Understand the Differences Between Retail and Offshore Private Banks

Many people don’t put too much thought into the diverse types of banks that exist. They simply want to know their money is safe and that they can access it when needed.

While the word bank can be a generalized term, it is important to recognize how different banks can be. This is especially true if you’re looking for an international or offshore bank which provides sophisticated banking and investment services for individuals as opposed to an onshore retail bank that focuses on the general consumer.

Let’s take a deeper dive into banking and explore the key differences and similarities between the traditional retail banks most are familiar with and offshore private banks.

What is a Retail Bank?
The most common type of bank is the retail bank. When people talk about swinging by their local bank to deposit a check or use the ATM, they are usually talking about their local retail bank. These banks offer a variety of financial services and are used by most for general checking, savings, and loan purposes.

A retail bank is also referenced as a domestic or onshore bank. This means it is used by people who live in the same country where it is located or headquartered. Although some retail banks have branches and offer services around the world, they are not the same as offshore or international private banks.

What is an Offshore Private Bank?
As the names suggests, an offshore private bank is both offshore and private. Since it is offshore, it is not a bank used by its local citizens. Instead, it is explicitly designated for use by foreign individuals, investors, and companies. It is also private, which means controls are in place to protect the offshore bank’s clientele.

There are many offshore banking destinations to choose from, savvy investors gravitate toward the options in Belize. As you move closer to opening an offshore account, you will need to meet certain requirements set by your choice of offshore private bank as well as the Internal Revenue Service (IRS) if you are a U.S. citizen.

Residency Requirements
From an account holder’s perspective, one of the biggest differences between a retail bank and an offshore private bank is the residency requirements. Most retail banks don’t have limitations or restrictions on where you must reside in order to establish an account.

On the other hand, offshore private banks do have limitations on who can open and maintain an account. An offshore private bank in Belize, for example, is only an option for those who can prove residency in a country outside of Belize. This means that it is for foreign investors, those who have second homes, or those who want to open an offshore business. However, it is not an option for a Belizean citizen or resident.

Initial Deposits
Another of the key differences between a retail bank and a private offshore bank is the required initial deposit. Think back to the first bank account you ever opened as a child or a teenager. There’s a good chance that it was at your local neighborhood bank, and your first ever deposit might have been $100 or even less. Often, retail banks have options for low initial deposits to establish accounts.

An offshore private bank doesn’t operate in the same way. Instead, these banks tend to have a minimum initial deposit that prospective account holders will need to meet. It tends to be in the thousands of dollars, although it can vary from one bank to the next.
Although you don’t have to be wealthy to bank privately offshore, you do need to be committed to this form of asset protection.

Privacy Levels
When deciding between a retail and offshore private bank account, there are many factors to consider. While no type of bank or account can meet the needs of all customers, privacy is important for many people.

If you are looking for the highest levels of privacy and anonymity, then choosing an offshore private bank is likely going to be the best financial choice for you. Many countries have implemented laws or regulations that make it easier to identify domestic bank account holders.

For example, the U.S. Bank Secrecy Act of 1970 and the USA Patriot Act laws in the United States strip some of the privacy protections that were once in place for U.S. bank account holders. The enactment of these types of laws have made offshore banking in regions with privacy protection even more appealing to certain individuals and investors.

Options for Multiple Currency Accounts
Many individuals and businesses are content with accounts that deal exclusively with one specific type of currency. However, many more want to limit their financial vulnerability and have access to several types of currency at the same time.

Access to multiple currency types can be beneficial if you live or vacation in a foreign country, if you pay bills overseas, or if you simply want to protect yourself against unexpected inflation in a specific currency.
Fortunately, offshore private banks tend to offer far more options for multiple currency accounts. This allows you to maintain balances in more than one type of currency regardless of where in the world you live or earn money.

Reporting Requirements
Another of the many ways that retail and offshore private banks can differ is when in reporting requirements. If you are American and open a bank account in United States, for instance, that bank will report account information to the IRS. There is little that you have to do, but there is also little that you can do to prevent it from happening.

In contrast, an American who maintains an offshore private bank account will be required to report some information to the IRS. Your bank may also have to supply certain documents to the U.S. Government thanks to FATCA, or the Foreign Account Tax Compliance Act.

However, international account holders find that this additional step is well worth the benefits that offshore banking brings.

Yields and Tax Advantages
Finally, the investment yields and tax advantages can vary between retail and offshore private banks. Even though every bank, every account holder, and every jurisdiction are a little different, there are some general expectations.

Typically, a private offshore bank delivers higher yields on investments as well as significant tax advantages. In Belize, account holders generally see higher interest rates offered as compared to most U.S. banks.
Individuals may also reduce their tax liability by transferring their investments to a Belizean offshore bank that offers tax-free structures.

Reap the Many Benefits of Offshore Banking
For those who are interested in diversification, asset protection, or new investment opportunities, an offshore private bank provides many benefits over the traditional retail bank. The banking structure of Belize is designed to provide optimal financial rewards for those who want to bank offshore.

Caye International Bank on Ambergris Caye in Belize is well known in the international and offshore banking world. We offer several types of accounts to suit the needs of those interested in benefiting from offshore private banking.