On Your Side: Offshore accounts are governed by local jurisdictions

The regulations that apply to offshore accounts stem from the bank's country of origin.

My wife and I have offshore accounts with Allied Irish Bank (AIB) and are concerned about whether we are protected by any compensation scheme. We both have a savings account and a fixed-term bond and the accounts are shown as being in the Isle of Man. Are we protected by the Irish government scheme or something else in the Isle of Man? We would appreciate any clarification. RF, Abu Dhabi

As the accounts are held by the offshore division of Allied Irish Bank in the Isle of Man, it is the Isle of Man's Depositors' Compensation Scheme (DCS) that applies, not the one for accounts held on the Irish mainland. It is all down to the jurisdiction where your actual account is held, no matter the location of the main offices of the financial institution. The Isle of Man branch of AIB Bank (CI) Limited is regulated and licensed by the Isle of Man Financial Supervision Commission. Its DCS compensates people who have money in both current and deposit accounts in banks and building societies licensed in the Isle of Man should the bank fail. The maximum compensation is calculated per depositor in respect to all of the accounts held with any one deposit taker. Deposits held by individuals are protected up to £50,000 (Dh297,000) per individual. In this case, if the accounts are held in joint names, the maximum amount protected is £100,000. The Isle of Man's DCS covers depositors irrespective of which country they live in and it applies to all licensed deposit takers, banks and building societies, and is overseen by the Isle of Man government.

I have been offered a new job, which is due to start towards the end of March, and my residency visa is being cancelled by my existing employer. My current job ends in a couple of weeks and I am going for a break back to the US before starting work with my new company. Friends have told me that my bank account will be inactive as soon as my gratuity goes into it. Is this true? I have loan payments coming out of my bank account and can't afford for it to be frozen. I also need access to the money in my account while I am away. Can you shed any light on this? CN, Abu Dhabi

It is standard practice for most banks to freeze an account when they receive a payment from an employer marked as "final payment". Unless you have outstanding debts or loans, it should be immediately unfrozen once you contact them to explain the situation. Banks do this to ensure that the money in your current account is directed to your debts with them and not withdrawn. If you have a new written employment contract, then you may need to show this to the bank as a form of security. Many are very wary of people potentially absconding without settling their debts and some banks will see your plans to go on holiday as a potential problem. Your new employer may be able to assist by speaking to the bank to confirm your new job, so they can see that the loan repayments will be maintained. The bank's helpfulness may vary depending on who you bank with and speak to. If you have any difficulties, please come back to me because I am likely to have contacts at the bank who can assist.

I had a current account with Royal Bank of Scotland (RBS) until early 2007, as well as a personal loan. When I resigned from my job in March 2007, my account was frozen and my gratuity was held against the outstanding bank loan, which was Dh140,000 at that time. I went to the bank and paid up front the total outstanding amount, after which I sent a fax to the bank to close my account with immediate effect. From that date, I did not have any communication with the bank until today, when I received a call from its debt-collection department asking me for the monthly installment. When I explained everything to the debt-collection executive, he informed me that my account was never closed and the bank was taking monthly installments from the amount I paid up front. Now I owe Dh40,000 to the bank, which it claims is the interest accumulated on this account. What is my legal standing on this issue? KSB, Dubai

The account in question was originally taken out with RBS, but it is now managed by Abu Dhabi Commercial Bank (ADCB). The matter was referred to the bank and after three weeks, it was resolved. A spokesman from the bank said: "Please note that we have been in touch with the customer and have conducted a thorough investigation. We have requested the customer to make a payment on the remaining balance of the loan and the foreclosure charges, which were due in 2007, without the interest, which had accumulated over the years. As of this date, the customer has paid the required amounts and we have closed the personal loan in our records. The customer is satisfied with this resolution and the complaint has been closed to his satisfaction." This is another case of a loan account being one payment short, something I keep seeing at various banks across the Emirates. As there had been no communication for nearly four years, it was inappropriate of the bank to contact KSB to demand repayment, with a very large amount of interest. This causes a great deal of distress and is not how such issues should be handled, especially as the bank is at fault for not having realised that a payment was outstanding. Fortunately, senior staff at ADCB saw the unfairness of this situation and waived the interest payments. KSB made one payment to settle the matter and he has confirmed that he is satisfied with the outcome.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Write to her at [e-mail]