March 2, 2010
Thanks to completely draconian US-led regulation, opening a bank account anywhere is about as fun as a barium enema. Opening a foreign bank account can be an even greater nightmare.
Most of the time, a foreign bank will want you standing there, in person, to open an account, as well as to provide a seemingly endless array of notarized documents, stamped papers, and letters of reference.
Trust me, it’s not their preference either… in order to keep from being blacklisted by the OECD, though, banks have to resort to this level of bureaucracy. They’re called “Know Your Customer (KYC)” rules, and the idea is to over-collect personal and financial information in order to determine that a bank customer is not a terrorist.
Anyone with half a brain can see that this is one of the stupidest notions in the world. It’s like locks on a door– if someone wants to break in, a pithy little lock is not going to stop him. Similarly, if a “terrorist” (I hate even using that word) wants to open a bank account, an avalanche of paperwork is not going to stop him.
As an example, I would point to accused arms dealer Victor Bout who currently sits in prison right here in Thailand; Bout was placed under US and UN sanctions back in July 2004, and yet he was still able to register numerous Delaware companies with bank accounts.
All the KYC regulations do is make it much more difficult for everyone else.
In our regular conversations, we’ve talked about the importance of having a foreign bank account… it is an essential flag to plant overseas, and you want to really consider low-tax jurisdictions with a strong, stable financial sector that have a history of not plundering the banks.
This includes places like Switzerland, Hong Kong, Singapore, Panama, UAE, Qatar, and a few others.
Many people understand the need to move some money out of their home country but are simply unable to take a far away trip just to open a bank account. If you’re one of these people, here’s an easy back door. It’s less than ideal, but it works.
The first thing you need to do is pick your banking jurisdiction, i.e. Hong Kong, Singapore, etc. and then find a large multinational bank in that jurisdiction that has a branch near you.
As an example, I will use Hong Kong and HSBC… though there are other jurisdictions and banks that you could use as well (Standard Chartered, etc.) HSBC is a good example because it has a presence in more than 60 countries, and you’d be hard pressed to find a civilized place that does not have a branch.
Among HSBC’s many branches are offices in Los Angeles, Miami, Vancouver, etc. So first you call HSBC in Hong Kong, explain that you are a foreigner, want to open a bank account, and would like to certify all the paperwork through your local HSBC branch.
The HSBC rep in Hong Kong will fax you all the appropriate paperwork, and when you have completed the documentation requirements, you should get in touch with the nearest HSBC branch in your home country and make sure they have “international banking services” available.
Let’s say you live in Orlando… that means you should head down to Miami, and the Miami branch will validate all the documents on behalf of the Hong Kong office.
Afterwards, the Hong Kong office will receive the documents and finalize the account opening.
This is the fastest and easiest way to open a foreign bank account without actually having to fly to a foreign country and go through the process on the ground.
The obvious disadvantage is that many people do not want to deal with a large, multinational foreign bank like HSBC, Standard Chartered, etc. I agree; it’s better to deal with a solvent local bank that does not have a large international presence.
However, unless/until you are able to get on a plane and fly to Asia, Europe, or the Middle East, this is one of the best and most cost effective interim solutions.
To be clear, even though you are opening it through a local branch in your home country, the bank account will be considered foreign and based in the offshore jurisdiction that you chose. If you are a US citizen, this obliges you to file US Treasury form TDF-90-22.1 by June 30 of each year.