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Singapore bank to Uncle Sam: ‘Stick it where the sun don’t shine…’


October 23, 2012,

I never thought I’d see the day. Two years since the HIRE Act, FATCA, and Dodd-Frank became law and threw global finance into a tailspin, two foreign banks have finally stood up to Uncle Sam. Let’s review briefly.

The HIRE Act was originally drafted in the early days of the post-Lehman crisis. Official unemployment (before they just stopped counting people) was the highest in decades, and politicians had to ‘do something’ to get the economy moving.

Of course, what better way to boost the economy than to pass more laws? It’s genius!

HIRE ended up being a bunch of bizarre tax rules and pet infrastructure projects… the usual stuff. Of course, they have to pretend to pay for all of this. So they invented FATCA, which stands for ‘Foreign Account Tax Compliance Act’.

In short, FATCA requires-

(1) All US taxpayers must annually disclose foreign financial accounts to the IRS if the values exceed a particular threshold (starting at $50,000). This requirement began last year.

(2) All foreign banks must enter into a blanket information sharing agreement with the IRS. If they don’t, the banks are subject to a 30% withholding penalty on US-sourced funds.

Then there’s the Dodd-Frank legislation… over 2,000 pages of unmitigated economic destruction which makes it tremendously difficult for foreigners to do business in the United States, or with US citizens.

The rules which were proposed in Dodd-Frank are so obtusely complicated, nobody can begin to understand them. Even the agencies which are responsible for implementing Dodd-Frank have continually missed their own deadlines because they don’t understand the law.

Bottom line, it’s more reporting, more registration, more paperwork, more hassle.

Understandably, foreign banks have been in turmoil over the last two years as a result of all this legislation. Nobody wants to crawl in bed with the US government, and some banks have taken action by shuttering US citizens’ accounts. Americans are even being dumped from foreign corporate boards.

Yet just yesterday, DBS Bank in Singapore stood up to the US government, indicating that they would not be registering with US authorities for at least for one Dodd Frank provision pertaining to swaps. Nordea Bank in Sweden made a similar statement.

This is an interesting turn of events which could evidence a bigger trend.

We’ve already been seeing signs that US financial influence is waning. The dollar is being slowly displaced in international markets. Countries around the world are starting to increase their reserves of China’s renminbi, as well as accept renminbi in international trade settlements.

We’ve also seen foreign companies like McDonalds issuing debt denominated in renminbi, the launching of renminbi-denominated commodity futures contracts, and the trading of renminbi assets in foreign exchanges.

All of that used to be dominated by the dollar. But now the dollar’s share is gradually fading.

If more banks follow DBS and Nordea in standing up to the US government, it will be the clearest sign yet that this trend is taking hold… perhaps accelerating the dollar’s decline.

What does this mean for us?

1) If you earn income in US dollars, make sure you’re holding your savings in another currency, precious metals, or productive assets.

2) If the trend holds, it’s about to get a lot easier for US citizens to diversify internationally and do business abroad. In fact, I’m already seeing encouraging signs of this in Singapore. More to follow on that.

Simon Black
Senior Editor, SovereignMan.com


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Comments on this entry are closed.

  • Michael

    Interesting, I got the very opposite impression of Singapore today from another newsletter the Q Wealth Report, apparently Singapore gov has signed a tax treaty with Germany to require assets to be disclosed, and is close to doing the same with other countries….thoughts? I live in Singapore so have most of my assets here, I guess it won’t change either way…

  • Dinar Queen

    Well, I guess the proof will be in the pudding — let’s make an attempt to open accounts there and see what happens. Better yet, use an LLC or IBC from a country other than Singapore and try to open an account. It’s time for the biggest bully on the planet, the USSA, to be slapped back and told to STFU. Excellent article!

  • Curby Weaver

    At the risk of sounding like Darth Vader, “The circle is now complete”. Back in 1964 Senator Barry Goldwater in his book No Apologies, wrote: “The Trilateral Commission is intended to be the vehicle for multinational consolidation of the commercial and banking interests by seizing control of the political government of the United States. The Trilateral Commission represents a skillful, coordinated effort to seize control and consolidate the four centers of power–Political, Monetary, Intellectual, and Ecclesiastical.”

    Their work is now done. What are they gonna do now? Go to Disneyland?

  • PSP

    There is a subtle point here that isn’t mentioned. Its not so much the lack of importance of the US to DBS as it is the sheer incredible importance of keeping its cusomter base protected and unnamed. Singapore banks rely largely on money that is deemed untraceable by Europeans, Asians (in particular Indonesians) and AMericans (not to mention African politicans… Mugabe visits often). Any dent in this view on data protection would be catastrophic for the Singaporean banking and investment community. The real loser, the people in other countries would might just have benefited from that extra money their governments might have had to spend on education, infrastructure, health, etc.

    • Guy Montag

      Not sure where you live but my gummint gets plenty of money and wastes most of it.

  • bawtho

    Simon, I hate to say it, but I went to DBS looking to open a very sizable account, but because I didn’t have a 6 mo. work permit, I was turned away. US citizens are being looked at more and more like rats on a sinking ship.

Read previous post:
I didn’t see this covered in any western newspaper

October 22, 2012, Bangkok, Thailand [Editor's note: Tim Staermose, Sovereign Man's Chief Investment Strategist, is filling in for Simon today.]...