Dateline: Tbilisi, Georgia
A few months ago, I heard from several non-Americans who are banking with Euro Pacific Bank in the Caribbean. I’ve said before that it’s a decent bank, but the downside is that they do not accept US dollars.
These friends of mine explained that the bank is asking people a lot of questions nowadays. Every wire that comes in they charge you high fees and they ask you all sorts of questions about what it’s for and who it’s going to.
I can identify with what they were saying. I recently had a guy send me money from his Seychelles company and that was a whole ordeal. Unfortunately, this is the direction that banks around the world are going.
Just as we discussed the other day about taxes getting harder for digital nomads, offshore banking is getting harder as well. Not only do they want to know where you live, but they’re asking a lot more questions. The days of one digital nomad running a Seychelles company sending money to another digital nomad running a Nevis company are coming to an end.
And the closer we get to 2017, the closer we get to the launch of the new global tax compliance agenda. This new global FATCA will essentially eliminate any privacy benefits in most of the world’s banks. Now, this shouldn’t be an issue for any of you since you should be reporting all your offshore accounts to start with, but it’s just another factor that’s making it harder and harder to bank with ease… anywhere.
Banks are asking more questions and becoming more difficult to work with. Period. The days of certain banking practices are coming to an end.
Is offshore where you’ll be treated best?
For example, 1% of all US dollar transactions in the world go through Latvian banks. In countries like Latvia, the US government is putting pressure on the banks to root up money laundering, particularly from sanctioned Russians.
Uprooting money launderers is a fine end goal, but what happens in the process is that everyone else is put under the microscope. I talked to someone recently who has money in a Latvian bank who explained that every time his company sends someone a dollar, they want to know exactly who it’s for, what it’s for, and why they need to send it.
Basically everyone is under investigation. If you cross a T the wrong way they’ll freak out, simply because of all the pressure the US is placing on them. The offshore banking industry, in some ways, is descending into the very reason people went offshore in the first place.
For instance, I have South African clients who say “Andrew, every time I want to send a dollar I have to prove why I’m sending it.” The same happens in China, where they have to prove why they’re sending Renminbi overseas.
So, for some people, if you’re really going to follow the advice to go where you’re treated best and stick to my nomad-minded principles (because “go where you’re treated best” does not mean you should be angry and hold a grudge, it means going where you’re treated best), the answer to such problems may just be to get a US bank account.
I know… Gasp!
However, I was talking to one of my tax lawyers the other day and he pointed out that if you really want to go where you’re treated best, you should bank for business purposes in the United States. And I have to admit that he may be right.
The imperfect US banking system
The US banking system has its problems. I’m not saying that it’s perfect by a long shot. The FDIC has less than 30 basis points, which is basically 0.3% on the dollar. If one or two big banks go under and don’t get bailed out, you’re in a bad situation. You’ll be relying on Congress to dip further into their already trillion dollar debt.
On top of that, US banks aren’t particularly good when it comes to things like online access. Just last year I wrote about a client who had their online banking frozen because they tried to log in from a different country — even though it was a country in the European Union!
The biggest dilemma with that situation is that US banks always think the solution to such problems is for you to show up at the branch with your debit card. As if they don’t understand that someone on the other side of the world wouldn’t find it inconvenient to travel all the way back to the United States just to reboot their online banking or reactivate a debit card.
The moral of the story here is that you’ve got to find the right banks. Now, a lot of US banks stink. Chase is one of the worst (although their merchant accounts are quite good). Bank of America is just terrible and Wells Fargo — although I don’t particularly like them — is a bit friendlier.
In fact, there are a few Wells Fargo branches that are actually decent. This is similar to the situation in Singapore I’ve described before about certain Singapore banks that still take Americans — you just have to go to the right branch. So, if you go to the right Wells Fargo branch and you’re a non-resident or a non-citizen, you can generally still get an account.
However, after the recent Wells Fargo scandal, I don’t know why they’d be your first choice. Better to go with my preferred banks than one of the big banks that seem so vulnerable to corruption.
The world’s largest tax haven
Here’s the bottom line, the US is the world’s largest tax haven. If you’re a US citizen, you may not understand or like that because it’s not the best tax haven for US citizens, and particularly residents. However, for US citizens living abroad and non-citizens living outside the US, the United States can serve as a tax haven.
For these people, there are ways to bank in the United States without having to pay tax.
Now, you could sit around and talk about how some of the US banks are bankrupt — and yes, some of them are. And sure, the FDIC is broke. But do you know who complains about those things?
In my experience, the first people to say they don’t trust the FDIC are the same people who — after I suggest banking in a place like Georgia — ask whether Georgia has deposit insurance. They don’t. They have a real free market.
Let’s be honest here, all these anarchist types who are going around complaining about the FDIC are full of it. It seems to me they just want something to complain about. I’m tired of complaining. It’s not productive and it doesn’t get results.
Instead, I focus on the Nomad mindset, I worry less about politics and I’m done calling people jerks and criminals. And you know what? I’m getting better results than ever by not doing that stuff. Perhaps that’s because the people who talk about free markets are the ones who complain that people sell their stuff or hate the idea of having to pay for things. They want everything for free… maybe they got confused by the meaning of a “free” market.
If you want to be an anarchist, that’s fine. Do your thing. But if you want results, be willing to do what it takes to get them.
A US bank account may be the answer
If a US bank account is what it takes to get the right results, then suck up your pride and bank in the US. It definitely isn’t the answer for everyone, but for some, the US may be the answer. Is it ideal? No. But if you’re looking to run a business, from an operational and logistical point of view it’s the best.
And, like I said, the answer is to find the good US banks — not Bank of America, not Chase — the ones that may not have quite as robust online banking, but do have excellent personal customer service. Look for the banks that understand international business and how to wire money overseas. Choose a bank that will take the time to get to know you so they can comfortably keep your account open while being compliant with KYC rules.
Believe me, all the other big institutionalized tax havens like the United States and the Netherlands (the ones nobody thinks of as tax havens) are cracking down and putting the squash on these tiny little islands. It’s not just about cracking down on tax havens in general, it’s also a competitive move. If offshore corporations from places like Seychelles, Nevis, Panama are rejected, the big tax havens win.
But that doesn’t change the fact that the United States is a great tax haven for foreigners and it can be for you too. If you want some of the best banking, the United States is increasingly the way to do it.
There are different ways to structure your business and banking to make this work to your advantage. And there are certain banks you should probably want to go to. Don’t just go to your local branch. You could, and there could be tax benefits, but if you’re planning on doing a more robust business you should probably choose a higher-brow bank that’s more open to wire transfers and other international-level operations.
Blame or profit?
The point is, the US is not a bad place to go largely because all these other places are getting shut down. And if they don’t get shut down, you’ll at least have to put up with more and more questions.
People from places like South Africa and China have long had to answer the questions about where their money is going. That’s all going to increase.
However, the United States is actually pretty favorable when it comes to leaving people alone. The United States does not need to impress the United States. Basically, all the money that is transferred internationally goes through Europe or the United States, which means they have a lot of say in the world financial system.
That is also why banks in places like Latvia are on pins and needles. Many smaller banks that aren’t tied into the Swift system may have a US intermediary to help them handle such transactions.
With so many regulations, however, one Latvian bank cannot send money through a certain US intermediary bank. Many banks have slowly been beaten into compliance simply because US intermediary banks won’t accept their money.
When you have a US bank account, you don’t have to worry about US intermediaries because you’re already in the United States. You may be sticking with the bully to keep yourself safe, but at the end of the day business is business.
Obviously you have to be compliant; and, obviously, if you have other reasons for not banking in the US, so be it. But if you’re just a normal businessman, the US could very well be the answer.
Sure, blame the US for what’s happening. Blame them for shutting everyone else down. Blame the OECD. Blame them all! But do you want to live your life handing out blame or focusing on what’s going to help you profit?
It’s a simple question: Do you want to blame or profit?