In the past, I’ve been tempted to park some money in an offshore bank. In part as an experiment, just to see the process. In part because, well, you never know.
Plant those flags!
But then I did some research and realized how absolutely awful an idea it is for most Americans. And, over the years, it just kept getting more awful.
Now I’m fully convinced it’s a terrible idea. And if you’re American and haven’t already done it, unless you have a really good reason, you should think long and hard about whether or not it’s worth it.
Yes, it’s completely legal. And yes, having savings in a foreign bank might save your hard-earned cash from political craziness in the U.S.
But for most Americans, offshore banking is more trouble than it’s worth…
One friend, Ashe Whitener, former head of business development at Peter Schiff’s Euro Pacific Bank, agrees. (Ashe now runs Liberty Virtual Assistants, which we interviewed him about in a previous episode.)
Ashe has seen just how much it sucks firsthand.
Euro Pacific, in fact, with its home base nestled in St. Vincent and the Grenadines, refuses to serve Americans due to intrusive and overly-burdensome security laws.
With that in mind, with the help of Mr. Whitener, here are 10 reasons offshore banking is a bad idea.
10 Reasons Offshore Banking is a Bad Idea
ASHE: “It’s a bank and they all pretty much suck.”
Blanket statement, yes. But banks pretty much suck.
Banks have been so zombified by cronyism, they are pure products not of economics, but of politics.
Meanwhile, the monopoly status of most banks give them no fear of any hungry underdogs. Meaning, they can treat you like crap and suffer little consequence.
To the next point…
ASHE: “The customer service is terrible across the board.”
If you think the customer service sucks for your domestic bank, just wait until something goes wrong with your account in Dubai, Czechoslovakia or, heaven forbid, Zimbabwe.
Some expats, to get around this issue, don’t deal with the banks at all. Mr. Salmon, for example, a British resident living in the Gulf Countries, goes through the advisory firm AES International in Dubai.
“I have a named contact,” he told The National, a UAE-based newsreel, “and if he isn’t there when I call he gets back to me within an hour. The service is fantastic, like night and day compared to the big banks.”
That level of service, of course, costs a lot of moolah. Which brings us to number three…
ASHE: “Really expensive to operate a standard account.”
Setting up an account might be simple in some places, but no matter where you go, managing that account will likely be expensive. To remain compliant, you’ll need a small battalion of lawyers and accountants to constantly stay up-to-date on thousands of lines of tax law.
For most Americans, this will just amount to a white elephant operation.
ASHE: “It puts you on government radar for money laundering and being a suspicious person. Banks are required to turn over ALL of your information the various global regulators for so many different reasons and triggers.”
Try withdrawing even $10,000 from your domestic bank account and see what happens. By luck of the draw, you’ll likely be treated like a criminal. And if having $10,000 is potential criminal behavior, imagine what authorities will think when they see you stuffing cash overseas.
Point blank: It puts a target on your back, with or without good reason.
And the IRS is on the hunt. Last year, the IRS collected a combined $10 billion from 100,000 taxpayers with money overseas.
ASHE: “You’ll be treated like crap by the bank, remember you are probably a criminal.”
Since the compliance rules are so absolutely ridiculous, you’re likely making someone’s job a lot more tedious than it needs to be.
As a result, some resentment might fester. And, of course, why else would they have to keep you under a microscope unless you’re doing something wrong?
ASHE: “Interrogated like crazy to get the account open.”
Again, if you want to defy Uncle Sammy’s borders and place your money where you want, expect to be treated like a slimy defector.
ASHE: “Wires are very slow.”
Once you have your money in the account, guess what? Everything moves at turtle pace. You could ship a bag of skittles to Australia before your money would make it to a neighboring country.
And here’s why…
ASHE: “Doesn’t use blockchain.”
The current system, SWIFT, is centralized, antiquated, increasingly vulnerable and expensive to maintain. Compared to blockchain technology, it’s a square wheel.
ASHE: “Constantly asking countless questions about your business, business partners and clients before they deposit your money.”
The interrogations, of course, don’t end with you opening the account. Rather, every small deposit is under the microscope. And in order to stay compliant, the bank must dig into every tissue and tendril of your business.
ASHE: “Makes tax season a much larger headache.”
Taxes are already overly-complex. And having an account overseas just adds to the complexity. And, once again, you’re probably doing something nefarious if you don’t keep your money in the U.S.
Even if you’re not.
In this day and age, for most Americans, offshore banking is a silly idea.
After all, these days we have bitcoin.
Managing editor, Laissez Faire Today
P.S. Have something to say? Say it! Chris@lfb.org.