Dateline: Kuala Lumpur, Malaysia
As strange as it may sound coming from me, I strongly think that there are good business opportunities in the US. It is not without reason that they are the leading world economy and superpower.
If you want some of the best banking, the United States is increasingly the way to do it.
But my approval comes with some major caveats, chief among them is that the American tax system is overly draconian and takes money from every US citizen, even if they have never been to the country in their entire life.
Besides, ever since FATCA provisions became the norm, at least for the US, bank secrecy is dead. Hence why the offshore world has largely moved from hiding money abroad to being strategic and transparent about one’s funds.
Nowadays, because of these new regulations, many banks around the world are forced to ask the “who, why, and where” if you do anything remotely out of the ordinary with your money.
And all this began when the US started leaning on these banking institutions.
In an ironic twist though, the US has no reporting obligations to any other country, meaning that at least for non-Americans, there are some very good benefits to banking in the US.
So, in this article, I will be explaining what the American banking landscape is like nowadays, why non-Americans would benefit from US bank accounts, and how Americans can still have a global footprint while still retaining the comforts of home, at least where banking is concerned.
The Imperfect US Banking System
US banks aren’t particularly good when it comes to things like online access. A while ago, 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!
I’ve had my own accounts blocked in much the same way as well – for logging in too often from abroad and transferring money to accounts in Singapore under my own name. Then, to make matters worse, I received a sketchy phone call, from someone that didn’t identify themselves properly. I ignored it, as you should, but it ended up being my bank and my account was flagged.
The biggest dilemma with the aforementioned 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. Most US banks stink if you’re someone with a global perspective. Chase is one of the worst (although their merchant accounts are quite good).
If most of your day-to-day life happens in the US, you won’t really feel much of a difference between good and bad banks though, as they more or less provide comparable services. The problems arise when you start behaving in ways that banks don’t approve of.
It’s also worth mentioning that not all US banks are safe, and some are more prone to fraud charges than others. So, security should definitely be near the top, if not at the top of the list.
Fortunately, we’ve already made a list for you of the top five safest US banks, as not all institutions are equipped to deal with the protection required when moving in foreign locations.
Because of all this, credit unions, and other small institutions, are extremely risk-averse. So, as soon as you start doing anything out of the ordinary and dealing with overseas transactions, they may close your account without any prior warning.
Don’t be too hard on them though, even if they really want to help they might simply not have the infrastructure ready for a global challenge.
Large retail banks, on the other hand, take the fast-food approach to things – everyone gets the exact same product, and beyond some superficial customization, they expect a certain type of behavior from you. If you don’t operate in the way that they expect, prepare yourself to be hassled and harangued for any minor deviation from the norm. That is unless you’re wealthy enough to have your own private banker in those institutions.
Overall, I would avoid big banks because they are usually not worth the headache. Though I’ve heard people say good things about Bank of America and Wells Fargo, with the only caveat being that they are obsessed with text verifications.
Personally I’ve had less than pleasant experiences with them, but I am aware that my experiences are not statistically significant in things such as these.
The Middle Ground
So, where does that leave us if the big banks are rich enough that they don’t need our money and the small banks have too narrow of a focus to be interesting?
If either extreme does us no good, then let’s take the middle path.
On the one hand, do not go for an institution so large that it can just impose sweeping and restrictive policies on its customers. On the other hand, you should also avoid banks so small that they will have a heart attack whenever you attempt to move sizeable amounts overseas.
What you want is a mid-market, mid-sized bank, preferably one with international exposure. If you have the money, chances are you will be able to get a connection with someone high up on the food chain, and they will be able to clear any problems before they arise for you.
I won’t name my specific US bank account, as the financial institution is by invitation only and I was asked not to advertise them, but I will point you to the likes of Bank of China in New York. I’m saying this for the Americans in the audience, as anyone with an Asian background would laugh at my suggestion that Bank of China is “mid-sized”.
It’s certainly a gigantic bank… in China. Whereas its footprint in the US pales in comparison to the local big players.
In other words, you can have the best of both worlds with Bank of China, and financial institutions of that nature.
Unless you appear in the Forbes list, it’s unlikely that the upper management of the bank would talk with you in China. But they have the financial might and infrastructure to fulfill any request. Whereas, if you’re a decently sized investor in the US, it wouldn’t be out of place for you to be able to have a direct line with their office in New York to resolve any matters.
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.
Traditional banks don’t tend to have such reservations. But these startups are often operating on razor-thin margins, and they’re at the regulatory knife’s edge.
They like to present a very open and global perspective. Charles Schwab, for example, attracts the attention of global travelers because they don’t have ATM fees. But this is a bit of a facade – they’re perfectly fine with business travelers, as long as they always come back to the US and conduct most of their transactions there.
Hence, if you don’t actually adhere to their ideal client avatar, they will also just close their doors to you.
The one exception I have heard about is Capital One, which seems to be better than average, but I would still recommend going with institutions where you can put a face behind the brand name.
The world isn’t run on brands and corporate slogans but on people interacting with each other.
The Benefits of a US Bank Account
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 non-citizens living outside the US, the United States can serve as a tax haven.
As hinted at before, the US is under no obligation whatsoever to share your financial data with the rest of the world. And as a consequence, it can well work like the offshore accounts of old, while the Caribbean and the like are suffering gravely under their reporting obligations.
All the 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 chopping down on tax havens in general, it’s also a competitive move. If offshore corporations from places like Seychelles, Nevis, and Panama are rejected from being able to get bank accounts or blocked from doing some day-to-day company operations, the big tax havens win.
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.
But overall, 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.
It might surprise you to learn though that there’s not much to learn about how to open a US bank account, and how to load a US bank account – it’s rather easy and straightforward, even as a foreigner and non-resident.
Why US Expats Should Keep Their US Bank Account
Often, when I talk with my US clients and we start designing their offshore strategy, they are very protective of their US Bank account. It gives them some semblance of normalcy and allows them to pay bills and other expenses that are incurred in the US.
Not only that, but they have often worked hard to get their Amex platinum card, Chase Reserve Card, Black Cards, etc, and thus there is some emotional investment for the US bank account itself. Fortunately for them, I’m not going to suggest cutting them.
In fact, it might be worth keeping them.
Indeed, it’s unlikely that they would find comparable accounts in foreign markets. I’m all for keeping the things that make your life better.
It’s also worth mentioning that the Federal Deposit Insurance Corporation (FDIC) guarantees deposits of up to $250,000, which is nearly double the depositary insurance that you would find in other developed economies like the EU and UK (€100,000 & £85,000, respectively).
Americans are limited in how much they are able to structure in foreign locations and truly benefit from tax-neutral environments. Hence, if they aren’t going to fully commit to relinquishing their US citizenship, it often makes sense to keep a portion of their cash wealth within American jurisdiction.
If there is no hiding from the taxman, you might as well keep it easily accessible for your day-to-day use.
Despite the reputation that the US has earned in the offshore banking industry, if utilized correctly, it can offer very unique banking opportunities that you are unlikely to find anywhere else in the world.
That said, to benefit from the immense potential while limiting or reducing the downsides, you need to do your homework. The US has a very diverse set of banks, from multinational behemoths that will see you as just another number on their spreadsheet, to local credit unions that get spooked if they see one too many zeroes in your account or foreign transactions.
Ideally, you would want to find a mid-range bank that you can create a personal and direct contact line with. Having a bank that gels well with your global offshore strategy is crucial both in the short and long term.
If you want help designing your offshore plan – US banks included – feel free to reach out to our team.