In the world of offshore banking and providing of offshore structures, there is a lot of words and definitions used to describe different terms within this area.
With this in mind and to better understand these terms, eban24.com therefore provide an alphabetical glossary for:
Banking And Financial Services Glossary
|
A
|
Account balance
The balance in an account at the beginning of each business day; includes all deposits and withdrawals that were posted from the previous night, whether or not funds have been collected. See also Glossary term, "collected balance."
Account statement
A printed or online statement of all the debit and credit transactions on an account for a given statement cycle.
Active account
A bank account in which there are recent transactions.
AER
Annual earnings rate on an investment.
Annual percentage yield (APY)
A percentage rate reflecting the total amount of interest paid on a deposit account (checking, savings, CDs, IRAs), based on the interest rate and the effect of interest compounding for one year.
APR
The annual percentage rate of interest, usually on a loan or mortgage, usually displayed in brackets and representing the true cost of the loan or mortgage as it shows any additional payments beyond the interest rate.
Automated Clearing House (ACH)
A nationwide electronic funds transfer network that enables participating financial institutions to distribute electronic credit and debit entries to bank accounts and to settle such entries.
Automatic Funds Transfer
An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every payday or once a month.
Automatic payment
An arrangement that authorizes payments to be deducted automatically from a bank account (usually a checking account) to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments are usually scheduled to be made on a certain day of the month.
Available balance
The amount of money in an account that is available for immediate use.
Average daily balance
The average amount in a deposit account that equals the sum of the daily account balances during an accounting period, usually a monthly statement cycle, divided by the number of days in the period. Can sometimes be used to calculate whether a service charge applies or to qualify for special services. See also Glossary term, "minimum daily balance."
|
B
|
Banking Secrecy (or Banking privacy)
A legal principle under which banks and financial institutions are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise. Effective bank secrecy is better achieved in certain countries, such as Panama, Belize, Switzerland or in other tax havens, where offshore banks and financial institutions adhere to voluntary or statutory levels of privacy.
Bank Statements
This is a statement from the bank giving details of transactions in the relevant account. It can be requested at any intervals required, usually monthly.
Bear Market
A bear is somebody who believes that the market is falling and a bear market is a falling market. See bull market for the opposite.
Bill Payments
An option of online banking in which clients are able to automatically transfer funds from an account to a billing institution. This can be set up to submit the payment on a schedule.
Bounced Check
When the bank has not enough funds in the relevant account or the account holder requests that the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder. The beneficiary of the cheque will have not been paid. This normally incurs a fee from the bank.
Bonds
These are securities which pay interest at specified intervals and the principle amount of the loan is paid at maturity.
Bull Market
A bull is somebody who believes that the market is rising and a bull market is a rising market. See bear market for the opposite.
|
C
|
Cancelled check
A check that has been paid. A cancelled check may generally be used as proof of payment.
Cashier's check
A check drawn on and issued by a bank. It does not usually bounce because its face amount is paid to the bank when it is issued and the bank then assumes the obligation.
Certificate of Deposit (CD)
A time deposit that is payable at the end of a specified term. CDs generally pay a fixed interest rate and generally offer a higher interest rate than other types of deposit accounts. Terms can range from a few monts to several years. If an early withdrawal from the CD prior to the end of the term is permitted, a penalty is usually assessed.
Certified Documents
These are photocopies of original documents that have been signed by a professional i.e. a solicitor, accountant, teacher, doctor or bank official. The professional also states, on the document, "original seen" since they must be able to verify that these are genuine copies and therefore have to have seen the original, they also date the document and put their full name, profession and their address.
Certified check
A check for which the bank guarantees payment.
Charges
This is the money paid to the bank for services rendered. Charges include overdraft fees, charges for bouncing cheques, interest on overdraft and any charges that a business account might normally incur.
Check Book
A small, bound booklet of checks. A check is a piece of paper produced by your bank with your account number, sort-code and check number printed on it. The account number distinguishes your account from anyone elses.
Check Clearing
This is the process of getting the money from the check-writer's account into the check receiver's account.
Checking account
A type of deposit account, sometimes interest bearing, which enables customers to place funds and withdraw their available funds on demand, typically by writing a check.
Check Card
A plastic card issued by eBan24 that customers can use anywhere Visa debit cards are accepted. A Check Card can also be used at ATMs so there is no need to carry both a Check Card and an ATM card. Also referred to as a debit card.
Chip and PIN
A Chip is a small electronic insert placed into a check or credit card. The PIN is a four digit personal identification number which is used with the card by the card-holder.
Clearing Bank
This is a bank that can clear funds between banks. For general purposes, this is any institution which we know of as a bank or as a provider of banking services.
Combined balance
Any combination of balances from linked accounts, such as savings, checking, and CDs. Can be used to meet the balance required to waive the monthly fee on some checking accounts.
Compound Interest
The process by which a deposit or asset can, not only earn interest, but also build continually on the new sums with additional interest. For example, if you have $500 deposited, and gain 2% interest ($10), the next cycle will see that you gain 2% interest but now on the new sum, which is $510. Your sum thereafter would be $520.20, and so on and so forth. The more frequently interest is compounded, the higher the effective yield.
Credit
A financial term that refers to an increase in a deposit account balance (such as a deposit made to the account). See also Glossary term, "debit."
Credit card
A plastic card issued to an individual for the purpose of purchasing goods and services using credit; a credit limit is established for each card holder.
Credit rating
This is the rating which an individual (or company) gets from the credit industry. This is obtained by the individual's credit history, the details of which are available from specialist organizations.
Credit scoring
This is the process of assessing an individual's credit-worthiness. The process involves taking information from an individual on an application form (for example when applying for a store card) and weighting the answers given. Certain responses will attract higher scores than others and the total score will determine whether or nor the organization wants to do business with the individual, or if they represent too high a credit risk.
Credit-worthiness
This is the judgement of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another. Much depends on whether an organization is involved with high risk customers or not.
Check enclosure
A service where the bank returns the checks with the account statement.
Custodial account
An account created for the benefit of a minor with an adult as the custodian.
|
D
|
Debit
A financial term that refers to a decrease in a deposit account balance, such as a check posted to the account. See also Glossary term, "credit."
Debit card
A plastic card issued by a bank which, in the case of eBan24 cards, customers can use anywhere Visa debit cards are accepted. Because the money is deducted directly from a designated checking account, there are no finance charges. A debit card can also be used at ATMs so there is no need to carry both a debit card and an ATM card. See also Glossary term, "Check Card."
Deposit
Money added into a customer's account at a financial institution.
Direct debit
An amount of money taken from a bank account, set up by the recipient and can vary in amount and exact time that it is taken from an account. Mortgages are usually direct debits.
Direct deposit
With direct deposit, your recurring deposits are made electronically into your checking, savings or money market account. Deposits can include salary, pension, Social Security and Supplemental Security Income (SSI) benefits, or other regular monthly income.
Disclosure
Information pertaining to the account services, fees and regulatory requirements.
|
E
|
Electronic Funds Transfer (EFT)
Any transfer of funds initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.
|
F
|
Float
The amount of time represented by checks that are in transit between the date they are deposited to an account and the date they are paid. The time between deposit and payment of the check is referred to as the float.
|
H
|
High Yield
Investments with high rates of return.
High-yield savings accounts
High-yield savings accounts don't have the check-writing feature.
|
I
|
Identity Theft
This is when criminals use an innocent person's details to open or use an account to carry out financial transactions. It is very easy to do with an individual's personal details, which is why shredding confidential information is so important.
Identity Verification
This is often used by financial institutions to verify the customer and usually takes the form of a pass-word and the answer to an obscure personal question such as the customer's mother's maiden-name.
Inactive account
A bank account in which there have not been any transactions for an extended period of time. In some cases (no activity within the period specified by state law, generally at least three years), the law requires a bank to turn the account over to the state as unclaimed property.
Interest bearing
An account that earns interest is an interest bearing account.
Interest rate
The rate paid on an interest-bearing account, such as savings, CDs and some checking accounts; also, the rate charged on a loan or line of credit. Different types of accounts and loans pay or charge different rates of interest.
Individual Retirement Account (IRA)
An investment account where an individual can contribute a specified amount of his or her income each year, intended to be set aside for retirement. The contribution is usually deducted before taxes and is therefore not reported as taxable income and remains so until retirement. One’s income is usually lower at retirement, so lower taxes are usually imposed once the funds are withdrawn. Depending on the amount of contributions during working years, one may also put themselves in a lower tax-bracket.
|
J
|
Joint account
Any account owned by two or more people.
|
L
|
Linked account
Any account linked to another account at the same financial institution so that funds may be transferred electronically between accounts, and, in some cases, the combined balance may be used to help meet the balance required to waive a monthly service charge on one of the accounts.
|
M
|
Minimum daily balance
The lowest end-of-day balance in an account during a statement cycle. It is often required to be kept in an account each day to earn interest, avoid a service charge or qualify for special services. See also Glossary term, "average daily balance."
Money Laundering
This is when money gained from crime is put into a bank so that it can be accessed safely by the criminals and terrorists. It makes the proceeds of illegal activities easier to get to.
Money Market Account (MMA)
A type of savings deposit account intended for larger deposits, that offer competitive interest rates. Many MMA’s place a restriction on the number of transactions that can occur in this account throughout the year, as well as requiring a minimum balance.
Money order
A financial instrument, issued by a bank or other institution, allowing the individual named on the order to receive a specified amount of cash on demand. Often used by people who do not have checking accounts.
Monthly maintenance fee
The fee charged to maintain a particular account, such as a personal or corporate account.
Mortgage
A mortgage is the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.
|
N
|
Non-Bank ATM
An ATM or cash machine that does not prominently display a bank’s name or logo. Fees generally apply to cash withdrawals at non-bank ATM
|
O
|
Offshore financial centre
Usually a low-tax, lightly regulated jurisdiction which specializes in providing the corporate and commercial infrastructure to facilitate the use of that jurisdiction for the formation of offshore companies and for the investment of offshore funds.
Offshore banking
Relates to the banking and financial industry in offshore centres. It is located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include greater privacy (see also bank secrecy), a principle born with the 1934 Swiss Banking Act), low or no taxation (i.e. tax havens), easy access to deposits (at least in terms of regulation) and protection against local political or financial instability.
Offshore company
The term offshore company may refer to either a company which is incorporated outside the jurisdiction of its primary operations regardless of whether that jurisdiction is an offshore financial centre (sometimes known as a non-resident company) or any company (resident or otherwise) incorporated in an offshore financial centre.
Typically the requirements for company registration under the relevant provision for non-resident status (as in the former of the two options above) will be pursuant to some or all of the following criteria. It must be incorporated from outside the jurisdiction in question, must not trade within the jurisdiction in question and/or must meet nominal tax expenses levied by the jurisdiction in question. Some jurisdictions are more favorable than others. Please confer to an eBan24 specialist in such matters.
Offshore investment
The keeping of money in a jurisdiction other than one's country of residence. Offshore jurisdictions are a commonly accepted solution to reducing excessive tax burdens levied in most countries to both large and small scale investors alike. Selected offshore domiciles are superficially viewed by some as havens used to conceal or protect illegally acquired money from law enforcement in the investor's country. Although this may occasionally be the case, legitimate investors also take advantage of higher rates of return or lower rates of tax on that return offered by operating via such domiciles. The advantage to this is that such operations are both legal and less costly than the solutions offered in the investor's country - or "onshore". Locations favored by investors for low rates of tax are known as offshore financial centers or (sometimes) tax havens.
Offshore solutions are accessible to anyone who can meet the minimum investment amount or pay the obligatory fees required to open such an entity.
Tax is the driving force behind 'offshore' activity. Due to offshore solutions investors are able to conduct investment activities in a profitable fashion. Often, taxes levied by an investor's home country are critical to the profitability of any given investment. Using offshore domiciled special purpose vehicles an investor may reduce this burden allowing the investor to achieve greater profitability overall.
Another reason why 'offshore' investment is superior to 'onshore' investment is because it is less regulated, and the behavior of the offshore investment provider, whether he be a banker, fund manager, trustee or stock-broker, is freer than it could be in a more regulated environment.
Offshore trust
Simply a conventional trust that is formed under the laws of an offshore jurisdiction. Generally offshore trusts are similar in nature and effect to their onshore counterparts; they involve a settlor transferring (or 'settling') assets (the 'trust property') on the trustees to manage for the benefit of a person or class or persons (the 'beneficiaries').
However, a number of offshore jurisdictions have modified their laws to make their jurisdictions more attractive to settlors forming offshore structures as trusts.
Online banking
A service that allows an account holder to obtain account information and manage certain banking transactions, including bill payment through a personal computer.
Original Interest Rate
Rate assigned when the CD account is opened. The Original Interest Rate is listed on your CD account receipt and statement.
Overdraft
This is when a person has a minus figure in their account. It can be authorized (agreed to in advance or retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility).
Overdraft protection
A service that allows a checking account to be linked to another account that helps provide protection against returned items or overdrafts. When your checking account does not have sufficient available funds to cover a check, funds are automatically transferred from the available balance in the linked account to cover the check. Choices can include using a credit card or a line of credit account as the linked account to provide protection.
|
P
|
Payee
The person who receives a payment. This often applies to cheques. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer.
Payer
The person who makes a payment. This often applies to cheques. If you write a cheque you are the payer and the recipient of the cheque is the payee.
Personal identification number (PIN)
Personal Identification Numbers (PINs) are numbers that customers use with their ATM or Check Card to access their accounts via ATMs or to make purchases with their Check Card. These numbers should always be kept confidential.
Phishing
This is when a criminal uses the internet to try to fraudulently obtain details of peoples accounts so that they can use these accounts themselves, usually to take money out of.
Principal
1. The amount owed or still owed on a loan, sans interest. 2. The original amount invested, without any earnings. 3. The face value of a bond. 4. The main party to a transaction that is acting at his/her own risk 5. The owner of a private company.
|
R
|
Rate of Return / Annual Return
Percent of your invested amount that you earn each year.
Repayment mortgage
This is a mortgage where the sum borrowed is paid off by the end of the mortgage term. It involves monthly repayments which consist of the interest on the loan plus some of the capital borrowed.
Returned Item
When you do not have enough available funds in your account (including any overdraft protection transfer from another account) to cover a check, the bank may decide not to pay the check and to return it to the payee. A returned item fee may be charged to your account. See your account agreement for additional information.
|
S
|
Savings account
An account where deposited funds are intended to stay for a short term period, with slow turnover. Savings accounts offer lower interest rates than market rates and funds cannot be withdrawn by check writing.
Security for Loans
Where large loans are required the lending institution often needs to have a guarantee that the loan will be paid back. This takes the form of a large item of capital outlay (typically a house) which is owned or partly owned and the amount owned is at least equivalent to the loan required.
Standing Order
A regular payment made out of a current account which is of a set amount and is originated by the account holder.
Stop payment
When you ask a bank not to pay a check or payment like a wire transfer you have written or authorized. Stop payments are generally placed on lost or stolen checks or on checks related to disputed purchases. Stop payment orders generally expire after 6 months and a fee usually applies.
|
T
|
Time deposit or CD
An account for a fixed term with the understanding that the funds will remain on deposit until the end of the term. Penalties for early withdrawals may apply.
Transfer
A movement of funds from one account to another.
Travelers check
Check issued by a financial institution which functions as cash but is protected against loss or theft. Useful when traveling. Also referred to as traveler's checks.
Trust
An arrangement whereby property (including real, tangible and intangible) is managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a settlor (or feoffor to uses), who entrusts some or all of their property to people of their choice (the trustees or feoffee to uses). The trustees hold legal title to the trust property (or trust corpus), but they are obliged to hold the property for the benefit of one or more individuals or organizations (the beneficiary, cestui que use, or cestui que trust), usually specified by the settlor, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.
The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law
|
U
|
Uncollected funds
Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn.
|
V
|
Variable rate
An interest rate that may fluctuate during the term of a loan, line of credit or deposit account. Sometimes the rate changes based on changes in an index rate, such as the prime rate or other prescribed criteria. Sometimes the bank changes the rate at its discretion.
|
W
|
Wire transfer
An electronic payment service for transferring funds by wire.
Withdrawal
To take money out of an account.
|
A
|
Administrative Offices
An administrative office is frequently located in a country other than that of the headquarters office, the parent company or a country of operation. The role of such an administrative office may be to co-ordinate international or regional activities, to provide particular services (such as management analysis, financial or other related services) or to perform a given function (such as marketing).
A number of otherwise high tax jurisdictions (such as the United Kingdom, France, Belgium and Greece) grant special tax treatment in order to attract the administrative offices of multinationals. In the case of Monaco which has been particularly successful in this regard, not only may the administrative office benefit from favored tax treatment, but its employees resident in Monaco would not be subject to tax there.
Adverse trustee
One who has a substantial, beneficial interest in the trust assets as well the income or benefits derived from the trust. A trustee that is related to the creator by birth, marriage or in an employer/employee relationship.
Alternate Director
A person appointed to represent and vote on behalf of a director of a company when he is absent from a meeting of directors.
Anstalt
Establishment, a legal entity without shares established in Liechtenstein, with some features of a trust but with corporate personality. Does not have shares.
Apostille
Certificate of Good Standing in connection with corporations according to the Convention of The Hague of October 05, 1961.
Anti-Avoidance Measures
The object of anti-avoidance measures, insofar as they relate to tax havens, is to prevent the avoidance or reduction of tax through the displacement of one or more connecting factors (i.e. the basis of tax liability) from the taxing jurisdiction concerned to a tax haven jurisdiction.
Anti-avoidance measures may be of general application or may refer to specific tax havens. Any measures usually appear in domestic tax systems; they may however be imposed by tax treaties.
Arbitrage
A form of hedged investment meant to capture slight differences in the prices of two related securities.
Asset manager
A person appointed by a written contract between the IBC or the exempt company or the APT and that person to direct the Investment program. It can be a fully discretionary amount or limitations can be imposed by the contract under the terms of the APT or by the officers of the IBC. Fees to the asset manager can be based on performance achieved, trading commissions or a percentage of the valuation of the funds under management.
Asset Protection Trust (APT)
A special form of irrevocable trust, usually settled offshore for the principal purposes of preserving and protecting all or part of the beneficiary wealth offshore against creditors or other claimants. Title to the asset is transferred to a person or corporate named the trustee or trust company respectively. Generally used for asset protection it usually will be tax neutral. Its ultimate function is to provide for the beneficiaries of the APT.
ATM (Automatic Teller Machine; Cash Dispenser)
Used for cash withdrawals with your credit card or debit card at over 900,000 ATMs worldwide.
Auditors
The last body needed in connection with a corporation: required to inspect the company’s bookkeeping and verify the correctness of annual accounts. Usually not employees or directors of the corporation but an outside firm.
|
B
|
Back-to-Back Loan
Back-to-Back loans are matching deposit arrangements. They may be used in order to solve a financing or exchange control problem. However, in the case of certain tax havens, the function of back-to-back loans is to reduce the taxable base subject to withholding taxes on interest payments, by interposing an intermediary subsidiary company between the source of the income and the recipient. For example, an intermediary company located in the Netherlands or the Netherlands Antilles may be interposed so as to take advantage of a favorable tax treaty. In such cases the authorities usually require a certain spread or "turn" on the rates so as to create a small profit which is subject to tax locally.
Bank of International Settlements (BIS)
A consortium of Banks, controlled by the Basel Committee of the G-10 nations' Central Banks, it sets standards for capital adequacy among the member central banks.
Banking
A considerable volume of international banking takes place offshore and many of the world’s major banks have banking and trust company operations in one or more tax havens.
Most tax haven jurisdictions have enacted legislative provisions and set up administrative authorities whose function it is to control banking and trust company activities.
Banking Passport
A banking passport is simply that you create a "new person" with another nationality and a full set of ID, a separate "legal entity" through a second passport (or third) in a name of your choice.
Bank Secrecy
In most countries one of the terms of the relationship between banker and customer is that the banker will keep the customer’s affairs secret. Staff members are normally required to sign a declaration of secrecy as regards the business of the banks.
Where numbered accounts are used their purpose is to limit the number of persons who know the identity of the client. In certain countries (e.g. Switzerland and the Cayman Islands) specific legislation makes breaches of bank secrecy subject to criminal law sanctions. However, in all legal systems (including Switzerland) there are specific cases where the duty of secrecy of a banker is discharged, e.g. where fraud, money laundering and narcotics are involved.
The exchange of information clause contained in most tax treaties may enable the tax administration of one treaty country to obtain information concerning bank accounts which its residents have in the other country.
Basle Practices
A committee of central banks setting standards for conducting their business resulting in minimum standards, preventative money laundering measures etc.
Bearer Bond
A bond issued in bearer form rather than being registered in a specific owner's name. Ownership is determined by possession.
Bearer Shares
Shares in the capital of a company which are transferable by delivery of the certificate. They do not display a shareholder's name but instead grant ownership rigths to any individual who is in actual physical possession of the certificate(s) Unlike registered shares, which are transferred by an instrument of transfer and display the shareholder's name on the actual share certificate, the name of the holder is not registered in the books of the company.
Beneficial Owner
Person who is the ultimate beneficiary of a company or trust
Beneficiary
A person to whom a trust's proceeds are distributed.
Besloten Vennootschap met Beperkte aansprakelijkheid (BV)
Dutch limited company for small commercial enterprise, not required to publish accounts; used as a Substantial Holding Company.
Big Brother
Your (un)friendly local government watching over your shoulder.
