There are many reasons to open an offshore bank account and it is a good idea for anyone with even a little bit of money.
No, offshore bank accounts are not just for criminals and to dodge taxes. In fact, it’s increasingly hard to hide money with FATCA and CRS now in place. Generally speaking, banks now automatically share your account details and information with your country of residence.
Not every country is part of CRS, and there are a few ways around it, but the trend is clear. There will be greater financial transparency going forward, and even if you currently manage to hide your money, you’ll potentially get caught retroactively, seven years from now, for something you are doing in the present.
I use the term “offshore” quite liberally. I don’t just mean islands, but generally “abroad.” Being European living in Europe, and opening a personal account in the US would qualify.
Here are 8 reasons why you should open an offshore bank account, now rather than later.
Let’s say you live in country A, you are employed in country A, and you keep your savings in country A. What happens if things go terribly wrong in country A?
You never want to be too exposed. Think of the Russian aristocrats in early 1917 who had everything in Russia, and compare them with their friends who had opened a bank account in Paris with some money “just in case”. Who do you think fared better after the revolution?
Think of Argentines who had all their money in Argentinian bank accounts, and compare them with those who had decided to have a second bank account right across the border in Uruguay. Who fared better?
The point is that you never know what could happen in your jurisdiction – war, political instability, economic collapse, extreme socialism. Having some money stashed away abroad is a very sensible thing to do.
2. Safer banks
Let’s say you’re French, and you have your money at BNP Paribas, or you’re German with your cash at Deutsche Bank. Do you feel safe? Well, you shouldn’t. These banks barely pass stress tests, have balance sheets with hidden monsters, and are backed by governments (more specifically France) that are not particularly solvent.
Why wouldn’t you move your money to a bank abroad with Tier 1 capital ratios of 25% versus 10%? You can find banks that are 2-3 times better capitalized.
Do you really believe that because your bank is in your town you have easier access to it? I challenge you to go to your bank in the UK or the US and ask for the equivalent of 15,000 Pounds/USD cash within 24 hours. Good luck.
3. Currency diversification
If you’re South African, you’re already pretty exposed to the ZAR. Your salary is in ZAR, your house is in ZAR, a lot of your pension fund as well, so why keep all your cash savings in ZAR a well? It would actually be completely irrational, from a risk management point of view, to do so.
Same goes for Americans with the USD and Europeans with the Euro. Don’t think you’re much better.
Open a bank account abroad, and save your money in a basket of currencies. Get some Euros, USD, Rubles, Swiss Francs, Singapore Dollars or whatever you want, but be diversified.
Don’t depend on a single central bank.
4. Asset protection
It’s a bit harder to sue you and get your money abroad. Let’s say you have issues at home, whether business related or an angry (soon to be ex) spouse. A court order comes through and freezes all your accounts. Guess what,
you’re screwed good luck with that.
If you had a foreign bank account, you’d still be able to access it. It takes a lot more procedures and time to try to get someone’s foreign bank accounts frozen.
5. Access to education and healthcare
Sometimes, countries go through hard times and capital controls get put in place, which means getting money out of the country becomes extremely complicated, if not nearly impossible, for normal people. And even if you can, you need to run through slow, nightmarish bureaucratic measures to get your money out.
Countless countries have had such situations, from Argentina, Zimbabwe, and Nigeria recently, to countries like France, Italy, etc in the 1970s and 1980s. Don’t think you’re immune to it. Shocks happen. and when they do, you’ll just find out Sunday night with measures being effective immediately.
Maybe your children attend University abroad, and now you can’t transfer your out to pay tuition? Do you think the university in the UK will care about your capital control issues? It won’t, and your child will be given a semester off until your sort out your finances.
Or maybe you need a special type of surgery that only doctors in Switzerland or Malaysia can perform? Guess what, your central bank doesn’t care, or won’t necessarily care in time.
Don’t let capital controls, driven by incompetent or thieving politicians, get in the way of your life plans.
6. Higher interest rates on your savings
In some banks abroad, you can get much higher rates on your deposits. You can have accounts denominated in emerging market currencies offering double digit returns (with the risk that comes along) or even in your own currency.
7. Flexibility is one of many reasons to open an offshore bank account
Let’s say capital controls get put in place, and you have some income coming from abroad. Well, you can always send that income to your offshore bank account, as opposed to sending it back into the financial hellhole that your country has become.
You want to buy something abroad? Well, you can do it without having to fill out paperwork or pay a tax on foreign transactions just like Argentina instituted in January 2020. If using a Argentinian credit card abroad for instance, you must pay a tax of 30% on all purchases, which gets collected directly by the credit card company.
8. Better service
I have bank accounts with private bankers who know me personally, with great apps through which I can transfer money anywhere in the world, and when compliance have questions I just send them the documents per email and reply to their questions. Georgia sticks out as one of those places with quality banking at affordable prices. It’s even possible to open a bank account remotely there. More details on Georgian bank accounts here.
What about your bank? If you want to send larger amounts of money abroad for whatever reason, how quick are they? How helpful are they? You’ll probably find out at an inopportune time, that they are neither helpful nor responsive.
9. Because, why not?
Seriously, why not? Why would you not do it? The only negatives are:
- A bit more admin (e-banking password to remember, etc)
- Some extra fees
- Probably having to declare it in your income tax returns. Having a bank account abroad is not illegal, but often you just have to declare it
If all you need to do is remember a login & password, pay a few dozen or hundred (depending on the bank) USD in fees a year, and add this bank account number to your tax forms every year. Why would you not do it for all the benefits, freedom, and peace of mind you can get?
There are countless reasons to open an offshore bank account
Very little downside, a lot of upside. Disproportionately positive lifestyle and freedom returns.
Panama is also a country where you can open a bank account remotely. More details on Panama here.
Or buy this book.
If you want to discuss your internationalization and diversification plans, book a consulting session* or send me an email.
*a consulting session is a discussion about your portfolio and objectives. It does not constitute legal, financial, tax or investment advice.