Where Entrepreneurs Should Keep Offshore Reserves

Most founders think about growing sales, not safeguarding cash. Until a market wobble, a sudden bank freeze, or a regulatory surprise makes “where do we keep our money?” the only question that matters. Offshore reserves aren’t about secrecy or clever loopholes—they’re about resilience: currency diversification, legal certainty, and uninterrupted access to working capital. This guide walks you through the practical playbook I’ve used with founders to place reserves where they’re safe, liquid, compliant, and useful.

What “offshore reserves” actually are

Offshore reserves are corporate cash balances held outside your company’s home country, either to de-risk a single-jurisdiction concentration or to support international operations. They can sit in:

• Bank operating accounts (for day-to-day payments)

• Custody accounts (for securities like T-bills)

• Money market funds

• Term deposits or short-duration instruments

Legitimate reasons founders use offshore reserves:

• Currency diversification and access to USD/EUR/CHF/SGD

• Jurisdictional diversification (rule of law, political stability)

• Supplier payments and payroll in regional hubs

• Protecting capital from local banking or capital-control risk

The goal is not secrecy. Expect to disclose these accounts under tax and regulatory regimes such as CRS and FATCA. The prize is continuity: the ability to keep paying staff and suppliers, no matter what.

A decision framework that actually works

When I sit with a founder, we prioritize:

• Safety: Counterparty strength and rule of law. Can you enforce your rights?

• Liquidity: Can you access funds quickly across time zones?

• Currency: Do holdings match future costs and obligations?

• Compliance: Will this structure pass audits, CRS/FATCA, and transfer pricing?

• Yield after risk and fees: Modest, predictable yield beats chasing the highest rate.

The three-tranche model

• Operating float (0–1 month of expenses):

• Purpose: Pay vendors, payroll, taxes.

• Instrument: Bank current accounts in the currency of costs.

• Priority: High liquidity, low counterparty concentration.

• Buffer (2–6 months of expenses):

• Purpose: Near-term liquidity beyond the operating float.

• Instruments: Term deposits under 3 months, instant-access money market funds (MMFs), T-bills maturing inside 6 months.

• Priority: Liquidity within T+0–T+3 days.

• Core reserves (6–24 months of expenses):

• Purpose: Stability in shocks.

• Instruments: Short-duration sovereign bills/notes (laddered), top-tier MMFs, custody accounts, possibly tri-party repo via prime institutions.

• Priority: Capital preservation and jurisdictional diversification.

Choosing jurisdictions: what good looks like

What I look for in an offshore banking center:

• Strong rule of law and creditor rights

• Stable currency and low capital-control risk

• Mature, well-capitalized banks and clear resolution regimes

• Efficient cross-border payments and multi-currency support

• Predictable tax treatment (ideally tax neutral at the reserve level)

• Regulator that’s serious (and predictable) about AML/KYC

Red flags:

• Weak independent judiciary

• Opaque deposit guarantee

• Frequent capital controls or payment freezes

• Widespread correspondent banking issues

• Institutions offering unusually high yields with little transparency

Below are the jurisdictions founders ask about most, with pros, cons, and use cases.

Switzerland

Switzerland remains a gold standard for custody and conservative banking.

Pros

• Political stability, reliable courts, strong private banking culture.

• CHF is a “risk-off” currency that tends to hold value during global stress.

• Deep custody infrastructure for sovereign bills, high-quality MMFs, and FX hedging.

• Skilled at multi-currency operations (USD, EUR, CHF, GBP, etc.).

Cons

• Higher account minimums and fees than mainstream retail hubs.

• Intense compliance scrutiny; onboarding can be slow for newer companies without audited statements.

• Deposit insurance is limited relative to corporate balances (you should not rely on it).

Best use cases

• Core reserves in custody accounts, particularly CHF and USD sovereigns and MMFs.

• Treasury setups for companies with European exposure that want rule-of-law certainty.

Practical tip

• Use a custody account rather than leaving large sums as deposits. You own the securities directly; bank failure risk is structurally lower than an unsecured deposit.

Singapore

Singapore is a favorite in Asia for both operating accounts and reserves.

Pros

• World-class governance, stable SGD, and highly rated banks.

• Excellent USD access and active Asian payments corridors.

• Strong legal system and predictable regulatory framework.

Cons

• Thorough onboarding; expect documentation and time.

• Corporate deposit rates can be modest; custody for T-bills and MMFs often makes more sense for reserves.

Best use cases

• Asia treasury center; holding USD and SGD.

• Buffer and core reserves in custody accounts with short-duration instruments.

• Operating accounts for regional payroll and suppliers.

Practical tip

• Pair a Singapore operating account with a custody account at the same bank group (or a major broker) for easy transfers between MMFs/T-bills and operating balances.

Luxembourg and the Channel Islands (Jersey/Guernsey)

These centers excel at custody, funds, and fiduciary services.

Pros

• Strong fund infrastructure, UCITS MMFs, reputable depositaries.

• Rule-of-law jurisdictions with deep expertise in institutional cash management.

• Good for holding securities; clean audit trails.

Cons

• Not primary payment hubs; use in tandem with operating accounts elsewhere.

• Fees can be higher and onboarding focused on larger balances.

Best use cases

• Core reserves in UCITS MMFs and high-quality sovereigns.

• Structures for holdco/treasury entities and intercompany funding.

Practical tip

• If your auditors like UCITS and you need EUR exposure, Luxembourg MMFs are straightforward and liquid (often T+0/T+1).

United Arab Emirates (UAE)

A major practical hub for global founders, especially those with MENA, India, or Africa ties.

Pros

• USD-pegged AED, excellent time-zone coverage between Europe and Asia.

• Modern payment infrastructure and business-friendly free zones (e.g., ADGM, DIFC).

• Competitive bank and EMI options for multi-currency operations.

Cons

• Onboarding quality varies dramatically by bank.

• Legal recourse and enforcement timelines can be more uncertain than in Switzerland or Singapore.

• Historically limited formal deposit insurance; treat large deposits conservatively and favor custody where possible if available.

Best use cases

• Operating accounts for regional payments.

• Diversification of USD operating float across the Gulf.

• Use caution with large unsecured deposits; consider custody or short-term T-bills via reputable international brokers.

Practical tip

• Work with banks that have strong correspondents and demonstrable international reach. Test inbound and outbound wires before moving significant sums.

Hong Kong

A veteran global hub with deep USD and CNH corridors.

Pros

• USD peg, robust banking system, major international banks present.

• Strong trade financing and FX capabilities; good for Asia operations.

• Efficient multi-currency management.

Cons

• Geopolitical considerations have risen in recent years.

• Some businesses face enhanced scrutiny depending on sector and counterparties.

Best use cases

• Asia operating accounts in USD, HKD, CNH.

• Buffer reserves in MMFs and short bills through custody accounts.

Practical tip

• Keep a small, functional HK presence for payments if you do China trade, while holding larger core reserves in Switzerland or Singapore.

The United States as an “offshore” option for non‑US entrepreneurs

For non‑US founders, the US can be a powerful reserve location—even if your company is not US-based.

Pros

• Deepest T‑bill market for short-term reserves, world’s primary reserve currency.

• Government money market funds with daily liquidity and strong transparency.

• Reliable custody through global brokers and banks.

Cons

• FATCA onboarding is thorough; sanctions and compliance regimes are strict.

• US persons have complex reporting (FBAR, Form 8938). Non‑US persons still face KYC and withholding considerations depending on instrument type.

• Geopolitical sanction risk if your business touches restricted parties or regions.

Best use cases

• Holding USD T‑bills and government MMFs in custody for core reserves.

• Non‑US founders who want deep USD liquidity without relying on a single bank’s deposits.

Practical tip

• Many non‑US companies can hold T-bills via a prime broker or global custodian with zero US tax on bank deposit interest and favorable treatment on certain government securities. Confirm with your tax adviser for your specific facts.

Cayman, Bermuda, BVI, Mauritius, Isle of Man, Liechtenstein

These jurisdictions are often used for holding companies, funds, or trusts.

Pros

• Tax-neutral platforms, sophisticated legal frameworks, and specialized service providers.

• Access to top-tier private banks for custody if you meet minimums.

• Useful for structuring intercompany loans and investment vehicles.

Cons

• Not ideal for day-to-day payment flows.

• Minimums and fees skew to larger balances.

• Public perception can be sensitive; documentation must be spotless.

Best use cases

• Holding core reserves in custody accounts connected to a holdco or treasury entity.

• Intercompany financing with clean governance and transfer pricing documentation.

Practical tip

• If you’re below private bank minimums, pair a mainstream operating hub (e.g., Singapore or Switzerland) with a reputable international broker rather than forcing a complex structure.

Eurozone options for EUR reserves

Germany, the Netherlands, and France offer stable EUR banking with SEPA access.

Pros

• Strong banking regulation and EU deposit guarantee frameworks.

• Efficient EUR payments via SEPA, clear oversight.

Cons

• Less flexible for multi-currency beyond EUR unless you bank with international groups.

• Corporate onboarding can be formal and slower.

Best use cases

• EUR operating accounts and buffer reserves matched to EUR costs.

• Treasury centers serving EU subsidiaries.

Practical tip

• If your base currency is USD but you have EUR costs, keep 3–6 months of EUR expenses locally and hedge additional EUR exposure with forwards rather than holding outsized EUR cash.

What to hold: deposits, custody, MMFs, and bills

Think in terms of instruments and the terms you’re accepting.

• Current accounts: Pure liquidity for operations. Credit exposure is to the bank.

• Term deposits: Slightly higher yield, but you’re locked in; still unsecured bank exposure.

• Custody accounts: You own securities outright. Ideal for T-bills, short sovereigns, and MMFs.

• Money market funds (MMFs): Choose top-tier, government or treasury-only funds with AAA ratings and low weighted-average maturity (WAM). Daily liquidity is common.

• Treasury bills/short sovereigns: Ladder maturities (e.g., 1–6 months) to keep a steady roll of liquidity while earning stable yield.

Operational tactic

• Sweep policy: Keep only the operating float in current accounts. Sweep excess daily/weekly into MMFs or T-bills in custody. This is the single most effective improvement most founders can make.

Multi-currency strategy without overcomplicating it

Match currency to costs first. Then diversify prudently.

• USD: Global settlement currency, deep markets. Most founders should anchor reserves in USD.

• EUR: Hold enough to cover European costs; hedge the rest rather than over-allocating.

• CHF: A classic safety currency; useful for core reserves held in Switzerland.

• SGD: Stable and well-managed; appropriate for Asia treasuries.

• GBP: Use for UK cost matching; avoid oversizing unless you have GBP revenues.

• AED and HKD: Pegged to USD; fine for short-term operating needs in those markets. For core reserves, default to USD/CHF/SGD.

• JPY: Useful for diversification in some cases, but historically low yields; only hold if you have JPY exposure or a deliberate strategy.

Hedging basics

• For known foreign currency expenses over 3–12 months, use forwards to lock rates.

• Avoid exotic hedges unless you have a treasury team. The simplest hedge you’ll consistently use beats the perfect hedge you never implement.

Example allocation (global SaaS, USD revenue, global costs)

• Operating float: 1 month costs split across two banks in USD/EUR/SGD.

• Buffer: 3 months in USD government MMF (60%), EUR MMF (30%), SGD bills (10%).

• Core: 12 months in laddered USD T-bills (70%) and CHF short sovereigns (30%) in Swiss custody.

Account structures and governance that pass audits

Entity choices

• Holding company (HoldCo) in a rule-of-law jurisdiction houses intellectual property and reserves.

• Operating companies (OpCos) in countries of operation handle revenue and expenses.

• Treasury entity (optional for scale): Centralizes cash, hedging, and intercompany loans.

Intercompany loans

• Document with board resolutions, commercial purpose, and an arm’s-length interest rate.

• Track currency and FX gains/losses; consult on withholding tax in both lender and borrower jurisdictions.

• Monitor thin capitalization rules and CFC regimes to avoid surprises.

Bank signatories and controls

• Dual approval for payments above a threshold, with role separation (requester/approver).

• Hardware tokens, IP whitelisting, and transaction limits.

• Disaster playbook: Who can move funds if key people are unavailable?

Board oversight

• Quarterly treasury report: balances by bank/currency, average yield, counterparty concentrations, and policy exceptions.

• Annual policy review: update limits, approved instruments, hedging approach.

Compliance, tax, and reporting

CRS and FATCA

• Expect your bank to report account details to tax authorities under CRS (most countries) or FATCA (US). Transparency is normal; build this into your governance.

CFC and anti‑deferral rules

• Many countries tax passive income earned by foreign subsidiaries under controlled foreign company rules.

• US founders: Be mindful of Subpart F and GILTI; the difference between active operating income and passive interest matters. Work with a cross-border tax pro.

Transfer pricing

• If your HoldCo or treasury entity lends to OpCos, you need arm’s-length rates and documentation.

• Consider safe harbor interest rates where available; otherwise benchmark using reputable databases.

Withholding tax

• Interest payments across borders may trigger withholding. Tax-neutral jurisdictions or treaty networks can reduce or eliminate WHT, but structure must be substantive and real.

Substance and economic presence

• Many jurisdictions require real decision-making, local directors, or office presence for treaty and tax purposes.

• Keep minutes, resolutions, and an audit trail of treasury decisions.

Personal reporting

• US persons: FBAR and Form 8938 for foreign accounts and assets.

• Non-US founders: Your country likely has analogs; skipping forms is a common and costly mistake.

Banks, brokers, and fintechs: who does what

Traditional banks

• Best for operating accounts and payments.

• Pros: Branch support, enterprise-grade security, integrated FX.

• Cons: Lower yields on deposits; onboarding can be slow.

Global brokers and custodians

• Best for T-bills, MMFs, and custody of securities.

• Pros: Direct ownership of instruments, transparent yields, quick switching between funds and bills.

• Cons: Not built for vendor payments; move cash back to a bank for operations.

EMIs/fintechs (e.g., payment institutions)

• Great for multi-currency wallets and low-cost FX.

• Pros: Fast onboarding, competitive fees, modern APIs.

• Cons: Usually not banks; client funds often safeguarded but not insured. Don’t keep core reserves here.

Payment rails

• SEPA (EUR), Faster Payments/CHAPS (GBP), Fedwire/ACH (USD), SWIFT for cross-border.

• Test large payments and urgent cutoffs before you need them.

Onboarding checklist

• Corporate docs: Articles, certificates, shareholder register, UBO declarations.

• KYC: Passports, proof of address for directors/UBOs.

• Business proof: Invoices, contracts, website, product description, source of funds.

• Tax forms: FATCA/CRS self-certifications, W‑8BEN‑E or equivalents.

Risk management you can explain to your board

Counterparty risk

• Cap exposure to any one bank or custodian (for example, 20–40% max).

• Favor institutions with strong capital ratios and global resolution frameworks.

• Don’t rely on deposit insurance—it’s small relative to corporate balances.

Market risk

• Keep reserve duration short; for most founders, sub‑6‑month WAM is appropriate.

• If yields fall, accept it; the mission is resilience, not outperformance.

Operational risk

• Segregate duties for payments.

• Enforce MFA, hardware tokens, and allow-listing for beneficiaries.

• Rehearse incident response: what happens if an account is compromised?

Jurisdictional risk

• Mix at least two jurisdictions.

• Keep operational funds where you sell, but store core reserves where law is strongest.

• Avoid countries with a history of sudden capital controls if reserves are critical.

Sanctions and KYC risk

• Screen counterparties. If you trade in higher-risk regions, expect enhanced due diligence.

• A single red flag counterparty can freeze your account. Put a compliance narrative in writing and keep it updated.

Costs and yield: set expectations

• Bank fees: Monthly account fees, wire fees, FX spreads. Negotiate packages if you keep balances.

• Broker fees: Often minimal for T-bills and MMFs; check custody and transaction costs.

• FX costs: Aim for interbank + 10–30 bps for large conversions via tier-one providers; retail spreads can be 100+ bps.

• Yield: Short-term government bills and government MMFs tend to track policy rates. When policy rates are high, yields are attractive; when they drop, accept lower returns for safety and liquidity.

A useful anchor

• If the “extra 0.5% yield” requires complex instruments or lower-quality counterparties, pass. Treasury is a risk-reduction function.

Step-by-step playbooks

Playbook A: Post‑Series B SaaS, $20M in fresh cash, global team

Objectives

• Keep runway safe for 24 months

• Smooth USD, EUR, GBP payroll

• Minimize admin overhead

Steps

• Open two operating banks in different jurisdictions (e.g., US and EU), both with multi-currency.

• Open a custody account with a reputable global broker or Swiss/Singapore bank.

• Tranche the cash:

• Operating float: 1 month across both banks (60% USD, 30% EUR, 10% GBP).

• Buffer: 3 months in USD government MMF (70%) and EUR MMF (30%).

• Core: 20 months in laddered USD T-bills (80%) and CHF short sovereigns (20%) in custody.

• Implement a weekly sweep from operating to custody when balances exceed float.

• Enter 3–6 month EUR/GBP forwards for known payroll to reduce FX surprises.

• Quarterly treasury report to the board with balances, yields, and counterparty exposure.

Playbook B: E‑commerce aggregator importing from Asia, revenue in USD/EUR

Objectives

• Reliable supplier payments in USD/CNY corridors

• Reduce FX slippage

• Keep 9 months of reserves safe

Steps

• Operating accounts in Hong Kong or Singapore for Asia payments; backup operating account in EU (SEPA).

• Custody account in Singapore for USD MMFs and US T‑bills.

• Hold 3 months of USD operating float across Asia and EU banks.

• Buffer: 3 months in USD MMF with T+0 liquidity.

• Core: 6–9 months laddered into 1–6 month T‑bills.

• Hedge CNY exposure via NDFs if you have predictable monthly settlements.

• Set supplier payment calendar and run FX conversions 2–3 business days before deadlines to avoid cut‑off risk.

Playbook C: Crypto infrastructure company with fiat reserves

Objectives

• Separate fiat reserves from digital asset operations

• Satisfy enhanced KYC expectations

• Avoid concentration risk

Steps

• Maintain clean fiat operating accounts at two conservative banks with documented AML program and transaction flow narratives.

• Keep fiat core reserves in a Swiss or Luxembourg custody account in short sovereigns/MMFs; do not commingle with digital asset entities.

• Document all on/off-ramp providers, flows, and counterparties; maintain updated compliance memos.

• Limit unsecured deposits; sweep to custody daily.

• Prepare for enhanced questions on source of funds, transaction screening, and any exposure to privacy tools.

Common mistakes and how to avoid them

• Parking everything in one bank

• Fix: Set a maximum exposure per institution and diversify across at least two banks and one custodian.

• Treating EMIs like banks

• Fix: Use EMIs for payments and FX convenience, not for holding core reserves.

• Leaving big balances idle in current accounts

• Fix: Sweep into MMFs or T‑bills; same-day/next-day liquidity is usually available.

• Ignoring compliance documentation

• Fix: Maintain a “KYC pack” with org charts, UBOs, contracts, invoices, and source-of-funds narrative. Update quarterly.

• Chasing yield with long-dated or lower-quality instruments

• Fix: Keep duration short and credit quality high. Your job is survival, not yield maximization.

• No hedging for known FX costs

• Fix: Simple 3–6 month forwards for payroll and supplier payments avoid painful spikes.

• Sloppy intercompany loans

• Fix: Arm’s-length rates, board approvals, and proper tax forms. Track withholding and CFC issues.

Frequently asked practical questions

How many banks do we need?

• At least two for operations in different jurisdictions, plus one custody relationship for reserves. Larger companies might use three banks across two continents.

How much per bank?

• A common cap is 20–40% of total cash per institution, depending on its strength and your risk tolerance.

Should we rely on deposit insurance?

• No. Corporate balances exceed coverage limits. Focus on institution quality and custody for securities.

Are money market funds safe?

• Stick to government or treasury-only MMFs from top providers, with short WAM and daily liquidity. Read the prospectus and check holdings.

What about stablecoins?

• Use them for specific settlement needs if your compliance team is comfortable and counterparties accept them. Do not store core reserves in stablecoins due to counterparty and regulatory risks.

Can we open accounts before establishing a local subsidiary?

• Often yes, through international business accounts or a holding company in a recognized jurisdiction. Banks differ—start early and be ready with documentation.

What’s a realistic timeline to set this up?

• Banks: 3–12 weeks per institution depending on jurisdiction and complexity.

• Custody/brokers: 1–6 weeks.

• Expect faster onboarding if your documentation is impeccable and directors are promptly available for KYC calls.

Putting it all together: a simple blueprint

• Jurisdictions: Pick two strong rule-of-law centers (e.g., Switzerland + Singapore or US + Luxembourg).

• Instruments: Use custody for core reserves (T-bills, sovereigns, government MMFs). Keep operating floats in bank accounts.

• Currencies: Anchor in USD; match EUR/GBP/SGD to costs; add CHF as a safety slice.

• Governance: Enforce dual approvals, weekly sweeps, and quarterly board reporting.

• Compliance: Maintain a living KYC pack and clear source-of-funds narrative; document intercompany flows and hedges.

• Testing: Wire small amounts first. Test FX and cutoff times. Rehearse contingency moves.

Personal notes from the trenches

A few patterns repeat across companies that sail smoothly through storms:

• They separate “money for today” from “money for survival.” Operating floats are tiny compared to core reserves.

• They own high-quality securities directly in custody instead of trusting bank balance sheets with huge deposits.

• They diversify across both institutions and jurisdictions, not just different brands in the same country.

• Their finance leads can explain, in two minutes, where every dollar is, who holds it, and how fast it can move.

If you’re sitting on meaningful cash, don’t overcomplicate it. Pick two top-tier jurisdictions, open two operating banks, get one excellent custody relationship, and implement a sweep policy. Hedge obvious FX, keep duration short, and write down the rules you’ll follow. That’s 90% of a world-class treasury for a growing company.

A final checklist you can act on this week

• Decide your tranches: operating (1 month), buffer (3–6 months), core (6–24 months).

• Pick jurisdictions: shortlist two from Switzerland, Singapore, US, Luxembourg, plus an operating hub where you sell.

• Open accounts: two banks for operations, one custody/broker for reserves.

• Sweep policy: set thresholds and automate where possible.

• Instruments: choose government MMFs and 1–6 month sovereign bills; ladder maturities.

• FX: map 12 months of foreign-currency costs and place simple forwards.

• Governance: implement dual approvals, hardware tokens, IP whitelists, and beneficiary allow-lists.

• Compliance: compile your KYC pack and update quarterly; document intercompany loans.

• Limits: set counterparty caps (e.g., <=40% per institution) and review quarterly.

• Dry run: test large payments and cross-border wires at least once per corridor.

Done consistently, this approach replaces hand-wringing with a disciplined system. You’ll know exactly where to keep offshore reserves, why they’re there, and how to get to them—any day, any time.