“Should we crawl into bed with the IRS?”
Thanks to the steady barrage of US government regulation ranging from the obtusely insipid Dodd-Frank financial reform to the impossible-to-implement Foreign Account Tax Compliance Act (FATCA), banks everywhere have to make this decision.
In short, Congress has arrogantly passed legislation to control foreign banks on foreign soil. FATCA, for example, requires that every single bank on the planet enter into an information-sharing agreement with the IRS.
Banks that don’t comply will face severe penalties, including being subject to a steep withholding tax on funds sourced through the US.
In the long-run, Congress will have put the final nail in the coffin of the US banking system as the market will simply establish an alternative destination to source, clear, and transfer funds.
For now, though, many banks are simply walking away from US customers altogether… throwing their hands up and saying “we would rather not do business with this entire market rather than deal with Uncle Sam ever again…”
To be clear, this is a bank-by-bank decision that each one is making individually. And we’re seeing -a lot- of banks around the world, from Singapore to Panama to the Cayman Islands, say ‘thanks but no thanks’ to US customers.
But, as the saying goes, whenever one door closes, another one opens. OK, maybe not exactly 1 for 1… but there are still plenty of options around the world where US taxpayers can establish foreign bank accounts to diversify their savings abroad.[As an aside, establishing a foreign bank account is one of the most important steps to take in order to safeguard your livelihood. It’s critical to move a portion of your savings to a jurisdiction that is not under the control of the bureaucrats in your home country, so that your funds cannot be frozen with a single mouse click or phone call.]
While I’m not able to list (for the most part) individual banks, the following jurisdictions have multiple banks that are still happy to work with US customers. I should know, I have an account in most of these places:
This tiny low-tax nation nestled high in the mountains between France and Spain has long been a favorite of well-heeled Europeans. Today, despite all the turmoil in the rest of Europe, Andorra has one of the most well-capitalized banking systems on the continent.
St. Vincent and the Grenadines
This country is more famous for being the filming location for Pirates of the Caribbean rather than as an international banking center. The banking sector is still quite small, and as a result, banks are still willing to do the extra paperwork required to deal with US customers in order to boost their balance sheets.
Perhaps one of my favorite places in the world to bank, you can get paid upwards of 13% interest in Mongolia, easily the fastest growing economy in the world.
Even though it’s just a short flight from a number of cities in the US, several banks in Belize will open accounts for US citizens through the mail without you having to leave town.
One of the original international banking centers, Hong Kong remains one of the most efficient places in the world to bank. It’s cheap, it’s fast, and you have unfettered access to opportunities in mainland China. Many of the big name banks, including HSBC, will still open accounts for US citizens.
With the local economy already so closely tied to the United States, most banks in the Bahamas have made the decision to stay in bed with Uncle Sam rather than rock the boat.
Among the most well-capitalized banks in Latin America, Chile’s banking system marches to the beat of its own drum. It’s very difficult (though possible) to open an account without obtaining residency first, but fortunately it’s a straightforward process to obtain residency in this thriving country.
Turks and Caicos
Like the Bahamas, T&C’s economy is heavily dependent on the United States for trade, tourism, and its financial sector (which constitutes 30% of all economic activity). While a few private banks have closed their doors, some larger multinationals (like Scotiabank) still readily accept US customers.