Dateline: Kuala Lumpur, Malaysia
Whenever I post about offshore banking, my followers often ask me whether they can open an offshore bank account remotely.
There’s something about opening a bank account from the comfort of your living room that’s just plain appealing. You don’t have to go through the hassle of booking flights, hotels, and appointments, and you can handle everything from your smartphone or laptop.
Remote banking just seems like an easy way to get all of the benefits of offshore banking while saving precious time and energy.
However, while it’s certainly possible to open an offshore account through remote banking, I had heard mixed reviews about the process from people who had actually done it.
So, I decided to open a remote bank account myself.
I reached out to a bank that I often work with and inquired about opening a corporate account remotely. I figured that since I had a relationship with the bank, remote banking with them wouldn’t be too difficult.
I quickly found out that I very, very wrong.
Although they were happy to have me as a customer, I still needed to fill out the proper paperwork to open a remote bank account.
I needed all kinds of documents – apostilled copies of my corporate documents, certified true copies of my residential utility bill, and plenty of other items that required various seals, stamps, and verifications.
The entire process took me about four months to complete.
Granted, it wasn’t my top priority, and I didn’t have anyone helping me handle it. But getting all of those documents in order took much longer than I expected – and much longer than it would have taken me to open an account in person.
I also encountered plenty of issues along the way. My utility bill, for instance, only had my apartment number on it (not my name), so I had to figure out a different way to prove my residence.
Now, compare this process to what you normally need to do to open an offshore bank account.
When I recently opened a bank account for a business in Singapore, I reached out to my contact there, flew to Singapore, had a one-hour meeting with the bank, and opened the account.
So, while I can see the appeal in opening an offshore bank account without even needing to leave your couch, remote banking can be a bit more difficult than you would expect – even if your situation is a bit more straightforward than mine.
In addition to all of the paperwork involved, you’ll also have to deal with low-quality banks, fees, and other bureaucratic hurdles in the world of remote banking.
With all of these potential problems, remote banking simply isn’t worth your time.
If you’re thinking of opening a remote bank account, read on to find out why your time may be better spent elsewhere.
Remote Banking is Paperwork-Intensive
One of the main reasons why I discourage people from opening remote bank accounts is the amount of bureaucracy and paperwork involved in opening and maintaining them.
Because the bank doesn’t ever see you face-to-face, they need a lot more documentation to perform due diligence on you as a customer when you open an account remotely.
For example, all offshore banks need to verify their customers’ identities, but this process is much easier to complete in person than online.
If you visit the bank in person, then they’ll usually collect your passport, scan it, check its legitimacy, and you’re all set.
Verifying your identity remotely, on the other hand, is a bit more difficult.
You’ll likely need more than just a scanned copy of your passport to prove your identity. In some cases, you may only need your driver’s license or national ID, but other banks might have more stringent requirements, which can sometimes be a hassle to fulfill.
Since remote banks can’t handle your paperwork in person, they’ll generally have strict documentation requirements to ensure their customers are legitimate.
You’ll complete what seems like an excessive amount of paperwork, and you’ll often need to have certain items apostilled or otherwise certified.
Additionally, remote banks are often quite strict about the types of documents that they require.
I ran into this issue when I tried to open my remote bank account. The bank required a certified utility bill with my name on it, but my utility company didn’t normally include my name on the bill.
This meant that I had to go back and forth with the bank a bit to find an alternative solution. Although we were able to come up with one, it took some time to sort out.
Any type of problem or special circumstance can therefore be difficult to resolve if you’re trying to open a remote account.
Opening a remote bank account is thus incredibly paperwork-intensive. Even if you’re only opening a simple personal checking account, you’ll probably have to spend a couple of weeks gathering everything you need.
However, this seemingly-endless stream of document requests doesn’t end once you open your account.
Occasionally, compliance directives will come down from the US or the OECD, causing remote banks to panic as they scramble to ensure they meet these new standards.
As a result, the bank may ask you for more information in order to keep your account open, starting the paperwork process all over again.
Although these documentation requirements aren’t impossible to meet, they can certainly cause a few headaches and take up quite a bit of your time.
So, if you want to open a remote bank account, you should seriously consider how much time and energy you’re willing to commit to it before you get the process started.
Remote Bank Accounts can be Low-Quality
Another challenge that comes with remote offshore banking is finding a quality bank that offers this type of account.
For the past few years, I’ve been saying that onshore is the new offshore. It’s simply better to find a high-quality and business-friendly onshore jurisdiction than a lower-quality offshore one.
Banks in places like Germany or Singapore aren’t exactly desperate for new clients, so they can be more selective about who they open accounts for.
And, since it’s easier for them to know their customers and do their due diligence with accounts opened in person, they generally don’t offer remote banking.
Therefore, you’ll often need to look at banks in more remote offshore jurisdictions, such as the Caribbean or Vanuatu, if you want to open a remote account.
These types of banks are more likely to offer remote banking services simply due to their location.
Because traveling to an island like St. Vincent and the Grenadines can be expensive and time-consuming, many banks in these types of jurisdictions offer remote banking to attract more business.
While many of these banks are reputable, you’ll have to weed out plenty of low-quality options to find good remote banking.
Mauritius, for instance, is a great emerging market for offshore banking. However, the quality of Mauritian banks can range from excellent to poor, and the country has only recently begun to introduce deposit insurance.
Before you even start the paperwork process, then, you’ll need to spend plenty of time researching your options and selecting a suitable bank.
Then, if you’re able to find a bank that meets your needs, you’ll have to contend with fees.
Because these banks must process all of your paperwork and take extra steps to ensure compliance, they often charge remote banking customers higher fees to compensate for those efforts.
Recently, I had someone come to me saying that he opened a remote bank account in Belize.
That’s a poor choice for many reasons, but this man’s primary concern was the fact that this bank would charge him $150 to send a wire transaction.
That’s right – $150.
While most remote bank accounts’ fees aren’t this extreme, you’ll still end up paying more for a remote account than an account that you open in person.
Finally, some remote banking institutions aren’t technically banks at all – they’re more like trust accounts.
Although this can be beneficial in some cases, these kinds of institutions aren’t as connected to the global financial system as a traditional bank, so you’ll usually end up paying plenty of money in transaction fees.
Overall, the simple fact is that a bank in a small offshore jurisdiction that accepts remote customers isn’t going to be at the same level as a bank that requires you to go there to open an account.
While decent remote banking options do exist, finding them takes effort, and you’ll still have to deal with plenty of fees.
FATCA, CRS, and Remote Banking
As I’ve said before, offshore banking is becoming increasingly difficult.
While I’m in favor of doing things legally and transparently, these new reporting requirements have caused plenty of headaches for offshore banks – especially smaller ones in traditional “tax havens” like the Caribbean.
Remote banking institutions have thus also suffered as they struggle to meet compliance standards.
Six months ago, a bank that we used to work with informed us that they could no longer even hold US dollars.
After losing several US dollar-correspondent accounts, they started to route all of their US dollar transactions through Turkey and other countries, and eventually, the bank decided to call it quits and stop making transactions in US dollars.
Unfortunately, these kinds of issues have become quite common among banks in small offshore jurisdictions.
In fact, some of these banks have even stopped accepting customers from the US and CRS countries in order to avoid these compliance headaches.
Therefore, as banking offshore generally becomes harder to do, using remote offshore banks is becoming even more difficult.
Is Remote Banking a Good Choice for You?
Unless you’re incredibly attached to the idea of remote banking, then the answer is most likely no.
Although opening an offshore bank account on your laptop or smartphone seems appealing, the time and money that you spend opening that remote account is better spent on opening an account in person.
To illustrate this, let’s compare the process of opening a traditional offshore account to the process of opening a remote one.
If you go the traditional route, you’ll first need to travel to the country that you want to open an account in. Then, you visit the bank, fill out some paperwork, and open your new account.
Plane tickets and accommodation might end up costing around $1,000, but you’ll be able to open your account in a matter of days.
You’ll also have better options to choose from, and you won’t be dealing with as many fees.
Compare that to the process of opening a remote account.
While you may not have to stray far from your couch, getting all of your paperwork in order can take weeks at best, and with all of the fees involved, you’ll likely pay more than $1,000 to maintain that account.
My advice? Make a plan for your offshore banking strategy.
Decide where and how you’re going to open accounts for personal and business use, and make a plan to travel to those places to open those accounts in person. Along the way, you can also take care of other things like business meetings, making foreign investments, or even getting a second residency.
At the end of the day, remote banking simply isn’t worth your time and money.
It may seem like an easy and convenient option at first, but in the long run, you may wish that you had done the legwork to open a proper offshore account.