Banking advisers say a properly structured offshore account should protect, preserve and increase assets while offering all the convenience of an onshore account.

An offshore bank account refers to any bank account opened outside of the account holder's usual place of residence or domicile. Usually, people open an offshore bank account in jurisdictions that specifically attract non-resident depositors by offering banking privacy, a tax-free environment, legal protection against overseas civil court actions and a sophisticated array of private banking services.

In most offshore jurisdictions, interest earned on bank deposits is free of tax for non-residents. Also of great importance is the ability to receive and deposit funds remitted from different sources or income earned from working overseas in any one of a number of hard currencies.

Continuing globalisation and the increased use of electronic banking have now allowed offshore account holders to gain access to investment opportunities that would not have been available a few years ago.

An offshore bank account can be opened in the name of an individual (personal account) or a company (corporate account). Often individuals form an offshore company as this can considerably increase their confidentiality.

Offshore banking providers such as HSBC, Lloyds TSB and the Sovereign Group offer a range of services and options. These include instant access accounts with credit card facilities, fixed-term deposit accounts - with the interest rates tiered according to the length of the term and the size of the deposit - and conventional variable-interest deposit accounts that may offer higher rates than fixed-term accounts.

The tax efficiency of offshore funds often means that they have higher yields than equivalent onshore funds.

However, account holders should be aware that banks charge for different facilities, for example credit and debit cards, cheque books and electronic transfers. These financial transactions and processes all involve money being transferred across the globe, and how much this costs varies widely from bank to bank.

Once the decision to open an offshore account has been made and the location and type of account has been decided, setting up the account is usually a straightforward process, although there is generally a minimum amount required to establish an offshore deposit account.

Compliance and legal requirements of both the account holder and provider are becoming more rigorous. Due to stringent legislation designed to prevent money laundering, identification is usually required. This is often in the form of a bank reference letter from an existing banking provider, verifying the applicant's credibility.

Compliance regulations imposed by the United States Inland Revenue Service, as well as intergovernmental bodies, such as the Financial Action Task Force and the Organisation for Economic Co-operation and Development, also require banks to look closely at their clients' offshore banking activities.

Hong Kong and Singapore are recognised as stable and well-regulated offshore centres, in addition to popular tax havens such as Barbados, Ireland, Bermuda, the Cayman Islands and the Bahamas.

Hong Kong and Singapore recently introduced new laws and regulations to strengthen their positions as private banking and fund management centres with flexible tax systems. Both financial centres are poised for further growth as Asia's economies recover and individual wealth continues to rise.

While offshore business and offshore markets exist in nearly all countries, only those with the presence of a vast number of operating institutions, the availability of a comprehensive range of services and a high volume of business are generally regarded as offshore financial centres.

The introduction of the European Union Savings Tax Directive on July 1 is another move that could provide a boost to Hong Kong's offshore banking industry. The directive is an agreement between EU member states to automatically exchange information about customers who earn interest in one EU member state but live in another.

Steve Travis, overseas manager for the Fry Group - which provides taxation, financial planning, retirement and estate planning - said there would undoubtedly be an increase in demand from clients for advice to cope with the directive.

The new development could tempt investors to move their deposits from the EU to Hong Kong or Singapore, which are, at present, outside the scope of the directive. In addition, use of the loopholes created by overseas incorporated companies, or offshore discretionary trusts, or offshore personal portfolio insurance bonds could surge in popularity.