An offshore financial company (OFC) such as a New Zealand Offshore Financial Company (NZOFC) is commonly set up by those doing business offshore. An OFC is typically set up in order to reduce banking costs by those requiring international banking services. Because of the low capital requirements and low cost of setting up an OFC in a location such as New Zealand it is possible for a New Zealand Offshore Financial Company to gain substantial profits from its banking services.
Banking services of a NZOFC can include the following:
- Taking Deposits
- Certificates of deposit
- Checking and savings accounts
- International credit and debit card services
- Loan services
- Wire transfer services
- Trust account services
- Cash management services
- The issuance of financial instruments and guarantees
- Payment processing services
- Marketing of investments
- Fund management
There is no limit to how many customers the company can have, how much can be received in deposits, or the number of type of currencies in which accounts can be held. Customers can be from anywhere in the world. The one strict limitation is that the word “bank” cannot be used in the company name.
A NZOFC can take money for deposit so long as the company is independent of the depositors. The monies deposited can be used to buy securities such as bonds currently paying up to 4.5% with a lower rate being paid to account holders. So long as deposits are invested in securities registered with the New Zealand Revenue Service, the interest earned by account holders will only be subject to a 2% withholding tax when interest is paid. This requires that the NZOFC register under the Approved Issuer Levy.
Depending upon the limitations placed upon withdrawals a NZOFC can offer varying rates of interest, always set so that the company profits from the accounts.
With deposit monies locked in for longer periods of time a NZOFC will typically pay a higher rate of interest to savings accounts.
Certificate of Deposit
A NZOFC can set up CD’s much like any bank, paying better interest on longer terms and pairing these monies with investments in better paying instruments. As with other banks the NZOFC can levy penalties for early withdrawal sufficient to cover expenses.
Credit and Debit Card Services
A NZOFC and issue both debit and credit cards, charge for the cards, and charge interest on the outstanding for a credit card. A NZOFC can offer a range of debit card programs including the following:
- Dividend, Incentive, Forex payouts, Employers, Contract Agencies
- Membership based affiliation applications i.e. Credit Unions, Banks with an existing account holder base
- Loan, Benefit Payout Applications i.e. payday, micro loans operations
- Insurance payout program, Pension payout program
- Commission payout applications Network Marketing Organizations, Affiliate payout
- Travel, Remittance Card Programs
- Gas stations, Telecommunications, cellular phones companies, cable TV companies, department stores, supermarkets
- Gaming and gambling industry: casino sites, online poker rooms, sports betting websites, waging websites, etc.
Loan services are explicitly allowed in a New Zealand Offshore Financial Company. Interest rates are set by the company giving the company the potential for a substantial profit on well chosen and managed loans.
Wire Transfer Services
These are allowed in an NZOFC and are often a major reason that customers come to a New Zealand Offshore Financial Company.
Trust Account Services
A New Zealand Offshore Financial Company can offer trust services just as a non offshore New Zealand bank can.
With far flung operations many international companies find it difficult to pay their employees working in the four corners of the globe. Likewise the same companies often can use help collecting from and doing the accounting for multiphase business transactions. A payment processing service can be a lucrative business for a NZOFC.
How to Run an Offshore Bank in New Zealand
If you start an offshore financial corporation in New Zealand you do not need to re-invent the wheel in a banking sense. The company can pick and choose the services it wishes to offer and can take advantage of computer systems specifically designed of offshore banking.
There are online banking systems available for offshore financial institutions. There are scalable for small operations up to the size of large private international banks. These systems support the work done by savings and loan associations, investment funds, payment processing, and more. There are several of these software systems available and many companies that use them. Asking for references may be useful in deciding which software to use and just how much of the package to purchase at the beginning.
The bulk of the operation of a NZOFC will be online. The “back office” work need be done in New Zealand. Just as companies in North America outsource so can your New Zealand Offshore Financial Company. By limiting services and the offer of securities to individuals and corporations outside of New Zealand many of the more time consuming tasks of running a NZOFC will be done away with.
The fact that the operation can be run without a person ever needing to come to a bricks and mortar office will greatly reduce building, equipment, and employee overhead. The fact that a NZOFC is not subject to reserve requirements makes the capital investment less that with a regulated bank in New Zealand. Directors and shareholders can be of any nationality and residency.
As with all business endeavors there are capital costs including the paperwork of setting up the offshore financial company and buying and training staff in use of the software required. Although the country of New Zealand will not require a capital requirement it will be wise to have a capital reserve for starting up and the various costs of an ongoing business. Much of the work, if well designed and planned, can be outsourced. It setting things up it will be well to seek out competent business, tax, and legal counsel.