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12 April 2024

The advantages of banking offshore

By Tim Searle

Tim, I was led to believe that bank deposits in the UAE are guaranteed both for local and international banks. But I believe it is also advisable to have an offshore account as well. What are its benefits? – Roger

We are frequently asked about where the best rate of return is and the safest place for your capital.

However, the term 'good return' is very subjective. It depends what you want to achieve from your money and your risk/reward profile. If you are interested solely in deposits then shopping around to secure the best interest rates can be a lengthy process.

Moreover, the amount of Anti-Money Laundering (AML) and Know Your Client (KYC) due diligence that must be completed for every account you open, puts most depositors off regularly changing accounts in search of the best returns.

This can be alleviated by placing funds through a collective investment vehicle and instructing the custodian to move your money between banks on your behalf. Since the custodian carries out the AML and KYC at outset it does not need repeating each time your change accounts for better interest rates.

Choosing the right bank account can be a difficult process when placing your money either in an offshore or onshore bank account. Onshore and offshore banks are fairly similar overall but it is their confidentiality that sets them apart from each other and now more than ever, their security.

At present, the UAE government has stipulated that deposits are secured but has yet to implement that notion into federal law, while other countries like the United States and United Kingdom have taken on a programme of nationalisation of their banking systems to restore confidence and ensure the recovery path is adhered to.

There are other considerations for local banking solutions namely the issues surrounding Shariah in the event of your demise and the implications for those in the absence of an ID card and the impact when seeking banking services. The main issue for dirham mortgage holders, too is the dilemma of falling Eibor rates when in contrast their mortgage interest/profit rates are continually increasing.

The basic criteria when selecting a suitable offshore account are not that different from those when choosing your bank at home – service, convenience and financial stability. Offshore banks offer all the services you expect from any bank. Look for banks that make it easy and convenient to transfer funds from anywhere in the world. The bank should be located in a country with maximum confidentiality with tax advantages and where the political situation is stable and friendly to foreign depositors.

An important point to take on board is that interest rates should be roughly the same around the world if quoted in the same currency. If there is a large discrepancy to the contrary one should carefully examine why. If the headline rate sounds too good to be true, discuss it with a wealth manager.

Tim Searle is CEO of Globaleye, a leader in financial services for the Middle East with over 4,000 clients. Send your queries to: money@business24-7.ae