Dateline: Barcelona, Spain
Admittedly, I’m not a “movie guy”, but one of my favorite movies of all time is the James Bond flick, The World is Not Enough.
In the first scene of the movie, Pierce Brosnan is in Bilbao, Spain haggling with Swiss bankers who helped move the money for a kidnapping before he jumps out of the bankers’ office during a fight.
It’s scenes like this that reinforce the image of “offshore banks” as mysterious and just plain cool.
In all honesty, a few of the HSBC bank branches here in Spain remind me of that scene in the movie. Even so, banking with HSBC is not particularly mysterious or cool. While I hesitantly recommended HSBC as an offshore bank in very limited scenarios in the past, I can no longer continue to do so.
For a couple of years now, those within the offshore community have been quietly complaining about dealing with HSBC, both for personal banking with HSBC Premier and even more so on the business side of working with them.
And in no jurisdiction have people had more problems with HSBC than in Hong Kong.
In fact, my own personal dealings, as well as the dealings of other people that I’ve had the opportunity to observe, have brought me to the conclusion that HSBC is the world’s worst bank. If someone comes to me and tells me that they have an account with HSBC, I immediately start helping them develop a strategy to get them away from it.
If you have an account with HSBC Hong Kong or if someone told you to get one, I’m going to walk you through exactly why so many people have been having problems with this particular setup.
In this article we’ll discuss the two most common problems people have with HSBC as well as how redundancy can help you avoid problems with HSBC Hong Kong and other banks like them.
If you’re going through the process of setting up your company in Hong Kong and you don’t have a bank account yet, you might think it’s logical to just go to a bank in Hong Kong. That makes sense.
And no bank is bigger in Hong Kong than HSBC.
For years, the way that all the company secretaries and all the people who’ve made their money churning out hundreds of cheap, new companies a day “assisted” their customers was by sending them to the Sheung Wan branch of HSBC.
They would send you to one of the bank’s many employees who you would find in a shoe box cubicle waiting to help you open an account.
For a while that worked just fine, but then HSBC got into some trouble.
They had some legal challenges concerning some of their customers and, in response, started going through a process of what’s called de-risking.
They didn’t want to accept companies that they felt would expose them to further legal complications.
Now, I know people who live in Hong Kong with their company based there as well. Their employees, offices, and all of the other trappings of a “normal business” are based in Hong Kong.
Some of these people still have accounts with HSBC because they have a relationship with their banker. They’re in the bank on a daily or semi-daily basis. There’s nothing abnormal about the business that they’re doing in Hong Kong.
For these folks, HSBC Hong Kong works just fine.
The challenge comes for everyone else who used Hong Kong as an offshore center to set up a company and trade through.
HSBC (and most other Hong Kong banks) no longer want to work with or accept these companies because they represent a risk to the bank.
They look at a company operating their business from Tahiti with remote employees found on Upwork and get worried because they have no idea what the person with the account is doing.
Instead of taking any perceived risk, they’ve decided to close all of those kinds of accounts.
It’s so bad with some of these banks that I actually knew a guy who worked as a senior official in a bank and he couldn’t open an account for his little side business in his own bank.
HSBC Hong Kong wants to work with companies and customers that can be tracked easily and understood so that they don’t have to worry about the repercussions of not complying with government regulations and controls.
So, if some company secretary or someone trying to sell you a company in Hong Kong has given you a reference to a bank that happens to be HSBC, you should probably tell them that it isn’t going to work.
It might have been an easy option before, but it’s just not going to work anymore.
And even if you follow their recommendation and try to set up an account, many people I’ve talked to that have been referred to HSBC Hong Kong have ended up being rejected. You probably won’t get an account either.
HSBC’s Customer Service
If you have an offshore account with HSBC Hong Kong and you haven’t already been caught-up in the de-risking process, they’re going to start sending you letters.
These letters will have about twenty pages of forms you’ll need to fill out about your company and what you’re doing with it.
This isn’t totally abnormal for banks, but HSBC seems to do this to you more often and much more frantically than other banks will.
Unlike other banks, however, you can’t call anybody.
The Hong Kong HSBC call center is terrible. Nobody there knows what they’re talking about. Your case will be handed off from one person to the next, one call center to the next, with no one really understanding what’s happening.
And no one is actually empowered to help you.
So, in this case, working with a huge, global bank is actually a detriment for your business because no one will be able to tell you how to fill out the forms or how to work through your situation.
Eventually, in the case of most people, what they’ll do is freeze your account. You’ll log in one day and won’t be able to send anybody any money.
You might call and try to figure it out, but eventually you’ll just give up, as most people do, and fly to Hong Kong.
When you get there, you’ll go to the basement of their business center and wait. You’ll see potentially a dozen other people around you who are in Hong Kong as foreigners with businesses just trying to get their money out and go.
When I ran into this problem with my HSBC account, I ran into a Thai national who was there trying to sort out his problems. His company had a small enough balance that he was able to just take it out in cash and put it in a suitcase.
Other people I met who were western businessmen had to wait around for cashier’s checks and some had to come back days in a row.
HSBC Hong Kong is not really that efficient.
In my particular case we didn’t have a huge problem to sort out, but it just became very difficult and complicated to deal with them.
We had such a hard time getting the answers that we wanted when we tried to close the account over the phone that I finally just flew there and closed the account in person.
They threw every obstacle my way. I had to talk to this person, then to that one. They had questions about my account and ran into problems at every turn.
Despite them telling me they couldn’t guarantee how long it would take, I did actually get out of there in about a day.
When I finally got that cashier’s check, I ran across town and deposited it.
Whatever advantage I had using a global bank was totally lost in having to deal with a globally clueless customer service infrastructure.
HSBC Premier is not so “Premier”
On top of that, there is little “premier” about HSBC’s Premier service. I’ve gotten better customer service from a Chase branch.
And I hate Chase.
My experience with HSBC Premier branches in several different countries has been that you can’t even get a fresh cup of coffee while you wait for your banker. Then there’s the fact that you have to wait for your banker.
Ask anyone at the branch what the benefits of being Premier are and they won’t give you too many real answers. Any therapist would say their answers show a lack of “presence”.
My experience with the one-on-one relationship managers in the US, UK, and Hong Kong has also been rather poor.
As an entrepreneur, I know the value of slick marketing and used to joke with employees in past businesses that we’d make them a “Vice-President” if they’d take less money. That’s basically what HSBC does:
Hires a bunch of grunts in monkey suits and calls them “private bankers.”
If you have $5 million to deposit, the HSBC Private Bank in the Cook Islands may be worth a shot, although I would tell you there are far better private banks in Switzerland, Singapore, and elsewhere with much lower minimums.
Personal Risk Reduction and HSBC
Spreading your risk between ETFs, mutual funds, and REITs won’t be enough if your money is not diversified internationally, including having multiple offshore bank accounts.
Offshore banking, at the end of the day, is really about one thing: risk reduction through international diversification.
There are some people who mistakenly believe that to protect themselves from things going wrong in their country, they should move ALL of their money to ONE other country.
That’s not how it works.
No country, or bank for that matter, is totally resistant to all the shocks of changes in government regulations or policies. A tax attorney friend of mine has suggested that perfect internationalization includes banks that have no connections in the country you live in or hold citizenship in.
Personal risk reduction through international diversification requires you to take steps to limit the amount of damage that governments and banks can cause when it comes to your lifestyle and business practices. And HSBC just isn’t a good way to achieve that.
Offshore Redundancy and Governments
Major banks like HSBC, Citi, Standard Chartered, or JP Morgan all have the problem of being tied just as closely to your home country as they are the tax-friendly locations where you’ll open an account like, like Hong Kong.
Even though HSBC USA is a totally different bank from HSBC Hong Kong, and their local registrations do put up some barriers, more of those barriers work against you than for you.
For example, I can’t deposit a paper check for a Hong Kong company at HSBC in Malaysia.
They’re two separate banks.
Likewise, when an account I opened at a Czech Republic bank was quickly opened and then closed with me never getting the account number, I couldn’t walk into that bank’s branch in Slovenia to get the number. I had to go to the Czech Republic.
On the other hand, there is increasing evidence that a government official could call up HSBC in another country and have your account frozen because you owe taxes. The barriers that keep you from smoothly dealing with separate banks doesn’t slow the government.
Domestic bank accounts you own are an easy target for your government. I’ve told the story of waking up one morning to find that a bank account for a non-California LLC had been levied by California for taxes I already paid.
All it took was the push of a few buttons.
Sadly, banking with multinational banks can subject you to the same provisions. I’m not saying you should dodge the taxman or skirt the law knowing that some local bank in Andorra will protect you. I’m not suggesting you do anything illegal or even immoral.
I am, after all, the goody two-shoes of the offshore industry. Everything we do is 100% legal.
What I am suggesting is that multinational banks like HSBC will throw you under the bus in two seconds if someone with a shiny badge comes and knocks on their door asking for money.
It’s similar to how the flight attendant on my flight to Barcelona gushed when one of the airline’s captains asked to sit in the emergency exit row for his commute to work, but I was told I’d have to pay extra.
The flight attendant knows and is perhaps even beholden to her co-workers, whereas I am an expendable passenger. A low-level employee doesn’t care too much about my business, and I know well enough that saying “I’m going to fly another airline” won’t get me far.
Bank employees feel the same way. Do you think HSBC is going to risk its good standing in the United States to keep you and your $100,000 happy?
Of course not.
Offshore Redundancy and Your Business
The fear of risk that banks carry with them is a concept that people who are new to the offshore field and are just setting up their first business may not understand.
It’s not like you’re in the United States banking in the same city where you live with people that you may know.
When it comes to offshore, banks have to know who you are.
HSBC in particular has decided that when it comes to de-risking, the best option is just to get rid of everything that could possibly be a problem.
While it’s fine to not take on new customers, what isn’t fine is having company secretaries tell you they can still get you an account there, even though that game stopped almost two years ago.
What’s even more unfortunate is that, if you’re still banking there, there’s probably a good chance that they’re going to eventually come around with questions.
They want to know why you’re banking there if you aren’t living there.
It’ll be just one piece of correspondence after another until, based on what I’ve seen, you’ll eventually end up with some big problem that needs to be handled immediately.
If you’re banking there now, I would tell you to do two different things: The first is to get a handle on what’s going on before it becomes a problem. The second is to have redundancies.
If you have a foreign company in a country you don’t live in, you need redundancies in place. You need more than one bank account. You need other options that you can fall back on in case your main structures fail.
The idea of having two or three different bank accounts set up might be strange at first, but the reason for this is very simple. Not only do you want a place to move the money if one of your accounts happens to get closed, but you need to spread the money out so that some bank like HSBC can’t totally put you out of business in a day by freezing your account.
Without redundancies, a freeze on one bank account means that you can’t pay your employees or your vendors.
Redundancies keep you from jumping up and down screaming until you drop everything you’re doing to fly to Hong Kong and pick up a cashier’s check when this happens.
Having multiple options protects you and your offshore business when banks decide that you’re too risky of a customer.
I am a practitioner, not a theorist. And in eleven years of studying this stuff, and many years of doing it myself, I’ve seen a lot of these different roadblocks put in my way. HSBC may sound good in theory, but it doesn’t deliver.
While HSBC isn’t the only bank that gives people problems, it is perhaps the most problematic bank from everyone I’ve talked to.
I’ve heard no good stories about them.
HSBC Hong Kong is very problematic to work with, but it isn’t the only branch of the bank where you’ll end up having trouble. You’ll find similar terrible service with HSBC in Malta and many other if not all locations worldwide. You’ll end up with too much paperwork and too few answers working with any other branch.
And yet I see people continuing to sit by hoping for the best, hoping they won’t be next in line for HSBC’s crack down.
If history is any guide in this case, they probably will be.