worker training to improve the U.S. economy’s competitiveness, she told members of the Senate Finance Committee.
But that would only come after reining in the coronavirus pandemic, which has killed over 400,000 in the United States, and the economic devastation it brought.
Yellen, who spoke by video link, said her task as Treasury chief will be to help Americans endure the final months of the pandemic as the population is vaccinated, and rebuild the economy to make it more competitive and create more prosperity and more jobs.
“Without further action we risk a longer, more painful recession now and longer-term scarring of the economy later,” she said.
Yellen said pandemic relief would take priority over tax increases, but corporations and the wealthy, which both benefited from 2017 Republican tax cuts “need to pay their fair share.”
She raised eyebrows of some senators and Wall Street when she said that Treasury would consider the possibility of taxing unrealized capital gains – through a “mark-to-market” mechanism – as well as other approaches to boost revenues.
She also that the value of the dollar should be determined by markets, a break from departing President Donald Trump’s desire for a weaker U.S. currency.
“The United States does not seek a weaker currency to gain competitive advantage and we should oppose attempts by other countries to do so,” she said.
Wall Street stocks rose on Tuesday in reaction to Yellen’s call for a hefty stimulus package, as well as to positive bank earnings updates. Oil prices also rose, while Treasury yields fell slightly on her comments that parts of the 2017 tax reform should be repealed.
Biden, who will be sworn into office on Wednesday, outlined a $1.9 trillion stimulus package proposal last week, saying bold investment was needed to jump-start the economy and accelerate the distribution of vaccines to bring the virus under control.
Asked what outlays would provide the biggest “bang for the buck,” Yellen said spending on public health and widespread vaccinations was the first step. Extended unemployment and nutrition aid, better known as food stamps, should be next, she said.
“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said.
She said even though the amount of debt relative to the economy has risen, the interest burden – the amount the Treasury pays to service its debt – has not, due to lower interest rates. She said she will watch that metric closely as the economy recovers.
NEW CLIMATE POST AT TREASURY
Yellen also called climate change an “existential threat” to the U.S. economy and said she would appoint a senior official at Treasury to oversee the issue and assess systemic risks it poses to the financial system.
She added investment in clean technologies and electric vehicles was needed to cut carbon emissions, keep the U.S. economy competitive and provide good jobs for American workers.
Yellen said China was the most important strategic competitor of the United States and underscored the determination of the Biden administration to crack down on what she called China’s “abusive, unfair and illegal practices.”
Asked whether China had committed “genocide” in its treatment of Muslim Uighurs as the Trump administration declared in a last-minute proclamation, Yellen said China is “guilty of horrendous human rights abuses, yes.”
Biden’s transition team urged the Senate to move swiftly to confirm Yellen. Democratic Senator Ron Wyden, who will lead the Finance Committee after Biden’s inauguration on Wednesday, said he would push for a confirmation vote on Thursday. Republican Senator Mike Crapo said he would work towards an “expeditious” confirmation for Yellen.
She also received the endorsement of all former Treasury secretaries, from George Schultz to Jack Lew, who urged senators in a letter to swiftly confirm Yellen’s nomination to avoid “setting back recovery efforts.” A spokeswoman for Treasury Secretary Steven Mnuchin, who steps down on Wednesday, did not respond to a request for comment.
(Reporting by David Lawder, Andrea Shalal, Ann Saphir and David Shepardson; Additional reporting by Trevor Hunnicutt; Editing by Heather Timmons, Andrea Ricci and Kim Coghill)
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