A word of caution on Panama banks and offshore accounts

Written by Andrew Henderson

Dateline: Managua, Nicaragua

In the movie Blow, Johnny Depp plays Pablo Escobar’s largest cocaine trafficker during the boom era of the 1980s. At one point, Depp’s character is responsible for 85% of all cocaine brought into the United States. Interestingly, he puts all of his newfound riches into a Panama bank.

This was back in the days before FATCA, when Americans could actually avail themselves of bank secrecy. Of course, anyone who recalls what happened to Panama banks knows that things didn’t end well.

Eventually, the government came in and took all of his money “for the people”. How ironic that these days places like The Land of the Free and the European Union do that.

In the end, Panama — and Panama banks — learned the lesson that so many other countries learn: taking peoples’ money doesn’t lead to economic progress.

For a while, Panama was “the Switzerland of the Americas”. While I tend to abhor the endless superlatives thrown around in today’s culture (it seems everything is “the new X” or “the X of Y”) I recognize that Panama banks truly used to be some of the best offshore banks in the world.

When the tax justice crusaders at the OECD slapped Panama on a gray list of “opaque” banking jurisdictions, Panama responded by quietly signing information-sharing agreements with countries like Singapore in order to appease the OECD.

This is how modern offshore banking works: morally bankrupt politicians take a “hard line” against “tax evasion” and other voodoo, and the average person who just wants to protect some of their money from Team Wealth Confiscation suffers.

However, even after Panama banks took action to remove themselves from the lists of uncooperative bank jurisdictions, the OECD wanted more. Three years ago, Panama signed a “nuclear” agreement in which Panama banks agreed to take all of the teeth out of any kind of bank secrecy or, to be honest, any other benefit for banking in Panama.

Panama banks made a completely one-sided deal to slit their own throat. And, as you might suspect, the United States government was first in leading this charge.

Today, Panama banks might as well be in Uncle Sam’s back pocket. That’s financial imperialism. Now, opening a bank account in Panama is no longer easy. No doubt, realizing Americans would stop coming down in droves, HSBC closed their safe deposit boxes in Panama.

Some of the banks that used to work with US persons closed their doors to Americans entirely as a result of the ruling. As Peter Schiff told the audience at my recent offshore conference, he doesn’t allow US persons to open offshore accounts at his bank in St. Vincent and the Grenadines for one reason: he can’t afford the compliance costs.

Consequently, banking in Panama isn’t the best option for Americans, or for many other nationalities. And then there’s this.

Other than the geographical convenience for Americans, there have historically been two reasons to bank in Panama:

1. For use with a Panama corporation

Panama corporations have always been tricky for US taxpayers thanks to an odd US tax law that states that Panama companies cannot be treated the same way most other offshore corporations would be. As such, they were always at a disadvantage.

Over New Years, the Panama government briefly attempted to remove the territorial tax status and tax local companies on their worldwide income. That would have been game over, and Panama knew it.

After the government came back from the New Year recess, they fixed the law. But it is troubling that the government could let something of that magnitude get through “accidentally”, as they later claimed.

2. For obtaining Panama residence

Panama’s Friendly Nations program is, hands down, the easiest second residency for Americans and many other developed-world nationalities to obtain.

The program requires depositing $5,000 in a Panama bank account and establishing an “economic tie” with the country, such as having a corporation, owning real estate, or even investing in forestry projects. If you’re looking for an easy place to get a second residence and become an expat, Panama isn’t a bad choice.

However, I would encourage you to follow the principles of international diversification and not move all of your money there.

Which countries are better than Panama for offshore bank accounts?

As the world’s wealth moves to Asia, I believe that stable Asian jurisdictions will be home to some of the best offshore banks in the world. Personally, I’m a big fan of Singapore and Hong Kong.

The problem is, it’s getting harder to open offshore accounts in Singapore, and Hong Kong is even harder. However, if you are willing to make the trip to Singapore, you can still open an account. It’s a much longer trip than to Panama for Americans, but I believe it comes with the added benefit of a country that isn’t in the pocket of the US government. (You’ll also get the added benefit of seeing an economy, and a region, that has real economic growth.)

The CIA has had their agents rattling around Central America for decades, causing problems and getting many of the Central American governments to buckle to American whims.

While the idea of banking offshore isn’t about hiding money from your government — a very bad idea for Americans in particular — having a foreign government act as a de facto agent of your home country’s government when asked defeats the purpose of going offshore.

If you have money on deposit in Singapore, the banks there aren’t just going to hand it over to some bureaucrat in The Land of the Free because they were asked.

US imperialism has caused much of the Americas to be under its thumb, with the few solid exceptions in places like Venezuela, which is ripe for wealth confiscation. Panama banks, in my mind, gained some of their initial attraction simply because of their geographical proximity to a large number of wealthy Americans.

Now that that wealth velocity has shifted to the eastern hemisphere, there are plenty of safe havens for wealth popping up around the world. In my “Five Magic Words” speech earlier this year, I shared several up-and-coming safe havens I believe will get more attention as banking jurisdictions in the future.

The bottom line: Panama banks were never on my list of favorite places to hold an offshore account. While I do see opportunities in Central America, particularly Nicaragua (it’s selling at a discount to the more established Panama), the real money is being made in the east. That’s where people are tripping over themselves to protect their wealth.

Panama and the region, in general, are certainly not a bad place to live, especially for Americans who want to visit the USA to see family and friends. When it comes to banking, however, use Flag Theory to live in Panama, while banking elsewhere.

If you’re still convinced banking in Panama is for you, my friend Cody Shirk wrote a great article on all of the steps you need to take to open an account, even as a US person in the Age of FATCA.

If you need help finding the right offshore bank for you, apply for a Strategy Call so we can determine your best options as part of a personalized and completely legal offshore plan.

Andrew Henderson
Last updated: Mar 26, 2020 at 2:19PM

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12 Comments

  1. Stephen J

    Hi Andrew – American writing to you from Singapore – very, very hard for an American to open-up ANY kind of bank account in Singapore these days and recently, a bank manager from a major Int’l bank advised us NOT to open an account with USD and also recommended that if we have a Singapore Pte Ltd- to have our stock held by locals or non US citizens. Offshore is far more difficult and about two years ago or so, a well respected company that formed offshore corps etc. and acted as nominees were obliged to turn over info on any US citizens they represented – and they did. Non US citizen – not an issue but you really need to check regarding offshore banking facilities… I am sure if you are a major MNC with large deposits – they’ll find a way.. Single account holder – another issue. Getting very hard for US citizens to open banks account and better to open it with local currency like SGD in Singapore or HK dollars in Hong Kong.. In addition, in HK – very detailed forms need to be filled in which are forwarded to the USA – FACTA compliance… cheers

    Reply
  2. John

    Hey! Thanks for the post!

    Reply
  3. Karen Sharpe

    Im wondering abt loans from Panama and if they are safe or another way to seperate people from their money & making their usa bank accounts vulnerable. I appreciate any info

    Reply
  4. John

    Bolivia is one of the countries that does not subscribe to any kind of US Control.

    Reply
  5. Scott

    Good day
    I’m from Australia and wish to open an offshore account is there any suggestions preferably not HK or SG.

    Rgds

    Reply
  6. Emily Thompson

    It’s nice to drop a message here after reading your brilliant article. I would like to ask you a question related to reference letter for opening a personal saving account in Panama.

    1. There is zero chance for me to receive any bank reference letter here in my region due to all their bank policies. However, a bank statement is the only thing can be provided to show balance and the date when the account is opened (it’s more than 3 years). Therefore the statement is not directly addressed to any receiver. Will any bank accept this kind of document as “reference letter”?

    2. How do banks check the professional reference letter?  Can my personal assistant write the reference letter for me? since she is a free lancer so there won’t be company title on it.

    My pleasure to connect with you here,

    Emily

    Reply
    • Joshua

      I am in the same boat, my bank will not issue a bank reference letter.

      Reply
  7. Les

    Are there any bail in laws in panama like the USA

    Reply
  8. Kathlyn J. Hinesley

    I am inheriting money and simply want to use the friendly nations residency option to live and operate a tiny training co. in Panama.

    I’m not trying to hide money. In fact, I’ve been doing the best I can to invest it here in the U.S. Apparently, now, U.S. laws won’t allow U.S. citizens to maintain investment accounts if they live offshore AND U.S. laws also make it all but impossible to have offshore accounts.

    I’ve lived overseas for years, and find life in the U.S. pretty unbearable. How can I legally get money to Panama to open an account or even buy a Carribean citizenship, if U.S. banks won’t cooperate?

    Any ideas of lawyers or investment brokers I can call?

    Reply
  9. kasym

    Good day to the magician. I’d learn from you to open a bank account. I’ve been deceived twice already to open a bank account. No money account. I’m writing to give you an answer. And after I open the bank account I will make the payment in full to give evidence that they opened an account for me to overpay for opening an account for the bank. our tales are no longer trusted, they themselves steal on write me the answer is quicker to the site

    Reply
  10. Irina Loncar

    Thanks Maria 🙂

    Reply

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  1. Maria Smith - Thank you for the article. Great blog that I enjoyed reading.

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