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When you hear the word off-shore bank account, do you think of money laundering? If you don’t, you’re probably lying since the media has painted off-shore bank accounts has a way “hiding” your money and avoid paying taxes in your local country. However, did you know that it is possible for off-shore bank accounts to be an effective player in the global market? Off-shore banking has become the norm for rogue nations and malicious citizens to garner and channel funds in a globalized economy. Although conventional war-fare is still an on-going tradition, the new battlefield is opening up on the financial frontier. As more and more nations and people start opening off-shore accounts, it is becoming exponentially harder for governments to control the flow of money and limit transactions amongst foul parties.

The financial system is modern warfare’s newest front. In a globalised economy money moves instantly and anonymously across borders. This can benefit terrorists, drug traffickers and rogue nations in need of cash. Keeping such customers out of the world’s sprawling financial system is becoming ever harder.

As the baby boomer generation begins retiring in large numbers over the next decade, these people may pursue off-shore accounts to avoid paying high taxes and save their money for their own lifestyles. In addition, it seems the rich in the US keep getting richer and there are many opportunities to dodge taxes and “rip” the government off. Nowadays, it is becoming much easier, due to the internet, to move your money and check up on your accounts.

But the most vexing problem that highly mobile financial flows pose for governments is that when they cross borders they may take tax revenues with them. This is particularly serious for rich Western countries with aging populations that they will have to support in retirement. Such countries have launched a raft of initiatives to strengthen the international financial system against the undesirable side-effects of financial globalization: financial crime, financial contagion and tax evasion. The idea is to prod financial centers worldwide to adopt international best practice on bank supervision, the collection of financial information and the enforcement of money-laundering rules.

There is a lengthy but extremely interesting article about off-shore accounts/banking and how it is changing the field of finance. It also talks about how off-shore banking can literally help the globalized economy and not serve as a way for people to launder their money.

Source: Economist | Download PDF

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