Offshore Banking

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include some or all ofstrong privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)less restrictive legal regulationlow or no taxation (i.e. tax havens)easy access to deposits (at least in terms of regulation)protection against local political or financial instabilityWhile the term originates from the Channel Islands "offshore" from Britain, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location (Switzerland, Luxembourg and  Andorra in particular are landlocked).
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By popular usage, the establishment and operation of U.S. or foreign banks in such offshore jurisdictions as the Bahamas and the Cayman Islands.

In popular use, "offshore banking" is often taken to mean nothing more than persons resident in one legal jurisdiction holding assets in financial institutions incorporated in another jurisdiction. Offshore financial transactions have a precise meaning. Banks or other financial institutions operating "offshore" are exempt from a wide range of regulations normally imposed on "onshore" institutions. Their transactions are tax-exempt, not encumbered by reserve requirements, free of interest-rate restrictions and often, though not always, exempt from regulatory scrutiny with respect to liquidity or capital adequacy. Over the last 50 years, all of the world's major banks have opened branches in offshore financial centres. A number of jurisdictions have been willing to "charter" banks upon presentation of the required fees. As long as they do not do banking business with the local population, their books are unexamined and their practices are uncontrolled.