Banking Offshore
Offshore diversification may be a new agenda for most North-Americans, but, for much of the rest of the world, it’s second nature. Let’s look at Argentinians as an example -
Any Argentine with any extra cash has a bank account offshore. This could mean an account in the United States, but, more likely, it means an account in Uruguay, which, if you’re based in Argentina, is the obvious first step offshore choice. From there, Argentines with more idle cash move on to diversify among other jurisdictions. If you know anything about the history of this country, you understand why. Argentines understand from hard experience the risks of not keeping money outside their own country. It’s a self-preservation strategy passed down from generation to generation.
We North-Americans, though, haven’t grown up thinking this way. For generations we’ve been brain-washed and lulled into thinking our finances are safest and most secure right at home. However, over the past three years some have been waking to the fact this is far, far from the truth. While even more are only realizing it now, later in the game, that keeping all our assets in the United States or Canada could, sooner rather than later, mean what it means for an Argentine to keep all his assets in Argentina. Trouble!
The problem is that, because we don’t have a tradition of offshore diversification, most people don’t know where or how to get started. Let’s remedy that right now and show you how easy it truly is -
It’s a simple as starting with a bank account in another country. That’s the most straightforward and most sensible first step you can take.
The place you choose or the jurisdictions are many. The traditional “banking havens” are well known including Switzerland, Austria, the Channel Islands, and the Caymans. However, these choices are more for high rollers with lots of cash. A bank account in one of these jurisdictions will generally be what is considered a “private” account -that is, an investment account — and it would generally come with a minimum deposit requirement of as much as $1 million in U.S. funds. That’s not an option for most of us, but don’t worry.
Belize, Panama, and Uruguay are three very good options for establishing an offshore bank account that also qualifies as a private (or investment) account but for which the account minimums are much lower. For example you can open an account with a private bank in Panama with an initial deposit of as little as a few dollars and in some cases no money at all to start – of course you will obviously need and want to get money deposited as quickly as possible or the bank will close your account as soon as the first months bank charges come up. Oh, and don’t let that term, ‘Bank charges’ scare you off. Most Panamanian banks will waive all service charges and pay you interest when you hold as little as $500 average daily balance.
Another option would be a “local” account in a place such as the U.K. or the Caribbean, where you find that many banks have international arms for foreign clients. These accounts aren’t typically investment accounts but operating accounts. Still, they provide a place to park cash outside your home country and (verify that this is a possibility in advance of opening the account) in different currencies. Look for banks that allow currency accounts in the major hard currencies - U.S. dollars, euro, pounds sterling – at a minimum.
For this kind of an account, there can be no minimum opening balance required, but you want to consider keeping at least $25,000 on deposit considering the ongoing fees and the time and trouble involved with opening the account in the first place.
This leads to perhaps the most important point to be made on this subject especially for American investors. It is getting tougher month by month, it seems, for an American to open an offshore bank account, thanks to the IRS’s ongoing bullying of the banking world. It is still possible, but I strongly recommend not only that you do this but also that you do it now or at least as soon as possible.
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The information expressed here is solely the opinion of the author. Nothing on this web site or in subsequent communications is to be considered personalized investment advice. Although we may answer your general questions, we are not licensed under securities laws to address your particular investment situation. No communication by any associate or representative of Learn About Panama is to be deemed as personalized investment advice.
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