How to take advantage of an offshore financial company – Online banking operation

An Offshore Finance Company (OFC), such as a New Zealand Offshore Finance Company (NZOFC), is typically established by those doing business abroad. An OFC is usually established to reduce banking costs for those who require international banking services. Due to the low capital requirements and low cost of setting up an OFC in a place like New Zealand, it is possible for a New Zealand offshore finance company to make substantial profits from its banking services.

The banking services of a NZOFC may include the following:

• taking deposits
• Deposit certificates
• Current and savings accounts
• International credit and debit card services
• loan services
• bank transfer services
• Trust Account Services
• Cash Management Services
• The issuance of financial instruments and guarantees
• Payment processing services
• investment marketing
• fund management

There is no limit to the number of clients the business can have, how much can be received in deposits, or the number of currency types in which accounts can be maintained. Clients can be from anywhere in the world. The only strict limitation is that the word “bank” cannot be used in the company name.

Deposits

A NZOFC can accept money for deposit as long as the company is independent of the depositors. The money deposited can be used to purchase securities such as bonds that currently pay up to 4.5% and a lower rate is paid to account holders. As long as deposits are invested in securities registered with the New Zealand Revenue Service, interest earned by account holders will only be subject to 2% withholding tax when interest is paid. This requires the NZOFC to register under the approved issuer lien.

reviewing accounts

Depending on the limitations placed on withdrawals, a NZOFC may offer different interest rates, always set for the business to benefit from the accounts.

Keeping accounts

With deposit funds locked up for longer periods of time, a NZOFC will generally pay a higher interest rate on savings accounts.

Certificate of deposit

A NZOFC can set up CDs like any bank, paying better interest over longer terms and combining this money with investments in higher paying instruments. As with other banks, the NZOFC may impose early withdrawal penalties sufficient to cover expenses.

Credit and debit card services

A NZOFC and issue debit and credit cards, charge for the cards, and charge interest on the outstanding balance of a credit card. A NZOFC may offer a variety of debit card programs, including the following:

• Dividends, incentives, foreign exchange payments, employers, contract agencies
• Membership-based applications for affiliation, i.e., credit unions, banks with an existing account holder base
• Loans, benefit payment requests i.e. payday, microloan operations
• Insurance Payment Program, Pension Payment Program
• Commission payment applications Network marketing organizations, affiliate payment
• Travel, Remittance Card Programs
• Gas stations, Telecommunications, cell phone companies, cable TV companies, department stores, supermarkets
• Gaming and betting industry: casino sites, online poker rooms, sports betting websites, betting websites, etc.

loan services

Loan services are explicitly permitted at a New Zealand Offshore Finance Company. Interest rates are set by the company, giving the company the potential to make a substantial profit on well-chosen and managed loans.

bank transfer services

These are allowed in a NZOFC and are often one of the main reasons clients turn to a New Zealand offshore finance company.

Trust Account Services

A New Zealand offshore finance company can offer trust services just like a non-offshore New Zealand bank.

processing payment

With remote operations, many international companies find it difficult to pay their employees who work in the four corners of the world. Similarly, the same businesses may often need help collecting and accounting for multi-phase business transactions. A payment processing service can be a lucrative business for a NZOFC.

How to run an offshore bank in New Zealand

banking software

If you start an offshore finance corporation in New Zealand, you don’t need to reinvent the wheel in a banking sense. The company can choose the services it wants to offer and can take advantage of computer systems designed specifically for offshore banking.

There are online banking systems available for offshore financial institutions. There are scales for small operations up to the size of large international private banks. These systems support the work done by savings and loan associations, mutual funds, payment processing, and more. There are several of these software systems available and many companies that use them. Asking for references can be helpful in deciding which software to use and how much of the package to buy at first.

labor requirements

Most of the operation of a NZOFC will be online. Back office work must be done in New Zealand. Just as companies in North America outsource, so can your New Zealand Offshore Finance Company. By limiting the services and offering of securities to individuals and corporations outside of New Zealand, many of the more time-consuming tasks of running a NZOFC will be eliminated.

The fact that the operation can be carried out without a person having to go to a physical office will greatly reduce overhead for construction, equipment and employees. The fact that a NZOFC is not subject to reserve requirements makes the capital investment less than with a New Zealand regulated bank. The directors and shareholders can be of any nationality and residence.

As with all business ventures, there are capital costs, including the paperwork to set up the offshore finance company and the purchase and training of staff in the use of the required software. Although the country of New Zealand will not require a capital requirement, it will be wise to have a capital reserve for start-up and the various costs of an ongoing business. Much of the work, if well designed and planned, can be outsourced. When preparing things, it will be good to seek a competent business, tax and legal adviser.