What is an offshore bank account?

An offshore bank is a bank regulated under international banking license (often called offshore license), which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. Since the 1980s, jurisdictions that provide financial services to nonresidents on a big scale can be referred to as offshore financial centres. OFCs often also levy little or no corporation tax and/or personal income and high direct taxes such as duty, making the cost of living high.

With worldwide increasing measures on CFT (combatting the financing of terrorism) and AML (anti-money laundering) compliance, the offshore banking sector in most jurisdictions was subject to changing regulations. Since 2002 the Financial Action Task Force issues the so-called FATF blacklist of “Non-Cooperative Countries or Territories” (NCCTs), which it perceived to be non-cooperative in the global fight against money laundering and terrorist financing.

An account held in a foreign offshore bank is often described as an offshore account. Typically, an individual or company will maintain an offshore account for the financial and legal advantages it provides, including but not limited to:

• Strong privacy, including bank secrecy.
• Little or no corporate taxation via tax havens.
• Protection against local, political, or financial instability.

While the term originates from the Channel Islands being “offshore” from the United Kingdom, and while most offshore banks are located in island nations to this day, the term is used figuratively to refer to any bank used for these advantages, regardless of location. Thus, some banks in landlocked Andorra, Luxembourg, and Switzerland may be described as “offshore banks”.

Offshore banking has previously been associated with the underground economy and organized crime, tax evasion^[3] and money laundering; however, legally, offshore banking does not prevent assets from being subject to personal income tax on interest. Except for certain people who meet fairly complex requirements (such as perpetual travelers), the personal income tax laws of many countries (e.g., France, and the United States)^[5] make no distinction between interest earned in local banks and that earned abroad. Persons subject to US income tax, for example, are required to declare, on penalty of perjury, any foreign bank accounts—which may or may not be numbered bank accounts—they may have. Offshore banks are now required to report income to many other tax authorities, although Switzerland and certain other jurisdictions retain bank secrecy regimes that can be more difficult to deal with. This does not make the non-declaration of the income by the taxpayer or the evasion of the tax on that income legal and many OFCs have recently been important colleagues to onshore tax authorities and law enforcement against wrongdoers. Following the 9/11 attacks, there have been many calls to increase regulation on international finance, in particular concerning offshore banks, OFCs, crypto currency and clearing houses such as Clearstream, based in Luxembourg, which are possible crossroads for major illegal money flows. Most criminality involving the banking system has happened because of the regulations and controls being circumvented.

An offshore, or overseas, bank account is one that you have in a country you don’t reside in. They allow you to make and receive payments, hold money and set up savings and investment accounts in multiple currencies.

Offshore accounts, also known as offshore bank accounts or offshore savings accounts, can make it simpler to manage your financial commitments across multiple countries and regions. They can be useful if you need to make, or receive, regular international payments and transfers.

Most expats have a bank account in their home country and another account in the country they’re living in. Many also consider opening an offshore account, as this can be an effective way to save, invest and manage money while abroad.

Reasons to open an offshore account include:

While each offshore account will come with different features and benefits, here are some of the common ones:

They typically also come with regular banking features, such as a debit card and online and mobile banking.

While offshore accounts could provide a tax-efficient way to save and invest, you need to disclose your income to any relevant tax authorities and declare any interest earned on offshore accounts.

Some offshore accounts may have a monthly fee, or may charge for international transfers. Others don’t. For example, the HSBC Expat Bank Account has no monthly fee and transfers between HSBC accounts are free.

Other fees and charges may apply so you should read through the terms and conditions before opening an offshore account.

The amount you’ll need to deposit, or earn, to open an offshore account will vary.

To join HSBC Expat, you must be 18 years or over, currently reside in an eligible country / region, and meet one of these criteria:

HSBC Expat Premier

You must either:

HSBC Expat Advance

You must:

Offshore accounts are not protected by the Financial Services Compensation Scheme (FSCS), which protects savings held with authorised UK banks and building societies, up to £85,000 per person.

However, some offshore accounts are covered by other schemes. For example, the HSBC Expat Bank Account is covered by the Jersey Bank Depositor Compensation Scheme, which offers protection for eligible deposits of up to £50,000.

Based in Jersey, HSBC Expat provides expat bank accounts with many of the benefits listed above.

Find out more about the HSBC Expat Bank Account

Please remember that the value of investments, and any income received from them, can fall as well as rise, is not guaranteed and you may not get back the amount you invested. This could also happen as a result of changes in currency exchange rates, particularly where overseas securities are held or where investments are converted from one currency to another. We always recommend that any Investments held should be viewed as a medium to long-term investment, at least five years.

Banking offshore may have potential tax benefits for you. However, tax rules differ from country to country. If you’re unsure about your personal tax obligations, you should seek professional advice. It’s your responsibility to ensure your personal tax obligations are met.