Dateline: Wroclaw, Poland For years, the United States and its cronies at the OECD have led a campaign to shut down offshore banking countries that didn’t goose-step along with their goals of global financial transparency. Countries like Switzerland that have enforced strict bank secrecy laws were prosecuted and destroyed. Today, bank secrecy is largely a thing of the past and, as a result, opening an offshore bank account is harder than ever for Americans. Additionally, laws like FATCA have forced offshore banks to shut down to Americans. In fact, some offshore banking countries have become almost completely off-limits to Americans (and other nationalities, as well). These include some of the stalwarts of the offshore world, and those most often associated with offshore banking.
Off-limits offshore banking countries
The following are five offshore banking countries that are off-limits to Americans or should just be avoided as a rule of smart offshore banking:
The United States government is directly responsible for two bank closures in Switzerland. Not bank failures, mind you, but solvent banks closing their doors because the US didn’t like the way they ran their operations vis-à-vis American clients. While Switzerland has always been an expensive place to bank, the US government has made it even more so. My colleagues, with decades of experience in offshore business, recall an era when the top Swiss banks demanded several million dollars to open an account with them. These days, almost all Swiss banks require at least $1 million on deposit. The lowest I’ve yet to find is approximately $800,000. Swiss banks are also known for their penchant for private banking, which favors long-term money management over transactional banking. If you don’t want your millions tied up for the long-term, look elsewhere.
Thanks to an odd interest in visiting the world’s micro-states, I visited Liechtenstein early in my world travels. The place is quite quaint; you can get from Sargans, Switerzland to the Austrian border in about half an hour. Liechtenstein banks operate much like those in Switzerland. Considering that Liechtenstein uses the Swiss military and Swiss currency in its micro-state, that doesn’t seem so crazy. Liechtenstein has had its own run-ins with US and European regulators. The Swiss unit of a Liechtenstein bank will close down later this year and pay millions in fines to avoid prosecution in the United States. In 2008, Liechtenstein was the center of a large tax evasion probe in Germany that left high-tax countries scrambling to condemn the micro-state as one of the last uncooperative tax havens. The country shed much of its bank secrecy and recast itself, not as a tax haven, but a “safe haven”. As a result of all of this, Liechtenstein has become rather gun-shy about opening accounts for Americans or many Europeans. In fact, you’d be hard-pressed to find any Liechtenstein bank that will open an offshore account for Americans, let alone set up a famed Liechtenstein trust for asset protection. Of course, some Liechtenstein bankers have bigger problems; the head of one of the country’s largest banks was recently shot dead in a “Mafia-style” murder, allegedly by the “Robin Hood of Liechtenstein”.
Luxembourg is an interesting place. While not as small as offshore banking tax havens like Andorra or Liechtenstein, it is nonetheless built on the success of its financial industry. These days, that financial industry is off-limits to Americans. Few, if any, Luxembourg banks accept US persons as clients. While several US firms, including American Express, have established financial services units in Luxembourg, most do not do business with Americans. After the Cyprus debacle, some in the EU complained that Luxembourg should be reigned in considering its small size (less than 1,000 square miles) and the size of its financial sector compared to the overall GDP. Of course, Luxembourg is far better capitalized than Cyprus and comes without any of the money laundering baggage that was present to the south. However, the slings and arrows directed at any developed world offshore jurisdiction these days are enough to cause problems for those wishing to open offshore accounts. If you’re American, skip Luxembourg. You really don’t have much of a choice.
I don’t know which is worse: the fact that some offshore websites are still promoting their ability to open a Cyprus bank account for clients, or the fact that some people are still going for it. While some would suggest that lightning rarely strikes twice, I wouldn’t be so fast to jump into bed with Cyprus with any amount of my money. I have concerns about their deposit insurance, their membership in the EU, the stability of their banking sector, and with their government. I don’t recommend you spend the reduced sum of 2.5 million euros for Cypriot citizenship, either.
You might think that Ukraine is totally out of place on a list of offshore banking countries. And you’d be right… in the sense that it is worlds apart from the safe-haven status of countries like Switzerland. However, Ukraine currently offers some of the highest deposit yields on earth, with some banks paying up to 18% on one-year CDs. In a world starved for yield, adventurous depositors might seek refuge in a place like Ukraine. Now, I’m a big fan of claiming higher interest rates in offshore jurisdictions. There’s no reason not to earn as much interest as you can, provided the jurisdiction you’re banking in is stable. Sadly, Ukraine is far from stable. Many banks in Ukraine are controlled by the local mob as a means of money laundering. Even some Ukrainian bank websites look remarkably similar to those 100%-a-day HYIP scams you see floating around online. That’s not surprising, because getting your money out of a Ukrainian bank can be near impossible. Few banks in Ukraine will send proceeds from your account out of Ukraine. You have to go there to get your money. I can’t imagine many of you want to go to Ukraine ever, let alone a second time. Then again, it is claimed that a Ukrainian banker toppled a large bank in Lithuania after using it to launder money, so your money might not even be there at all. There was a time I might have been cautiously agnostic about opening an account with one of the international banks in Ukraine. Today, I wouldn’t advise doing even that. Some places are easier to open an offshore account than others.