Banking for tax free offshore companies, international business corporations and other corporate vehicles is often part of an administrative and financial value chain. This value chain is structured to optimize administrative processes, limit regulatory intervention and maximize the growth potential of the company. Offshore banking and financial services for tax friendly corporations became a daunting task due to severe abuse by illicit actors, obscure activities and other financial scandals. As a result, standard customers with legitimate business models and activities are subject to periodic scrutiny and experience more difficulties to maintain bank accounts and approval of other financial services.
Banking secrecy is the core of the fiduciary relationship between financial institutions and their customers. Offshore financial centers further this relationship by providing private banking and wealth management services to a specific set of clients. These clients are often considered high net worth individuals or run a stable and trustworthy international business. Private banking and the offshore financial industry are therewith closely connected and work in conjunction to provide exclusive services to a pre-qualified audience.
People have a right to financial privacy. Governments and their respective regulators, as well as several international organisations aim to restrict undesired corporate activities that potentially lead to tax evasion. Friction between these two objectives triggers a cat and mouse game where professional advisers always aim to identify still existing loopholes and strive for regulatory arbitrage.
The global finance system has been abused by illicit actors and several financial scandals had a downward effect on society. Financial institutions and banks in particular are considered the gatekeepers of the financial system. They file currency transaction reports and suspicious activities reports to their local financial intelligence unit to avoid illicit use of their operation. Failing to comply with these standards may lead to hefty fines and even economic isolation. The latter brings down the financial institution and is of serious threat to the offshore banking system and smaller, privately owned financial institutions.