Dateline: Montreal, Canada
One of the first steps toward internationalization that I recommend is opening a foreign bank account. Moving part of your money into another country’s banking system subjects you to a different set of laws than where you’re from and gives you a Plan B for your money if things go south.
However, there are times when you don’t want to open an overseas bank account and, instead, need to close one. Depending on where the bank account is and how you opened it, this could prove to be relatively easy, or a real pain.
As someone who visits banks almost everywhere I go, I’ve become quite fluent with the banking system in dozens of countries. I know which branches get the best results, which banks are most efficient, and which banks deal in which currencies.
That’s the knowledge I obtain from countless trial-and-error. One thing I haven’t had as much experience in until lately is how to close a foreign bank account.
Why Close an Offshore Bank Account?
In my case, the answer is simple: I had too many bank accounts. As someone who collects them while traveling to dozens of countries each year, they can start to pile up.
Not all foreign bank accounts are easy to manage remotely, and I’ve learned which ones suit me better than others.
However, for most people, there are several clear reasons to close a foreign account:
- Your objectives change. This was the case with one of my accounts, which I originally opened as a way to save money in Swiss francs. However, I’m investing more in tangible assets now and this bank’s inability to offer online banking made it less useful to me. While I liked the bank itself, it didn’t serve my original purpose.
- The bank or jurisdiction becomes riskier. If for some reason, you assess that your money’s safety in the bank worsens, you’ll probably want to remove it. If you saw people lose 60% of their cash in the Cyprus bail-in, it likely inspired you to move your money out of similar jurisdictions with poor-risk profiles. This could also be the case for account holders in the many banks that lost their US dollar correspondent account.
- The bank has become difficult. Also known as “you don’t have a choice”, this scenario is becoming more and more common. Banks in Hong Kong, for example, have little interest in dealing with foreigners. I’ve been saying that for three years, and it’s more true than ever. Banks like HSBC don’t even want some of their own employees banking there from what I hear.
How to Close your Account
How to close your offshore account depends on how you opened it. Some banks that allow remote account opening — opening the account without your physical presence in their branch — only allow remote closing. This can be a little nerve-wracking since you aren’t able to see the banker or speed things along, and bankers in places like the Caribbean where remote opening is common aren’t typically known for speed.
The alternative can be equally dicey; you opened the account in person, but now need to visit the actual bank to close the account. This is why I suggest that you open foreign accounts in strategic locations, rather than just spitballing it; you never know when you’ll need to return to the location.
With some particularly difficult banks, you’ll be forced to return to the actual branch where you opened the account. This seems to happen more in Asia than elsewhere, although I don’t have much experience banking in Latin America so I can’t comment there.
It’s important that you choose a branch location that is easy to reach in the future. If you go to China, don’t open an account in some remote village where you’re sightseeing; open it in Beijing or Shanghai instead so you can easily get there.
I’ve recently closed several accounts; here are my experiences with each.
Account closure at ING Bank in Romania
I opened a bank account in Romania just a year ago. I’m a fan of Eastern Europe and believe in the long-term stability of the currency. I also think that there are worse banks in Europe than ING now that they’ve focused on their core business. Of course, that’s not to say ING makes strategic sense for folks who don’t live as a nomad.
My ING account was opened at a branch in Bucharest. The process was easy. However, not being in Bucharest made funding the account difficult without incurring currency conversion fees that were higher than I would have liked.
I asked my assistant to call the bank and inquire about the account closure process. She came back to me with a simple form that I completed and DHLed to Bucharest. The bank got back to her within two weeks informing her that they needed to speak to me; I didn’t really feel like speaking to a Romanian call center agent (despite their often excellent American English), but I had no choice.
The first call was not sufficient for the bank’s taste, so they asked to verify a few things and set another call. I was traveling that week, so my schedule was dicey and I missed their call once or twice. However, we finally connected, they asked a few security questions and agreed to close the account.
The only issue was that I had left about 80 Romanian lei (roughly US$20) in one of the sub-accounts, and there was no way for them to send me that money anymore, short of my coming to Romania. Obviously, for the price of lunch, I wasn’t exactly going to pack my bags, so I agreed to waive those funds.
No big deal. Although it did seem odd that a bank would be allowed to just keep your funds. Even in the United States, some banks won’t send closing checks for under $5, but will donate it to charity. Here, I guess the charity is ING… but the benefactor is me, with one fewer dormant account to manage.
Account closure at KOM Bank in Montenegro
Montenegro is one of my favorite up-and-coming jurisdictions in Europe. I’ve written about the place glowingly for several years. It’s a rare treat to find a government that actually appreciates the investment.
While I am making an investment in Montenegro, this particular bank account no longer served my needs. For one, I don’t even think KOM Bank Montenegro has a website. The bank is very prominent in Serbia and even owns naming rights to an arena in Belgrade, but Montenegro seemed to be almost an afterthought for them.
I opened an account while vacationing in Kotor Bay a couple of years ago. I was fortunate enough that, even in a country as small as Montenegro, account closure is possible at any branch. During my visit to Budva last month, I visited the Budva branch and simply asked them to close the account.
My Serbian and Montenegrin team members had called in advance to make sure this was possible and asked them to have cash waiting for me. Unfortunately, the bank got confused and had the large bills waiting at the branch where I opened the account, and not the branch I was closing it at 20 miles away.
When I arrived to close the account, I presented the now-expired ID with which I had originally opened the account. (It’s a good idea to keep all expired IDs as you may need them in situations like this.) I was asked to fill out a one-page form, wait about ten minutes, sign a few other account closure forms, and then wait five minutes for the cash.
Since I had never funded a large sum into this account, it was easy to be paid in cash. Still, the fact that the large bills were at a different branch meant I got small bills… a lot of them. The branch told me there was no way to exchange them short of driving to the other location.
Before leaving, I asked for a letter explaining that the account had been closed. The bank had presented me with a zero balance statement, but I needed to make sure that the account was closed rather than just zeroed out so that I can cease reporting it on future FBARs.
Fortunately for me, I had already planned on visiting Montenegro for reasons other than closing the account. Had I not, it would have been a long trip just to close an account. Also, had I not had Montenegrin speakers on the payroll, it also might have been harder considering not everyone there speaks English (although some do speak Russian).
Account closing at HSBC in Hong Kong
Now for the big one…
I’ve long said that HSBC — particularly in Hong Kong, but really anywhere — is among the world’s most dreadful banks to deal with. Now, add 5,000 new compliance agents who will basically take over the bank and you’ve got a bureaucracy to rival that of a communist government.
HSBC is so big and so cumbersome that I’ve heard stories of people who actually work in their compliance department being denied accounts for no reason. HSBC Hong Kong is now off-limits to practically any new business, even those based in Hong Kong unless you have an initial deposit estimated at US$2 million.
They’re even closing accounts without telling people.
In our case, one of our companies is based in Hong Kong and we opened an account with HSBC back in the go-go days when they were much more lenient. The process always involved an in-person meeting, but approval rates were in the 80% range, so long as you didn’t do anything stupid.
Now, approval rates are practically zero. But HSBC isn’t just holding back new account seekers; they’re making life difficult for existing account holders, as well. In our case, that meant monthly stacks of paperwork (each 20-30 pages thick), with forms to be filled out and returned regarding everything from US citizen beneficial ownership to the nature of the company.
Enough is enough
Look, banks are getting more stringent everywhere. Bank overseas and you’ll have to fill out forms. Heck, bank in your home country and you’ll deal with forms. But this was pretty ridiculous — especially considering the “geniuses” at HSBC Hong Kong’s commercial banking center in Sheung Wan wouldn’t even say what they wanted.
Every pile of paperwork became a fishing expedition of “We can’t tell you what to say, but if we don’t like it, we’ll hassle you”. We retained local experts to help us, filled out every form, and returned it by the deadline. But that didn’t stop the next fishing expedition. Eventually, we had had enough.
As with ING, my assistant called HSBC in Hong Kong and asked for the paperwork. Once we started asking to close the account, they gave us problems. Beyond just being difficult, their staff is about as dumb as you can get. Between outsourced call centers and low-level grunts in Hong Kong, we got a different answer every time we called.
I’d heard of other folks having this issue with HSBC who’d worked it out… in time. There was nothing wrong with the account, but when a bank is run so bureaucratically, no one can really help you.
Each time we’d call, it would take at least an hour on hold to even reach a human. They would, of course, then say they weren’t the right person or department to help and would transfer you. Half the time, they’d screw up and disconnect you.
I’m glad I had an assistant handling this because, at one point, it took up half of her week. I would have had a heart attack dealing with this stunning level of ineptitude. Even after a few calls with these guys, she realized why I hate HSBC so much.
Getting the run-around
Eventually, she got me an account closure form. All I had to do was sign it and send it to Hong Kong with wiring instructions for the remaining balance. After seven days, they’d just send the money to my other account.
So I ran around, printed the form out, sent it via DHL, and waited. Then came the bank’s reply: your signature doesn’t EXACTLY match. We need to speak to you. So we arranged a call.
Some girl from the Philippines called me and asked me a bunch of questions before explaining that account closing wasn’t even her department. She would have to schedule an appointment with the real person I needed to speak to, which she did. Only when the time came, that person didn’t call.
Three days later, I was in the backseat of a friend’s car when some other low-level grunt from HSBC called and prattled on with questions and excuses as to why she also couldn’t help me… despite the fact that she insisted on the appointment to begin with. At one point, I caused my friend to crack up in laughter as I got so frustrated that I started shouting Trump-Esque “Excuse Me!”s over her, trying to get a word in edgewise.
That account closing was not to be, so my assistant went back to square one and ended up just sending in another account closure form. It also was denied. There’s nothing worse than getting a bureaucratically worded letter from one of the worst banks in the world saying that your request was denied yet again because the hoop of your “H” was at the wrong angle.
Taking matters into my own hands
Finally, I decided to take matters to the next level. I had opened my account in Hong Kong, and so I flew to Hong Kong to close it. I had had enough, and the cost of a flight from Montenegro and four nights at The Langham in Tsim Sha Tsui (I wanted to make sure I had enough time in case they hassled me in person, as well) was well worth it just to be done with this.
I arrived in Hong Kong on a Tuesday night to discover my personal HSBC card didn’t work at the ATM. That was later attributed to their propensity to send new debit cards for no reason to old addresses on your account and was quickly resolved.
On the next morning, I enjoyed a nice breakfast at The Langham thanks to the Amex Fine Hotels program and arrived at HSBC’s central offices at 10:30am. I entered the lobby of the building where I was instructed to take an escalator down to the commercial accounts section in the basement.
I got in line and was quickly standing in front of the first friendly and seemingly competent HSBC employee I had ever met. This lady was efficient even for Hong Kong standards, and far more cheerful. Everything seemed to be going well until…
We need to get an approval to close this account. “From who?”, I asked. “The department that approves closures for this type of account.” Further questions also went unanswered as I was ushered to talk to a far less intelligent and far more portly woman who was the liaison for some shadowy other department.
I wasn’t the only one
I hung around for a while to see what would happen. After all, I only had three business days to solve this issue. There was nothing wrong with our account except for the fact that it was held with a bank so difficult that they couldn’t handle the simplest of procedures. I have no doubt that they didn’t want our business going forward, but as I wasn’t about to keep millions of dollars in the hands of such inept people, I have no doubt they didn’t.
After waiting for a few hours, I started to notice more stereotypical white dudes crowding into the basement, each carrying stacks of paperwork. As I stood at an empty teller window, I overheard each of them — perhaps a dozen in total by end of day — saying they were there to close their accounts.
One guy had the same problem I did, where his closure was subject to some approval process that no one seemed to understand or cared to explain, and had an infinite timeline. Worse yet, this department could not be reached via phone, only by email, where their policy for replying was apparently “whenever we damn well please”.
After two hours of hanging around, I took a long lunch to clear my head. I used that lunch to take a good chunk of cash out of my personal HSBC account before heading back to the branch.
The long-awaited end
When I returned, I got back in line, only to be told — this time by a manager who looked more like a pit boss in a pinstripe suit — that they were still waiting on what sounded like a pretty simple process from the guys upstairs.
So, once again, I sat and waited. In this entire time, only one of the people who came to close their business account seemed to have any immediate success. He was a Thai guy who walked out with what appeared to be about HK$200,000 in cash in a backpack. The rest of us just sat around.
By 5pm, the lady I was working with summoned me to come back up and said that things were coming together, but there was still more paperwork. I waited at her teller window as she and about six other people in her bullpen area handed various documents of mine to each other for the necessary stamps, seals, and signatures.
That paperwork took about thirty minutes as we transferred Hong Kong dollars from one account to another account, and US dollars to another account still. Finally, after about seven hours at the bank, I was presented with a demand draft (the name for a cashier’s check in Hong Kong) for the value of the account.
After months of dealing with one of the world’s worst banks, I was free.
Takeaways for overseas bank account closing
Working with the right foreign banks for your specific situation is important. If you don’t, you might end up spending time closing bank accounts you wanted to keep but no longer can, or traveling all over the world just to close down accounts causing you problems.
Fortunately for me, none of these accounts were particularly problematic other than being an unnecessary distraction. For others, that might not be the case. Keep these lessons in mind when opening your next overseas bank account.
One other lesson is that your foreign bank may close your account in its local currency. Besides the $20 in Romanian lei, the accounts I held in this article were held in US dollars, euros, Swiss francs, and Hong Kong dollars, or some combination thereof. Even if those banks lost their ability or desire to pay me out in my currency of choice (such as US dollars), I would have been happy getting a check for euros and taking it to any number of other banks.
However, when you deal with banks in Belize or some tiny island somewhere, you might just be stuck holding a less desirable bag. I’ve heard stories of people getting checks denominated in Belize dollars. Good luck finding a bank to take that deposit.
Just as when you buy real estate and decide on a four-bedroom house because it will have better resale value, take the time to think ahead about how to close your foreign bank accounts if you or the bank decides that’s the right thing to do. Or, ask me for help with a banking plan that reflects what’s really happening in today’s offshore banking world.
Oh, and one more lesson: #NeverHSBC.