Cyprus: Private and Corporate International Banking

The most common reason individuals and corporations access offshore centres is for commercial and private banking services. In the Bahamas, for example, banking employs over 3,000 people. The predominance of offshore banking in jurisdictions like the Bahamas is primarily because of advantageous banking laws that ensure good service, confidentiality, and asset and tax protection. These laws also provide freedom from certain banking regulations. Offshore banks often do not have reserve requirements or strict treasury laws. As a result, they can lend funds at lower interest rates and pay higher rates on deposits. They also have more freedom than onshore banks to invest depositors’ funds, and can provide attractive investment returns on relatively low-risk bonds, term deposits, and other bank products.

1. Banking Secrecy

Banking secrecy is the foundation of global private banking. A banker’s obligation to maintain strict confidentiality is based on your rights to personal protection and privacy.

These basic rights are outlined in many countries and in the United Nation’s human rights act. However, the introduction of intrusive fiscal laws, severe limitations to how capital can be transferred, and the existence of digital transactions has resulted in a significant loss of privacy for legitimate business and private financial matters. Many offshore jurisdictions have laws forbidding anyone to divulge a banking secret that he or she has been entrusted with. The punishment can be a fine – sometimes as much as millions of dollars – or imprisonment. Government authorities can spontaneously initiate proceedings against an offender, even if there has been no complaint or denunciation.

Banking secrecy is preserved in two ways: imposed secrecy or self-imposed secrecy. Imposed secrecy refers to bank secrecy legislation, often found in a jurisdiction’s bank act and usually administered and policed by a central bank or minister of finance. Self-imposed bank secrecy involves an individual bank’s adoption of additional secrecy requirements outside of a bank act.

An offshore bank’s ability to provide secrecy and discretion is extremely important. The right to banking secrecy belongs exclusively to the private and corporate client, not to the bank. Banking secrecy can be lifted only if a client is first convicted of a criminal offence such as money laundering, insider trading, or drug trafficking. Most offshore jurisdictions do not consider tax-related offences criminal to jeopardise banking secrecy.

Secrecy extends far beyond keeping account content and ownership confidential. Ideally, it includes the ability to engage in discreet bank transactions and services. Secrecy has never amounted to blanket protection. By law, banking secrecy protects the public’s interests and prevents any unjust interference in these interests.

2. Services to look for in an Offshore Bank
1. Banking Laws

The offshore bank you choose should be in a jurisdiction whose banking laws suit your agenda. In the absence of rigid or well-defined bank laws, look for a bank that has taken the initiative to define its own set of regulatory practices.

2. Level of Disclosure

Banks usually ask their clients to provide certain confidential details, such as jurisdictions of residence, bank references, and sources of funds. The level of disclosure that a bank requires may determine if you are prepared to work with that institution. Establish a sense of what information you are willing to disclose to your offshore bank and check to make sure that your boundaries will be respected both initially and throughout the duration of your interactions.

3. Deposit expectations

When you choose an offshore bank, consider its deposit expectations. Typically, banks that set high minimum deposits will provide superior service – but they require large deposits to maintain an account. If you choose a bank with low minimum-deposit requirements, make sure you will still receive optimum service.

4. Bank insurance

Depending on your agenda, you may need an insured bank, although there are a number of bank acts in place. For example, the United Kingdom Depositors’ Act requires its banks to insure depositors’ investments to varying amounts depending on the circumstances. If you intend to leave significant assets in a bank, it is recommended that you choose an insured bank.

3. Advantages of offshore banks over local banks

Private offshore banks provide better service than onshore banks in most respects. But before you choose an offshore bank, do some research. Make sure the bank is reputable and willing to work with you as opposed to simply acting as a reservoir for your deposits. Choose your bank based on service, reputation, and its ability to communicate well with you. The table below is a general comparison of local and offshore banks, and suggests some factors you may want to consider when evaluating your potential offshore bank.