Opening a non-resident offshore bank account is: A) easy B) difficult C) extremely difficult D) impossible E) all of the above
And the correct answer is….
E) All of the Above. It really depends on what kind of account, at which bank and from which country you have a passport.
The entire process is counter intuitive. In a rational world (the idea of which is pure fantasy) the easiest place for an American to open an account in another country should be at an American Bank or a bank with US branches or subsidiaries. The next easiest bank should be a private, for profit bank. And the hardest place should be a government owned bank run by civil servants. Right?
WRONG! Thanks to international banking hysteria flowing from the Patriot Act…
In Uruguay, for example, if you are an American citizen without Uruguayan residency, none of the US banks here will let you have a bank account, even if you already have an account with the US parent bank! They might let you have an account after you get your residency, but they will still not be thrilled about it.
International banks without a US presence are a bit better and seem to be a mixed bag of what they will do and not do, depending upon the day of the week and the phase of the moon.
Frankly, in Uruguay, we have found that the easiest bank at which to open an account is the government owned Banco de la República Oriental Uruguay (BROU). If you are willing to start with a savings account with an ATM card that works here and worldwide, you need only walk in with your passport and a US$500 minimum deposit and they will open the account.
And Uruguay is better than many other places. Business associates in Panamá tell me, “it is easier to get a commercial airline pilot’s license than to open a non-resident account”. Swiss Banks will not even look at you unless you are willing to leave a minimum of US$50,000 in an account at all times.
Even banks traditionally friendly to non-resident accounts, such a Latvia’s Rietumu Banka, which enjoyed spectacular growth over the last decade, has turned nasty. For example, they have implemented a policy whereby non-US owned single member US LLCs must have a tax exemption letter from the IRS, and audited accounts, to have or even keep a long-standing account—even though such tax exemption is a matter of uncontested BLACK LETTER LAW and audits for private LLCs are virtually unknown.
The Patriot Act and the Basel rules have basically divided world banks into three groups:
- those who over-react because they are afraid of violating the Patriot act/Basel rules;
- those who are using the Patriot act/Basel rules as an excuse to squeeze their customers; and
- those who are in countries that don’t really give a damn; like China, the Islamic banking Centers, and those banks in Russia with powerful political connections. (Remember when 60+ Russian banks lost their US correspondent accounts? Not one of them was a bank with “connections”!)
Simple transactions, entirely legal and above board are being halted or delayed by banks—usually to earn extra interest on the money without passing any on to thecustomer—using Know Your Customer (KYC), Patriot Act or Basel rules as an excuse.
Regardless of any other consideration, because of US Government pressure, it is harder to open an offshore account as an American Citizen, than anyone else in the world.
For a free copy of the 25 page Basel Committee on Banking Supervision’s “Customer due diligence for banks”, click here.
Because of this, literally hundreds of millions of dollars are flowing into Islamic Banking centers where a more reasonable approach is taken, AND there are also a growing number of banking alternatives, about which I will write next week.