Quora Answer: Why Does Offshore Banking Continue to be Associated with Criminal Activities?

The following is my answer to a Quora question: “Why has offshore banking been associated with criminal activities and money laundering?”

Offshore banking is simply having transactions and accounts in a bank that regulated under an international banking license, an offshore banking license, as opposed to a local license.  The terms of the off offshore banking license prohibit the bank from establishing any business activities in the jurisdiction of establishment so as not to compete against local banks.

Offshore banking has less regulation and transparency, and this makes it attractive to funds of dubious origin.  As such, it is a magnet for money laundering.  Accounts with offshore banks are often used to for tax evasion.  Aside from this, offshore banks have a lot of legitimate business.  There is greater privacy and discretion, fund transfers tend to be easier, it is a legitimate means of tax avoidance, and most importantly, offshore banking protects your funds from political instability in the more challenging parts of the world.  It is that last reason why we have offshore banking in many financial centres.