US Indicia: Why Your Offshore Bank Hates You

Dateline: Mexico City, Mexico

Jovana Vojinović, my director of operations, and I have been doing a worldwide banking tour in Europe. What we’ve discovered is that there is not a single bank in Liechtenstein that wants to take even a former US citizen, like myself. 

They simply don’t want to deal with me or anyone even slightly connected with the US. Part of this has to do with FATCA and US indicia.

The Foreign Account Tax Compliance Act (FATCA) is a US program that was passed under Obama in 2010 and was designed to stop tax evasion. 

Now, I am the goodie two shoes of the offshore industry. 

I don’t help people with tax evasion. 

There is a big difference between tax evasion and tax avoidance

What FATCA does is go after banks—particularly in Switzerland but also worldwide—that they suspect might have bank accounts for US persons. 

Most Swiss banks are prickly, to begin with for anyone in terms of high requirements, low responsiveness from bankers, and low rate of customer service from what they require in deposits. Since the initiation of FACTA, there’s a zero chance that they’ll even look your way if you bear even a slight connection to the US.

Here’s why: FACTA requires that any non-US bank is required to fill out IRS Form 8966 to provide the US with information about any accounts held by US persons.

Any bank that doesn’t comply is subject to a 30% withholding tax on certain US payments.

This is all in an effort to track down any worldwide tax dollars owed so that people are not taking money from Americans.

While FACTA has done much to increase transparency, reporting, and trust in the offshore world, its immediate effects were thousands of closed offshore accounts for many US persons (even suspected US persons) and massive amounts of paperwork for bankers and their customers. 

In the long run, it has made it extremely difficult for US persons and those involved with the US to open offshore accounts in many countries. 

FACTA has been quite successful wielding its big stick and as a result, over a decade after FACTA began, banks still don’t like opening accounts for US persons.

What Is US Indicia and Why Is It a Problem?

If you’re wondering how to open an offshore bank account as a US person, here are some important factors the US will use to keep tabs on you. The 7 US indicia or indicators that the US uses to tag people who could be US persons are:

  • Place of birth in the US
  • US citizen or resident as an account holder in an offshore account
  • Residence or mailing address in the US
  • Telephone number in the US
  • Recurring payments from a non-US account to a US account
  • A US address for a power of attorney or signatory authority
  • An account holder with a US address marked with “in-care-of” or “hold mail” as the sole address

It’s also important to note that any non-US person who shares a joint account with a US person or any business or not-for-profit organization that has a US person as a signatory authority on a financial account can be affected by FATCA.

Banks might make you fill out a US tax form even if you are not a US person. Any hint of connection to the US will cause them to dig deeper to ensure they’re covering all bases.

The big US indicia that I always mention is having the US as your place of birth in your passport. The US government went through a massive worldwide effort to get all countries to put the place of birth in the passports they issue. They even breathed down the neck of St. Kitts and Nevis to get it done.

Now because of this, most countries put a three-character country of birth. So, for my wife, it’s RUS, for me, it’s the USA. When I got my Comoros passport they didn’t ask me what country I was born in — they barely ask you any details. So, in my Comoros passport, it says Cleveland. There are some passports, for example in Europe, where they put the city of birth. Perhaps they thought they were doing a favor by putting that. 

Don’t think that just getting a second passport will solve your US indicia problem. There is a common misconception that you can just become St. Lucian and you’ll be openly accepted.

Your passport will still say you were born in the US and banks will still ask you about your US connections. You’d have to lie under the penalty of perjury and possibly have all your money confiscated because you would not file a W-9 with the IRS. 

In the end, if you are a natural-born US citizen, you are not going to get away from it no matter what you do. No country will change your place of birth on your passport. You are always going to have your place of birth stated as the US.

Even If you’ve given up your citizenship, banks often request to see your certificate of loss of nationality. 

Jovana and I went to all the banks in Serbia and found banks that would cooperate with us. We went all day, all week slogging around meeting with bankers. The one thing that constantly caused bankers to raise an eyebrow was the response to their question, “Where do you live?”

Banks don’t generally want to hear I live in 17 different places. I went with my home in Montenegro and gave them my address along with all the other pertinent information banks collect and with all that I passed inspection.

At one bank, the banker quickly looked over my passport, but what caught her attention was when she asked where they could reach me to send an SMS. As my Serbian phone was a little slower and wouldn’t get the SMS immediately, I gave her my Google Voice number. When I gave her the +1 number, she said, “Oh, so you still have something with the US.” 

She got me. 

She was a nice woman, but still found a connection between the US and me. Now obviously +1 could also be a Canadian number, but it caught her attention. They simply don’t want connections to the US.

I used to bank in Baku, Azerbaijan regularly. They didn’t pay attention to many of the details years ago. Now it’s just terrible and I don’t like banking in Azerbaijan — nor do they appreciate any connection to the US, even if you’ve renounced your citizenship there.

Opening an Offshore Bank Account as a US Person

What it comes down to is that some offshore banks will reject you as a US person while others are willing to comply with FATCA reporting and will take you and treat you well. You can’t change the place where you were born and how that country acts, but you can put things in order so that you can go where you’re treated best.

Here are some important things you can do to find what banks fit you best:

The first step to opening an offshore bank account as someone with US indicia is to be up to date on your tax compliance. If you meet any of the US indicia it will flag your account to be reviewed. Take the time now to make sure you are not delinquent on any taxes.

Know the requirements for offshore bank accounts. Offshore banking is not a simple procedure, especially as a US person. There are special IRS forms you will need to be aware of. Any non-US bank account will most likely require you to file the Foreign Bank Account Report (FBAR). Not doing so, either willfully or not, will bring enormous penalties. Check out our Ultimate Guide for FBAR filing and due dates.

As with opening any offshore bank account, but especially for a US person, you need to know that a bank will fit your profile and needs. As a US person, you need to know the banks that work well with US persons, in addition to meeting your other banking and investment needs.

There are places like Switzerland and Liechtenstein that are closed to banking for US persons, but others like Georgia are very accepting of US persons and offer great interest rates. There are also other countries somewhere in between that will require large deposit amounts and make you pay high fees in order to accept you as a US person.

So make sure you know what bank profile you’re looking for.

Next, find a bank that knows you and your goals and supports you in them. The terrible banks that don’t know their customers well and what you’re working towards, like HSBC, will send you a letter every 3 months making demands of you to fill out their long-winded forms. Or you’ll occasionally get a letter asking you to confirm your status for Common Reporting Standard (CRS). 

Find a bank that doesn’t make your life more difficult. If you are banking with HSBC or similar banks, you need to get out. Find a bank that will treat you best.

Here at Nomad Capitalist, my team and I have developed a list of banks that get it right from the beginning. We also work with a lawyer from the beginning to get things set up correctly. 

We have substantial experience with hundreds of banks that would never bother anyone when the accounts are opened and set up properly. Reach out to our team and we’ll help you get started.

Andrew Henderson
Last updated: Apr 26, 2021 at 1:08PM

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