Dateline: Tallinn, Estonia
Thank FATCA for this.
The United States government has embarked on a campaign of total financial imperialism with its laws designed to make every foreign financial institution the unpaid slaves of the IRS.
Only this time, the slaves are fighting back.
It’s no secret that more and more offshore banks around the world are unwilling to accept Americans. Ever since the United States passed the most heavy-handed law in modern financial history, foreign banks started saying that they wouldn’t be able to accept American clients.
Since then, I’ve reported that banks from Hong Kong to Singapore have made it harder — if not impossible — for US persons to open accounts with them. In the past few months, I’ve spent time on the ground in both places, talking to my banker contacts and asking them why that is.
The simple answer is: we don’t need Americans. They’re more trouble that they’re worth.
You see, while Barack Obama has no clue how to react to Vladimir Putin’s annexation of Crimea, the United States government as a whole still believes they are living in a world that resembles some Cold War-era relic. To them, there is only one country on earth that matters: the United States.
In 2014, that’s far from the truth.
In recent years, China has created hundreds of billionaires. Russian oligarchs have created vast sums of wealth. And emerging markets have created a whole new class of emerging affluent consumers around the world.
One country doesn’t rule the world any more, and that one country also doesn’t dominate the global money supply, either.
So offshore banks are unwilling to accept Americans because of the huge financial and bureaucratic strain it puts on them. They have enough business from customers whose countries don’t expect them to fit a multi-million dollar tab just to stay in business.
How has FATCA put American investors at a disadvantage?
I was talking to some friends of mine in Latvia last week and the news on banking is grim. In fact, just this month, more offshore banks have hung up the “closed for business” sign and have gone on record saying that they are unwilling to accept American customers.
Their reason, of course, is FATCA.
Latvia’s Rietumu Bank — which one of the panelists at my Passport to Freedom conference this past January labeled an “amazing bank” — is now off limits to Americans. With Latvia functioning as the new hub for Russian wealth, Latvian banks don’t need to bend over backwards for Americans.
A friend of mine who lives in Latvia said he visited six banks to open a simple checking account, only to be denied by five. The sixth wanted him to pay several hundred euros in compliance fees just to apply, with no guarantee of actually being able to open an account.
To be honest, paying hefty fees is the new normal for Americans who wish to bank offshore. If you know the right people, there are a few banks that will still take Americans, but the numbers are quickly shrinking. In fact, paying a few hundred euros for a bank account in a European jurisdiction sounds like a downright bargain, considering how practically every bank in Switzerland, Liechtenstein, and Luxembourg has shut its doors to Americans for good.
Peter Schiff (who also spoke at my conference) owns a bank in St. Vincent and the Grenadines where he also refuses American clients. I was speaking with him several months ago and he told me that the reason is simple: “I can’t afford it.”
Peter can’t afford the costs of compliance; costs that one Canadian bank said will exceed $100 million. So, rather than deal with the paperwork, Peter’s bankers simply target rich people from other countries. They have such a firm policy against Americans that they don’t even answer the phone when the caller ID shows a US number.
This is the liability that comes with US citizenship. Your government thinks that it can make unilateral mandates to every offshore bank on planet earth and not experience any pushback.
How far will the IRS go to track your money?
The US government just signed an information sharing agreement with Hong Kong, which will force the Hong Kong government — and all Hong Kong banks — to hand over details on any US person holding an account in their banks. This includes information on accounts owned by US green card holders. (Chinese-Americans especially need to be careful with this, even if they no longer live in the US.)
The word in the financial community now is that the IRS is working on an information sharing agreement with Mainland China. Typically, I would expect China to stand up to The Land of the Free and take a stand against their imperialism.
But the Chinese financial system operates in a very pragmatic way, and the tea leaves indicate that China will likely agree to exchange data with the United States. (Just in case any rich Chinese are hiding money in the US — ha ha)
Meanwhile, the IRS is setting up more offices around the world, and agents are badgering banks in places like India to hand over customer data. Even if you weren’t born in the United States, if you have or used to have a green card or citizenship there, your offshore bank accounts will be tracked down, and you will have trouble opening new accounts.
The lesson here is clear: the US government is going to continue to make it more and more difficult for banks around the world to open offshore accounts for Americans. Eventually, every bank will simply wave the white flag and accept the licks that come with refusing American capital.
If you’re a US person, this is a de facto capital control on you. Your government will tell you, in typical Land of the Free fashion, that you have total freedom to move your money anywhere you wish. It will just so happen that no foreign financial institution on earth will take you.
Isn’t it nice how governments pass egregious laws knowing how things will end up, but conveniently blame business instead?
That’s exactly what’s happening, as the US claims it only wants to prevent tax evasion. But no matter how you cut it, the end result is that Americans can’t open offshore bank accounts. And it will only get worse.
If you haven’t opened an offshore bank account yet, you need to take steps to do so today. My guide to offshore banks highlights banks that will open accounts for Americans — and even for as little as $500.
Important points to take into consideration today:
1. There’s only one way to totally escape FATCA compliance… and that’s citizenship renunciation.
The number of Americans renouncing their citizenship increased 221% last year, according to a recent Forbes article. It used to be a couple hundred people turned in their passport each year; now it’s in the thousands. And the shadow statistics are much higher.
Offshore banks are so deathly afraid of the IRS now that most will give you a hard time trying to open an account with a foreign passport that indicates a birthplace in the United States. Of course, we frequently discuss having a second passport, but don’t think that that alone will save you. Banks want to know you are completely and totally free from the US before opening your account.
Until then, you’ll suffer the increasingly capital controls that come with US citizenship. Note that “US persons” effected by stringent banking laws include green card holders, even those that don’t live in the US. If that’s you, you have to decide if having access to a bankrupt country you don’t live in is worth the economic pain. A lot of green card holders are giving theirs up for that very reason.
2. Fees for Americans holding offshore bank accounts are going up.
My offshore banker friend in Belize told me last year that he was going to impose a $250 annual fee on American clients who bank with him. That fee is now in force, along with the monthly fees to store your cash in his bank.
The fee, he says, is the only fair way for the bank to recoup its FATCA compliance costs without hurting business from non-Americans. While this fee is a rather cheap insurance policy against even worse government financial intrusion, it’s a less than cheerful reminder of what your government is doing to you now.
Living in a totalitarian society has its costs.
And other offshore banks I’m familiar with charge as much as $50-60 a month in fees just to hold an account. That fee may well be worth it for a private bank in Andorra, but most people don’t want to pay $700 a year to have a checking account.
3. Who you know will become increasingly important.
Peter Schiff recently said that governments will try — as they have throughout centuries of history — to “stop the bleeding” by stopping the free flow of money to other jurisdictions. They figure that by keeping the money in the country, it’s easier to steal.
As more and more banks close their doors to Americans, who you know — and who can help you — will become increasingly important.
That’s why we’re here.