By Mashum Mollah
In recent years, technology has changed global banking systems in multiple ways. Sitting in your office in Singapore, you can open an offshore bank account in any of the tax havens of the world including the Cayman Islands, Switzerland, and more. There is no dearth of popular offshore jurisdictions in the world.
Offshore bank accounts can be a great avenue for business to save their hard-earned wealth from the increased taxation regimes that we are seeing all over the world. As more and more governments seem to lose hard at making their financial economies work, they run towards increasing taxations as a way of boosting their revenues.
While offshore banks offer a lot of solutions to problems, they can turn into problematic entities if they get frozen. In this article, we look at some important things you need to know about frozen offshore banking accounts.
Why do Offshore Banks Freeze Accounts of Registered Holders?
In the last few years, international nations have been trying to strengthen their hold and grip over offshore accounts. Let us look at some of the major reasons why your offshore account has been frozen-
1. De-Risking of Assets-
Banking institutions, including the ones that offer offshore facilities, are all looking to de-risk. This is a term that shows that linking to a particular source of money could prove to be not in the best interests of the bank.
De-risking can be necessitated because of rising global pressure from nationalized banks and international countries. Agencies of the government force the banks to hand over banking details of offshore accounts and issue notices that might lead to criminal escalations.
2. Not having Enough Balance in the Offshore Account-
You need to understand that the interest for banks that offer offshore accounts is the higher sum of money that is deposited in their accounts. If your account has a low balance, for the bank it means that offering the necessary protection does not make any financial sense at all.
Offshore banks specialize in drawing and living on high-interest rates that are deposited in their accounts. If they are not able to get the interest from your bank account, they are simply going to freeze the account or close it down.
3. The Nature of your Business and its Credibility-
Even though offshore banks are famous for looking the other way in most instances, they cannot in some extreme cases. If your accounts have been frozen, the nature of your business or its credibility can play an important role.
If you are looking to open an offshore bank account, you need to make the bank understand well in advance about the nature of your business. If there is a certain criminal element that is a value attached to the business, an offshore bank will try to keep itself as protected as possible.
What Happens when your Offshore Bank Account is Frozen?
According to financial experts, the freezing of offshore banking accounts happens in two stages. Let us now look at them in some details-
Stage 1- Asking for Explanations and Paperwork
In the first stage, a representative of the bank is likely to contact you and ask you to furnish some paperwork. They will also raise some issues regarding your account and give you a time frame to respond. During this stage, they might restrict some of the banking facilities that were available to you previously. You will be required to submit all the paperwork and ensure that it fully satisfies all the questions of the bank.
Stage 2- Government Review and Indefinite Suspension
If following your submission of the documentation, the bank seems unconvinced it could mean that it is facing a lot of pressure from governmental authorities. This could mean an indefinite suspension that can range from anywhere from six months to a year. During this period, the bank will ask you to negotiate with the law of the land and arrive at a conclusion. While your assets will not be handed over, it can mean freezing will prevent you from using the same.
The Bottom Line:
If you are looking to understand the Activities That Could Be Performed by an Offshore Bank, you can click on the link to understand the situation and processes better. Getting your offshore bank account frozen might be a difficult pill to swallow.
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