A masterpiece of an investigative report by the International Consortium of Investigative Journalists (ICIJ), dubbed the Pandora Papers, has lifted the lid on offshore accounts.
In Kenya, the report linked President Uhuru Kenyatta’s family to a number of offshore accounts in Panama and the British Virgin Islands.
The Kenyatta family linked offshore bank accounts and companies were valued at over Ksh3.3 billion.
The report elicited mixed reactions from Kenyans with many demanding answers from the Head of State.
But as questions linger and demands for answers escalate, the elephant in the room is how can one open an offshore account and be able to maintain it and the legal requirements in Kenya guiding the entire process.
An offshore account is a bank account held in a country where one does not reside. It allows individuals owning them to make and receive payments, save or invest.
Most people choose to open them as it makes it easier and cheaper to make international payments, transfers, and payments.
Owning one is associated with a lot of advantages that include higher returns on international investment, protection from economic and political stability, generate higher interests rates, and also allows them to hold multiple currencies.
Also on top of the reasons why most people hold offshore accounts is that in case government orders freezing of accounts of an individual, his offshore accounts cannot be affected allowing the person to transact normally.
Legal Framework Guiding Opening of Offshore Accounts
According to Reginald Kadzutu, Chief Executive Officer, Amana Capital, running an offshore account is not illegal in Kenya.
He stated that the money in offshore accounts only becomes illegal when an individual is using those accounts to evade remitting their taxes.
“It is not illegal to have an offshore account, it is your money you are free to decide where to put your money as long as you are not doing it to evade tax,” he stated.
But for a person who is holding the Presidency post, then it raises the question of morality whether they trust the economy of the country they are tasked to lead.
“There is a moral question here. That is money that could have been used to circulate in the country’s economy,” he added.
This affirms arguments that have been raised on different platforms in that at the moment, there are no laws prohibiting running and maintaining foreign bank accounts.
How to Open an Offshore Account
Just like other bank accounts opening processes, one is required to provide proof of identity supported by other legal documents such as a National Identity Card or a valid passport depending on the country one is opening the account.
They require your personal information, such as your name, date of birth, address, citizenship, and occupation. To verify them, one you will need to submit a copy of their passport, driver’s license, or other identifying documents issued by the government.
Depending on the country of opening, some banks may also require information on the source of one’s deposits.
Offshore banking institutions may also ask for financial statements from one’s country of residence giving full detail for at least the last 12 months.
One might also be required to disclose the type of transactions that will be undertaken through the account. This follows pressure across the world for offshore accounts to remain transparent in their operations.
One will also be required to disclose the type of currencies they intend to use while using their foreign accounts.
How to Run an Offshore Account
Offshore accounts offer their customers a wide range of currencies to choose from. The account becomes more beneficial especially when the currency is unstable.
To deposit money into an offshore account is quite easy. An individual only wires the money electronically and the funds are deposited to their account. However, the transactions are charged depending on different banking charges rates.
Withdrawing funds on the other side is also not so much complicated as most offshore bank accounts use debit cards while others prefer writing checks to their customers.
Maintaining an Offshore Account
Maintaining an offshore account is much similar to maintaining local bank accounts. In Kenyatta’s family case, some of the accounts were termed dormant. To avoid such declarations, one is required to keep the account active by making transactions.
Transactions are done in terms of making withdrawals, deposits, and bank-to-bank transfers.
Also to run a successful offshore account, the holder is required to ensure that all the funds in the account are not depleted.
Failure to do that, an offshore account is considered inactive therefore prompting the banking institution to shut it down.
