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bank accounts

Questions: An Emergency passport? European citizenship; foreign banking rules; walking away

By Simon Black · 10 comments

March 5, 2010
Kuala Lumpur, Malaysia

Greetings from Malaysia, where I’m spending an extended weekend before heading briefly to Singapore on business.  I’ll tell you more about the country next week… but if you’re interested in Asia, it should definitely be on your radar.

Before turning to this week’s questions, I wanted to give you a quick update on the job posting from a few weeks ago.  Ordinarily, Matt and I would have made a decision by now, but the applications keep rolling in… I lost count after a few hundred.

To expedite our decision, we’re going close the posting at 11:59pm EST, Monday night March 8. No other applicants will be considered after that time.

Please remember, since there have been so many applications, my staff and I will not be able to respond in order to confirm receipt. Rest assured, if you sent us an email, we received it.

On to this week’s questions:

Tom writes, rather emphatically “Simon, I left the US over a year ago. I now need a 2nd passport as I am almost out of pages on my current one. Problem is, I can’t go to the embassy due to some legal problems back home, and I don’t have $50k to spend on a new passport. What can you recommend?”

Tom has an interesting and unfortunately all-too-common case. I don’t know what he’s done or if he’s guilty of any wrongdoing, but a last-minute second passport is no panacea for criminal troubles.

(to be clear, I don’t equate ‘law’ with morality, but this is a different subject altogether)

Why? Because even if you’re completely innocent of some trumped-up charge, any new country that would consider accepting you for citizenship would first do a background check, and if you’re in hot water, they probably won’t take you.

Conversely, if you actually have done something immoral, you should probably just face the music. After all, the cosmic forces of the universe have a way of working these things out.

Regardless, I think this underscores the importance of taking action. If you have the means, going through a second citizenship process NOW, before it becomes a critical need, is a smart thing to do.

I discussed a few cost effective second passport options last week, and I will continue to do so in future letters.

Speaking of second passports, I made a mistake when I mentioned something about Polish citizenship last week– my thanks to “anonymous” for sending along this correction:

“Simon, you said that a Polish citizen could establish permanent residence in another European country like France or Italy and  become eligible for citizenship there after 7-10 years.  The EU rule is that local citizenship can be applied for after 4 yrs residence, though it’s much faster with marriage.”

She is absolutely correct, my apologies for the oversight.

Stephanie in New York writes, “Simon, thanks for the great information on opening a foreign bank account this week. As a US citizen I understand that I need to file a form to the Treasury Department each year– what are the details on that?”

First- standard disclaimer: check with your tax advisor for any updates. But the current rule is that US taxpayers must report foreign bank and financial accounts on form TDF 90-22.1 each year by June 30.

According to the IRS, A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts, including any savings, demand, checking, deposit, or any other account maintained with a financial institution.

As of now, you do not have to file the form if the aggregate value of all of your foreign accounts was less than $10,000 for an entire calendar year. If the aggregate value of foreign accounts exceeded $10,000 at any time during the year, you are obliged to file the form by the following June 30th.

James asks- “Simon- you’ve been in Thailand for a month but you haven’t said anything about the nightlife or social scene!”

That’s because you can read about Thai nightlife anywhere. I figured you’d be more interested in the hydroponics plantations where I buy organic vegetables than a review of the Go-Go bars…

… but to put it briefly, you can find whatever you want in Thailand. Sex, drugs, and rock n’ roll are as pervasive as Buddhist monks and the works of Shakespeare. If there’s interest, I’ll write a dedicated post about this, just let me know.

Lastly, Pat asks: “OK Simon- I owe $136k on a house that I bought 4 years ago; it’s now “worth” about $70k, tops.  I make plenty of money, but the payment is slowing me down.  Would it be immoral to jump ship and go rent somewhere else?”

Personally, I have an immensely open mind to not judge people for the way that they live. I only broadly repudiate things based on very few moral absolutes– for example, genocide and pedophilia are clearly ‘wrong’ in my book.

Walking away from your mortgage does not make my list.

If you do decide to walk away (and I’m not encouraging you either way), just bear in mind the single universal law of causality… there will be consequences from your actions, and you must be prepared to accept them.

That’s all for this week; enjoy your weekend, and we’ll talk again on Monday.

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A simple shortcut for a foreign bank account

By Simon Black · 16 comments

March 2, 2010
Pattaya, Thailand

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.

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Your questions: Central American healthcare, Swiss banking, Panama foreclosures, Belize

By Simon Black · 13 comments

January 29, 2010
Boquete, Panama

It’s a beautiful day in the Panamanian highlands, and I’m taking the opportunity to explore the countryside for undervalued land deals.  The Chiriqui province of Panama, where I am now, is sort of like the Panamanian version of Texas– fiercely independent and proud… locals consider themselves to be citizens of Chiriqui first, and Panamanians second.

As we’ve discussed in previous letters, I have been sincerely exploring the idea of developing a subscribers-only sustainable community, and Chiriqui is on the short list of locations.

On that note, I really want to thank you for providing me with your feedback about the community concept; over 650 people have filled out the survey so far, and I’m convinced that the idea has tremendous merit. More to follow on that in the future– for now, let me get to some subscriber questions:

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Why you don’t want to go at it alone

By Simon Black · 7 comments

Blair is in her early 40s from Southern California.  She’s intelligent, fairly aggressive, and an experienced financial executive at a mid-sized manufacturing company. In total, she has about $250,000 in savings, some of which she used to buy property in Panama.

She is single with no children and has been traveling to Panama to plant flags since 2006. She plans on (semi) retiring there in another 5-years and has unfortunately learned a lot of hard and costly lessons.

At the height of the global property boom, Blair bought a unit in an ocean-view condominium tower in the San Francisco barrio of Panama City. I like San Francisco– it is well located and presents a nice mix of local Panamanians and foreign expats.

At the time, however, San Francisco was put under a building moratorium because the neighborhood was severely overcapacity with its infrastructure.  Waste treatment facilities were overburdened to the point that raw sewage was washing away construction sites, water utilities couldn’t get pressure to higher floors.

Of course, Blair’s real estate agent didn’t mention any of this to her. He cheered her on to make the purchase, encouraging her wise decision-making and investment acumen at every step along the way.  He looked good, sounded good, and had even lived in Miami for a while… sounds like a trustworthy fellow worth his salt, right?

Wrong. Blair was terribly misinformed. Aside from the sewage and the lack of water pressure, even her beloved ocean view was gone before the building was even complete– another building was erected between her bedroom window and the sea, built by (you guessed it) the exact same developers.

Like many gringos, Blair found her real estate agent on Google and was initially impressed by his English skills and claims of knowing important people in the country. She admits to being taken as a fool and quite literally is paying the price for it.

(It is exactly for this reason that I put together my Panama Black Paper, released in September and December, which names names of people in Panama to do business with, and people to avoid like the plague.)

Because Blair has such a long-term view, though, she has taken everything in stride.  She feels that, by the time she semi-retires in five years, she will be able to recoup what she invested in the condo.  Meanwhile, as Panama City’s infrastructure improves, she has been able to generate positive rental cashflow on the unit.

She has since wised up to the city life, and these days she is actively searching for a new property outside of Panama City where it is cleaner, quieter, but still accessible.

By the time she is ready to move there, she expects several new multinationals to have relocated to the nearby Panama Pacifica commercial park located just outside of the city.  This commercial park, she believes, will present a lot of opportunity to entrepreneurial-minded people who can provide essential business services.

Because she expects to be generating business income in Panama, she plans on registering a Belize company to conduct the business, thus planting her business flag outside her country of (future) residence.

She told me that she already made this mistake once– two years ago she searched for “Panama companies” on the internet and purchased a corporation from one of the service providers who popped up.

As it turns out, a Panamanian corporation was the exact opposite of what she needed, and the Panamanian lawyer she spoke with had no earthly idea what her US tax implications would be as a result.

Blair has since straightened out her tax situation once she finally found a competent US tax attorney who had expert knowledge of international business structures and was willing to help her out without breaking the bank.

Aside from planting a residency and business flag, Blair has moved some money to a European bank; she feels comfortable in Austria because she does not live there or do business there, so the government has little cause to milk her.

Lastly, she is planning on eventually acquiring second citizenship, possibly through a South American program that I will be discussing next month.

Her ideal vision for the future will be living outside of Panama City as a citizen of a South American country, with her business based in Belize, generating revenue in Panama from multinational firms, and banking her capital in Austria.

Because her foreign business will neither be engaged in US trade nor generating US-source income, her company will not be subject to US corporate income tax. Additionally, as an expatriate, she will be able to pay herself a salary of roughly $90,000/year tax free.

I think one of the key lessons here is that planting multiple flags is not always a do-it-yourself process. As Blair’s story demonstrates, there are potential landmines along the way, though expert advice is available to ensure a smooth journey.

Knowing how critical this expert advice is, in the last few months we provided you with key contacts in the Panama Black Paper, and introduced you to a top international tax attorney.  Next month, we will be discussing South American residency and citizenship programs, so stay tuned for that.

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Case Study: Multiple Flags in Venezuela

By Simon Black · 1 comment

January 19, 2010
Mexico City (DF), Mexico

For such a pale skinned gringo, his Spanish was impeccable. We were both sitting in the business class lounge at the airport, and the fluidity with which he was prattling away in Spanish on his mobile phone caught my attention.

Ordinarily, given his very light complexion and European fashion sense, I would have guessed that he was Argentine; his accent, however, was devoid of the traditional telltale Argentine indicators– the “sh” and “zh” sounds, use of the ‘vos’ for the second person, etc.

I was a bit puzzled and had plenty of time to kill thanks to an incomprehensible flight delay, so when he finished his conversation, I asked him (in Spanish) where he was from.

“I’m originally from Britain, ‘mate.” He must have noticed my surprise at hearing the Queen’s English, so he followed that up with “but I’ve been living in Caracas for over 20-years.”

Needless to say, this sparked a lengthy conversation between us about the politics of Hugo, the real situation on the ground in Venezuela, and what he’s doing to protect himself. I’ll call him Baldwin.
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How to avoid living in a police state

By Simon Black · 155 comments

If I have been too subtle in the past, let me be absolutely clear this afternoon: the time to do something, the time to take action to safeguard your future and your families livelihood, is NOW.

I’m more impassioned than usual this morning… and with reason.  Reluctantly, I tuned in to Team Obama’s press briefing last night about the ongoing saga of the Nigerian underwear bomber.  Obama’s is clearly trying to cultivate a fear of al-qaeda while simultaneously building blind trust in his government.

After the President’s remarks, his Homeland Security Secretary and Deputy National Security Advisor took the stage to unveil a series of proposals to ‘improve security.’

I’ll spare you the details as you have probably already heard them, but the bottom line is simply more government– a bureaucrat’s ultimate and only solution. This means more TSA, more air marshals, more undercover agents, more gun-toting soldiers, more pat-downs, more scanners, more searches, more scrutiny, more suspicion, etc.

How do you spell police state?

I’m ordinarily laid back about this sort of thing. I can afford to be since I’m a safe distance from all of that stupidity… but in this case I looked down to find that my knuckles were turning white, clenched around my glass of 2005 priorato.

I set my wine down and remarked to my friends who were watching with me, “What is it going to take for people to wake up and get the hell out of town? Do they need legions of storm troopers marching down the street before they realize it’s time to go??”

I was positively exacerbated.  The US is turning into a police state, and I’m not even saying this specifically to Americans living there. Many countries around the world are following close order behind Uncle Sam.

Once again, the time to act is now.  So what should you do?

First, make sure you have access to funds outside of your home country. This is one of the most important flags that you can plant.  You should open a foreign bank account (like I discussed in the Panama Black Paper), and/or consider storing precious metals in a private storage facility overseas.

Later this quarter, I plan on releasing a new Black Paper that contains actionable information to open an account at safe foreign banks that still take US customers.  You haven’t heard of most of them, and would probably never hear about them because it’s actually illegal for foreign bank to advertise in the United States in most cases.

Stay tuned for that.

Second, you should really be thinking hard about foreign property. Why? Because it can be a great investment; it’s an easy, non-reportable way to move money overseas; and it can be your escape hatch when you’re finally ready to hit the eject button.

Remember, I’m not talking about a 50 million euro villa in Monaco; you can pick up cheap land in Latin America for less than $50 per acre, and I’m pretty sure that everyone reading this letter has at least 50 bucks to spare.

Also, as I’ve discussed in the past, you can buy foreign property using your tax-deferred retirement savings, and I plan on revisiting this topic in short order because it is an absolute no-brainer.

Additionally, if there’s interest, I may also explore the idea of building a small, cost-effective, subscribers-only development.  It would likely be on the outskirts of Panama City and include self-sustaining fresh water and agricultural resources.

Third, if you have the means, you should really consider obtaining second (or third, fourth, etc.) citizenship. Second citizenship can be the ultimate emergency exit if things get really bad, and it effectively serves as the most comprehensive insurance policy you could even have.

I have a lot of contacts in this field, and my colleagues and I are currently experimenting with a few options that I plan on bringing to you soon.  I won’t bring you a passport program unless one of us has gone through the process ourselves, so give me some time while we play guinea pig.

Fourth, give serious consideration to your finances; unless you are already independently wealthy or have sustainable income streams, think about what you would do to earn money if you lost your job today.

Think about what skills you have– what problems can you solve that other people are willing to pay you for? What opportunities to you see around you that can be quickly and profitably exploited?

I guarantee you that there is opportunity everywhere around you. For example, a friend of mine is an intelligent, 22-year old girl who lives in Minsk, Belarus– the last bastion of the Iron Curtain.  While Belarus is not the totalitarian state it once was under the Soviet Empire, it’s pretty close.

And yet, despite living under a tyrannical yolk, my friend has become quite a successful entrepreneur, launching a successful brick-and-mortar company and several profitable web sites just within the last few months.

I raise this simply to point out that if an inexperienced but intelligent and energetic young girl can find opportunity in a place like Belarus, then I would wager that there is a plethora of opportunity out there in places like Panama, Abu Dhabi, Chile, China, Angola, Thailand, Bulgaria, and even the US/Europe.

In fact, I know this to be true because I see so much of this opportunity when I travel.

So those are the top four things I would recommend you do in making your own personal preparations. I clearly have a lot of work to do between the real estate, the citizenship programs, and the banking Black Paper… but after seeing the writing on the wall so plainly last night, I will be refocusing my efforts to get these moving quickly for you.

In the meantime, let me know your thoughts– I’m frankly curious to know what you would like to see in a real estate development, and at what, if anything, it would take for you to hit the eject button.

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Four jurisdictions to store gold overseas

By Simon Black · 10 comments

January 7, 2010

Reporting from: Estepona, Spain

I’ve long believed that exchange controls will eventually return to the developed world, specifically in the United States and Western Europe. Struggling to find buyers of their debt, these governments will likely impose strict penalties for net outflows and retail currency transactions.

Unfortunately, most people will be too broke, too stupid, or too distracted to care that their savings are trapped in a rapidly depreciating currency within a federalized, bankrupt financial system. You are clearly not one of these people or we wouldn’t be having this ongoing conversation.

Moving some money out of your home country now makes a lot of sense; if you keep all of your wealth within one country, particularly where you live or your business is based, you are completely exposed to exchange controls, tax confiscation, litigation, extortion, etc.

Opening a foreign bank account is certainly one approach; we have talked about that before and will continue to do so.  But gold presents an interesting alternative because it effectively exists outside of the financial system.

When you hold cash, either in a bank or in token amounts of a few thousand dollars, transactions are reported to the government.  Banks, brokers, real estate agents, car salesmen, etc. are essentially unpaid government agents, forced to report on their customers’ financial activities.

Turning paper currency into gold privatizes wealth; to most governments, gold is just personal property, like stamps, a wardrobe of tailored suits, or action figure collectibles.
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Multiple Flags Overview

By Simon Black · 5 comments

January 4, 2010

Reporting from: Malaga, Spain
Welcome back; I hope you had a relaxing holiday.

I spent 10-days with my family combing through the Italian countryside and drinking some unbelievable wine from a local grape called “Primitivo.” It’s a distant cousin of the California Zinfandel, and is only found in this region. A bottle from the best vineyard will set you back about 9 euro.

For New Year’s Eve, I saw a fireworks show that was simultaneously the most disorganized and explosive I have ever witnessed… so literally for me, the new year began with a bang.

I’m optimistic about 2010. I know a lot of people in the financial community who think that ‘this is it,’ that 2010 shall bear the worst economic cataclysm in history, causing widespread doom and agony.

Sure the conditions are ripe for stock/bond market crashes, a currency crisis, and multiple sovereign debt defaults.  But these are a far cry from a gloomy end of human civilization.

It’s not that I have tremendous faith in world ‘leaders’ (as ridiculous a moniker as that is to use); last month’s debacle in Copenhagen only further underscored how perverse and ineffective the existing political process is, and everyone is really starting to see it.

The Social Contract is deteriorating rapidly, and in the end, the one thing that you can count on is that people will ultimately do what they perceive to be in their self-interest.  This is what drives markets and trends.

As the protracted effects of government stupidity become more apparent, one such trend that I see emerging this year is the rise of the sovereign individual– the rebirth of the multiple flags approach.

I’ve talked about this before and I wanted to start off the year with a quick primer since it is a recurring theme of this letter. To be more specific, I absolutely implore you to plant multiple flags as part of your New Year resolutions.

The idea, originally conceived by international finance guru Harry Schultz, suggests diversifying different aspects of your identity across multiple ‘flags,’ or geographic jurisdictions.

As an example, Schultz coined the term ‘three-flags’ in the 1960s, suggesting that an individual should have citizenship in one country, residence in another, and businesses in another.

Later authors expanded on this idea by adding other ‘flags,’ including places to bank, places to ‘play,’ places to house electronic assets, etc.

Many writers today talk about ‘five flags’ or ’six flags,’ but frankly I don’t see a limit on the number of things we can diversify geographically: email, citizenship, residence, banking, brokerages, gold/silver deposits, business registration, e-commerce, customer base, phone/fax, financial instruments, postal mail, etc.

So what’s the point? Why should you do this?

Diversifying geographically increases your freedom, your privacy, your sovereignty, and potentially reduces your tax burden. It protects you against bank failures, market changes, litigation, divorce, overzealous governments, and “NGC’s” (non-government criminals).

Perhaps even more importantly, planting multiple flags expands your existing contact base and opens a lot of doors to new opportunities.

Think of it like a life insurance policy– even if the worst never happens, it gives you great peace of mind and in many cases can rank as a significant asset.

While everyone recognizes these benefits of life insurance, no one actually expects to die anytime soon… so they put shopping for a policy on the back burner, sometimes until it’s too late.

In this case, the time to start diversifying internationally and planting multiple flags is now… before it’s too late– before currency controls are imposed, before tax codes change, before the last remaining foreign banks close their doors to foreigners.

I could cite you examples all day long, but I will list just a few hypothetical cases–

Imagine getting sued, losing the case, and having your financial assets commandeered by the court. Now imagine if your assets were safely offshore in another country.

Imagine being investigated by the government and having your email archives turned over to the authorities. Now imagine if your email server were in another country.

Imagine being robbed (taxed) by the government because your business is structured within its jurisdiction. Now imagine if your business were registered in another country.

Imagine having everything in your home country taken from theft, coercion, and litigation. Now imagine having cash and gold locked away in a secure, private vault overseas.

Imagine the social decay in your city getting so bad that riots and violent crime are a common occurrence. Now imagine having property overseas.

I’m sure you get the idea. Putting your assets, your business, your citizenship, your residency, your family’s livelihood under one flag, one government, is putting all of your eggs in one very frail, weak basket.

Technology makes it incredibly easy to diversify, and I see more and more people waking up to that reality each day. It takes only moments to set up an offshore email account, a few minutes to lease a private vault, and just a couple of hours to set up a company in Singapore.

The possibilities are truly endless, you just need to find the right tools and the right flags that work for you. Yes, even if you are a US citizen who is taxed on worldwide income, there are still several options available to live a multiple flags lifestyle.

I will be discussing the options in future letters, as well as individual case studies.

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