An offshore financial company (OFC), such as a New Zealand offshore financial company (NZOFC), is usually 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 financial company to make substantial profits from its banking services.
Banking services of a NZOFC may include the following:
- taking deposits
- Deposit certificates
- Checking 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 types of currencies in which accounts can be held. 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
An NZOFC can accept money for deposit as long as the business 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. Provided that 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 imposed on withdrawals, a NZOFC may offer different interest rates, always set for the company 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 better-paying instruments. As with other banks, the NZOFC may impose early withdrawal penalties sufficient to cover expenses.
Credit and debit card services
An NZOFC and issue debit and credit cards, charge for the cards, and charge interest on the outstanding balance of a credit card. An NZOFC may offer a variety of debit card programs, including the following:
- Dividends, incentives, foreign exchange payments, employers, contract agencies
- Membership-based affiliation applications, i.e. credit unions, banks with an existing account holder base
- Loans, benefit payment requests, i.e. payday, micro-loan operations
- Insurance Payment Program, Pension Payment Program
- Commission Payment Apps Network Marketing Organizations, Affiliate Payment
- Travel, Remittance Card Programs
- Gas stations, Telecommunications, cell phone companies, cable TV companies, department stores, supermarkets
- Gambling 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 permitted in a NZOFC and are often one of the main reasons clients turn to a New Zealand offshore financial company.
Trust account services
A New Zealand offshore financial company can offer fiduciary services in the same way as a non-offshore New Zealand bank.
processing payment
With remote operations, many international companies find it difficult to pay their employees who work in all 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 financial 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 scalable 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.
manpower 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 the overhead of 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 convenient to have a capital reserve for the start-up and various costs of an ongoing business. Much of the work, if well designed and planned, can be outsourced. When setting things up, it will be a good idea to seek competent business, tax and legal advice.