Offshore Bank Accounts: Everything you need to know

Key takeaways

• Offshore bank accounts let you hold funds in foreign currencies, reduce FX costs, and manage international transactions more efficiently.

• While they offer benefits for global businesses, they often come with high fees, complex setup, and strict regulatory checks.

• Airwallex gives you many of the same advantages, including multi-currency accounts, local payment rails, and better FX rates, without the cost and complexity of setting up bank accounts in other places.

Managing money across borders is tough enough. Add in currency fluctuations, international fees, and local banking restrictions, and suddenly your global ambitions come with a lot of admin.

That’s why many businesses explore offshore bank accounts to hold funds in foreign currencies, reduce FX costs, and simplify cross-border payments as they expand into new markets. But offshore banking is often misunderstood—it’s sometimes associated with secrecy or tax evasion, when in reality it’s a legitimate tool for businesses with global customers, suppliers, or teams.

In this guide, we’ll break down what an offshore bank account is, how to open one, the pros and cons, and which jurisdictions are commonly used. We’ll also explore modern alternatives that offer the same benefits—like holding and converting multiple currencies or collecting local payments—without the complexity or cost.

What is an offshore bank account?

An offshore bank account is an account held with a financial institution in a country outside your home jurisdiction. It functions like a standard current or savings account, but it’s located in a foreign country where you don’t live or operate a business entity.

These accounts are often located in places like Singapore, Switzerland, Luxembourg, Jersey, or the Cayman Islands. These countries are known for having stable banking systems, favourable tax laws, or specialist services that appeal to international customers. But businesses also set up offshore accounts in markets where they frequently need to accept or make payments, for example, to remote employees, or suppliers.

Businesses use offshore accounts for a few reasons:

• Avoid forced conversions and maintain balances in the currencies you need

• Reduce foreign exchange costs (lower FX fees on international payments by holding funds locally)

• Access foreign banking systems (gain entry to investment markets and banking infrastructure in other countries)

• Simplify cross-border operations (make it easier to transact internationally without constant currency conversions)

If you regularly send or receive payments internationally, or run a business with global customers, an offshore account can offer more control over how you hold, convert, and move money around the world.

Is offshore banking legal?

Yes, offshore banking is legal in most countries, provided it is used transparently and for legitimate business purposes. For global businesses, expats, and international investors, these accounts are a common tool for managing cross-border finances. The negative reputation often comes from its misuse for illegal activities, which is different from its intended, lawful use.

Understanding the distinction is key:

• Legal use: Managing multiple currencies, simplifying payments to international suppliers, collecting revenue from global customers, and diversifying assets are all legitimate reasons for a business to use offshore accounts.

• Illegal use: Hiding assets to evade taxes, laundering money, or financing illicit activities is illegal and carries severe penalties.

Modern regulations, such as the Common Reporting Standard (CRS), require financial institutions to share account information with tax authorities automatically. This means transparency is mandatory. You must report any income, interest, or balances held offshore to your local tax authority as required by law.

For businesses that need the benefits of multi-currency management without the complex compliance and setup of traditional offshore accounts, modern financial platforms like Airwallex offer a more direct solution.

*This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice.

Advantages of offshore banking

If your business operates internationally, offshore banking can offer more control over how and where you manage your funds, especially across multiple currencies. Here’s how an offshore account could support your business:

• Hold and manage funds in multiple currencies: Avoid forced conversions and hold payments in the currency they were received in. This gives you more control over timing, rates, and how you use your funds.

• Reduce FX costs: Accepting, holding, and paying out money in multiple currencies can help you avoid repeated conversions and high bank markups on exchange rates.

• Protect assets: In some jurisdictions, offshore accounts offer added protection for business funds, especially in cases of legal disputes or political instability at home.

• Access international investment opportunities: Some banks allow you to invest across global markets, often with tools or advice tailored to international businesses.

• Bank with stability and privacy: Offshore banks in countries like Switzerland or Singapore are known for strong regulation, banking privacy, and reliable service, even for complex business structures.

• Support business expansion: If you’re selling in or sourcing from overseas markets, an offshore account can make it easier to pay suppliers, receive customer payments, and manage online payments across different currencies.

Disadvantages of offshore banking

Offshore banking can give you more control over international money management, but it’s not without its challenges. The barriers to entry are higher than most businesses expect, and the ongoing admin can eat into time and resources:

• Higher setup and maintenance costs: Many offshore banks require a significant opening deposit or minimum balance. Ongoing fees for account maintenance, transfers, or withdrawals can also stack up quickly.

• Strict compliance and due diligence: Offshore accounts face heavy scrutiny. The documentation process can be time-consuming and frustrating, especially if you’re unfamiliar with local regulations.

• Longer approval times: Between paperwork, background checks, and identity verification, account approval can take weeks or even months. There’s often little transparency about timelines along the way.

• Limited deposit protection: Most offshore banks fall outside local deposit protection schemes. If the bank goes under, you may not have the same level of security you’d get with a regulated domestic account.

• Tax reporting obligations: Offshore accounts don’t exempt you from tax. In fact, they usually come with extra reporting requirements. You may need to disclose account balances, earnings, and interest to your local tax authority, or risk steep penalties for non-compliance.

If you’re considering offshore banking, make sure you weigh the full cost, complexity, and compliance burden alongside the benefits. In some cases, there may be faster, more transparent alternatives that give you the same capabilities without the red tape.

How to open an offshore bank account

Opening an offshore bank account isn’t wildly different from opening a domestic one, but it usually comes with stricter checks, longer approval times, and more paperwork. Each bank in your target jurisdiction has its own rules, but most follow a similar process:

1. Submit an application: Fill out a form with basic details about your business, your reason for opening the account, and how you plan to use it. Some banks ask about expected transaction volume and source of funds at this stage.

2. Provide required documentation: You’ll typically need to submit business registration documents, proof of address, identification for directors, and financial statements. Some banks may also request notarised copies, which adds an extra step.

3. Pass compliance checks: To prevent fraud and money laundering, banks conduct rigorous Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. When opening offshore accounts, you will need to undergo this process with every individual bank.

4. Pay your opening deposit: Many offshore accounts come with minimum deposit or balance requirements. These can range from a few thousand dollars to much more, depending on the bank and jurisdiction.

Once approved, you’ll usually get access to online banking, a multi-currency account, and sometimes a debit card.

Which countries are best for opening an offshore bank account?

The right location for your offshore bank account will depend on where you’re doing business today and where you’re planning to grow next. For businesses seeking simpler alternatives, international business bank accounts can offer similar multi-currency capabilities without the complexity of traditional offshore banking.

Opening offshore accounts can help you reduce FX costs, avoid international transaction fees, and minimise currency risk.

It also makes it easier to collect payments and pay out locally without delays or forced conversions. When looking at places to open offshore accounts, here are some considerations:

• High-volume payment destinations: Consider countries where you regularly pay suppliers to reduce FX fees and improve payment speed.

• Customer locations: If you receive payments from customers in certain regions, having local accounts can simplify collections and reconciliation.

• Foreign currency needs: Open accounts in jurisdictions where you need to hold and manage foreign currencies to avoid constant conversions.

• Investment presence: If you have investments or operational entities in specific countries, local accounts can streamline fund transfers and support growth.

Offshore banking alternatives: A modern approach

Offshore bank accounts can help businesses expand internationally, but for many companies, the time, cost, and complexity involved can become a barrier, not a benefit. The challenge for a growing business is clear: you need multi-currency capabilities, local payment infrastructure, and efficient FX management, but you don’t necessarily need the overhead of traditional offshore banking relationships.

Modern financial infrastructure platforms now offer many of the same operational benefits without the red tape. Instead of opening separate accounts in each country, you can use a single platform to manage your global finances.

With an Airwallex Business Account, you can open local currency accounts in over 20 currencies across 60+ countries in minutes. Collect and hold funds with local account details, access interbank FX rates regardless of your transaction size, and pay suppliers globally using local payment rails that ensure approximately 95% of transfers arrive the same day.

Whether you’re scaling into new markets, managing overseas teams, or supporting international customers, Airwallex gives you the infrastructure to operate like a local business from anywhere in the world.Explore how Airwallex can support your business growth.

FAQs

Is offshore banking legal?

Yes, offshore banking is legal in most countries. It is commonly used by global businesses, expats, and international investors. However, accounts must be used transparently and declared to tax authorities as required.

How fast can I open and start transacting?

The traditional offshore account process is famously slow, often taking weeks or months due to demanding requirements like notarised documents, minimum balances, and enhanced compliance checks.

With Airwallex, that friction is gone. Once your business is approved, you can open local currency accounts in minutes and start receiving, holding, and converting funds immediately—no branch visits or separate banking relationships required.

Can I receive local payments without an offshore account?

Yes, absolutely. By opening local currency accounts through Airwallex, you get access to local banking details, such as sort codes, IBANs, or routing numbers.

You can share these directly with your customers so funds arrive over local payment rails, not SWIFT. This means there’s no forced currency conversion—you hold the funds and decide when to convert, giving you full control over your FX strategy.

This approach also makes reconciliation cleaner since you can report in the currency you originally sold in, all from a single dashboard.

How do I lower FX costs without opening offshore accounts?

You lower your FX costs by being strategic about when and how you move money. The best approach is to hold balances in the currencies you sell in, which helps manage foreign exchange risk, then only convert when the market rates align with your cash-flow plan.

When paying out, route funds over local payment rails to avoid expensive SWIFT fees. You can further reduce markups by leveraging Airwallex’s market-leading FX rates and transparent pricing.

Streamline everything by batching both conversions and payouts to simplify approvals and track all your realised versus unrealised FX performance in one central view.

Do I need a local legal entity to open an offshore account, or can I avoid that?

Many banks expect you to have a local legal presence or will subject you to time-consuming enhanced due-diligence, which piles on cost and ongoing admin.

If your primary goal is simply to collect and hold money locally, you can usually avoid the need for entity setup entirely by opening local currency accounts via Airwallex. We provide you with local account details without the red tape, allowing you to test new markets or scale existing ones much faster while keeping your global operating model lean and agile.

What’s the minimum deposit required for an offshore bank account?

It varies by bank and jurisdiction. Some require as little as $1,000, while others may ask for $10,000 or more to open and maintain the account. Always check the minimum balance rules before applying.

What are the tax implications of having an offshore bank account?

You must report any interest, income, or balances held offshore to your local tax authority. Not doing so can result in penalties. Offshore accounts do not exempt you from tax, and in some countries, come with extra reporting requirements.

How do I choose the right offshore bank for my needs?

Start with your operational needs. Look for a jurisdiction where you already trade, hire, or source. Consider banking fees, available currencies, regulation, and how easy it is to manage the account remotely.