Offshore banking is an activity that initially referred to a location off the British mainland, thus the term offshore. But through the decades of practice, offshore banking has veered far from a simple geographical meaning. Offshore banking centers are indeed usually islands like Panama, but as long as the key features of offshore banking are in place, it is usually included in this general classification. Offshore banking has something in keeping. There are great confidentiality and privacy between the bank and the bank’s client.
Even if it is usually the norm that banks do not get more than the necessary information from account owners, offshore banks take this privacy to a higher level by actively protecting the identity of its clients. Offshore banking also appeals to people who wish to reduce their tax payments. Usually, offshore banking centers exist in areas under the jurisdiction of governments who levy minimal or even no taxes on accounts. Another advantage to offshore banking is providing a safety net for people leery of political problems in their home state.
Some people who live in especially unstable countries prefer to open offshore accounts to insure against this possibility. But offshore banking has also gained the taint of unwittingly helping money laundering, organized crime and terrorist activities. Panama has been dragged through this muck as well. Thus, Panama has tightened its controls while sill upholding its strict confidentiality agreement with banking clients.
Why Panama? Panama has passed a comprehensive banking law that created a body, Basle Committee on Banking Supervision in particular, to oversee banking regulations and policies in Panama as well as execute these same policies, so that Panama banking system can reduce the negative aspects of offshore banking while safeguarding its benefits. This new banking act had reduced the number of banks operating in Panama, thereby assuring banking clients that they are dealing with legitimate financial institutions.
Of course, the more strict regulations among banks translate to more strict offshore banking requirements in Panama as well. Before you can open an offshore account in Panama, you would have to submit the necessary documents supporting you and other signatories’ identity. You would also have to obtain a reference from a bank that you have been transacting business with for at least two years. Aside from that, you will have to testify as to where the funds in the account will be coming from as well as how much money you expect to be in the account on the average. There are other requirements to opening an offshore account in Panama so you would do well to consult a legal or a banking professional about it.
But conforming to the requirements of the Panama offshore banking system, even if it may be quite tedious, would be worth your while. Panama still upholds that the privacy of the client is primary among all considerations. Panama offshore banking has safeguards in place to enforce this.