Foreign Asset Protection/Banking: How To Get Started?

[Dan1]

So I've been searching around on this in the forum on this topic, didn't find a ton.

Basically I am weary of the "coming crash" of the US banking system and want to diversify my cash.

I currently have about 500k in the bank tax-free, all in US banks- not coming in here to brag or anything, I'm just detailing my situation. (I posted about that a while ago in my other thread https://www.thefastlaneforum.com/co...-stash-500k-in-banks.60871/page-2#post-492306

Basically I just want to know- how "easy" is it to put money in a foreign bank and what is the best way to do it?

Or what is there to know in general about this?

In the US I have single-member LLC taxed as S-corp.

I see different services around like the Dollar Vigilante and such that I could use if necessary but I need more information. I'm going to talk to some other people I know but figured I'd drop in here since I'm sure there are people that know about this.

 

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[tigerscent]

Out of interest, what makes you think foreign banks would be any safer, or offer greater protection?

 

[croman]

@GlobalWealth

 

[GlobalWealth]

I currently have about 500k in the bank tax-free, all in US banks- not coming in here to brag or anything, I'm just detailing my situation.

I would be very cautious about keeping that much cash in any bank, US or otherwise. In Europe they have now gone into negative interest rate territory and some banks are charging depositors a fee just to hold cash.

There are better options. If you want to keep it in cash, or cash equivalents and hold it offshore, you should consider currency money market funds or etfs.

You can even diversify across currencies to hedge your currency risk if that appeals to you. Money market funds are basically a series of short term bonds. So you are not limited to the deposit insurance minimums and you are no longer the bank's creditor.

After the dodd-frank bill, the law changed that basically made it impossible for the govt to bailout the "too big to fail banks" in the US. This also made it so that depositors were turned into creditors. In other words, if a bank fails, you will not get your funds. You stand in line like every other creditor. Of course there is fdic, but right now, the fdic has less than .2% in cash available to cover its obligations. Not a good position for US bank depositors.

Basically I just want to know- how "easy" is it to put money in a foreign bank and what is the best way to do it?

It really depends on what you are trying to accomplish. As noted above, if you are just parking a lot of cash, it would be better in a money market fund or currency etf. That can be accomplished by opening a foreign brokerage account. If you are American, you will most likely need an introduction as FFI's don't really like Americans due to FATCA.

As for as how easy, it is not that difficult. Not much different than opening a US bank or brokerage account. However, unless you make a personal visit it will take a few weeks for them to do their due diligence and activate your account.

In the US I have single-member LLC taxed as S-corp.

Ok, not sure the relevance here, but depending on your business and your personal situation, it may be a good idea to set up an offshore structure.

 

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[GlobalWealth]

Out of interest, what makes you think foreign banks would be any safer, or offer greater protection?

Since dodd-frank passed, banks must be allowed to fail now. Part of that legislation also makes depositors creditors of the bank. In short, if a bank fails, you will stand in line like any other creditor to get your cash. Considering the fdic has less than .2% reserves for its potential depositor obligations, it does not look good for depositors.

And contrary to media nonsense, US banks are in worse shape than they were a few years ago.

Unfortunately, most of Europe is not faring much better. With negative interest rates now in the EU, many banks are charging depositors a fee to hold cash. (there are still some good EU options).

Offshore banks can be a good option as many of them do not make loans, or they only make loans of the actual cash on deposit - unlike US banks which leverage at least 20:1 on loans. Put another way, if you deposit $100k in a US bank, they can loan out around $2mm. In most offshore banks, if you deposit $100k, then can loan out a max of $75k. It makes a big difference in safety reserves.

There are pros and cons, but ultimately, I would suggest just not keeping a large cash horde in any bank.

 

[Dan1]

Yeah guys I am aware that I need to do something different.

I am aware that storing in American banks is not the best situation.

What are the best countries to store cash in if not Europe or US?

What do you actually need to open a foreign account and feel like you're money is "safe" there?

I mean if you're not an actual resident, don't have an "SSN" there(or equivalent), what makes you think these weird semi-communist countries' governments won't just steal your money at some point?

 

[eribruski]

Buy Canadian real estate... leverage your currency against the Canadian dollar.

We did the same in the States when our dollar was strong.. now we are cashing out!

 

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[illmasterj]

As GlobalWealth mentioned, you might consider ETFs to park your funds. An inexpensive and simple enough account to open with is http://www.boom.com/en/. They operate out of Hong Kong and are quite affordable as far as trading goes. I am not an American myself, but I have heard that they are open to working with Americans (unlike many banks/FSPs).

If you are explicitly looking for a bank account offshore, there are a lot of considerations that only you can make. Are you doing it for safety alone? Are fees a concern? What currency will you be holding your funds in? Do you need to pick up a phone and speak with an English speaker? Is the online banking in English? Etc.

Personally I look to Singapore for security and high quality banking services. As you have over $200,000SGD, you are eligible for premier (poor man's private) banking. The big draw card here is that you can save yourself a flight to Singapore, which you would typically have to do in order to open an account with a lower deposit.

If you are concerned about losing funds, it's a tough game when storing cash. Diversification is your best bet, but you don't want so many accounts that you lose track of your funds or fees eat up your deposits. Banking with a few of the safest banks (https://www.gfmag.com/media/press-releases/global-finance-names-worlds-50-safest-banks-2015), keeping a little cash on hand, then buying physical assets is probably the safest way to go.

 

[GlobalWealth]

Personally I look to Singapore for security and high quality banking services. As you have over $200,000SGD, you are eligible for premier (poor man's private) banking. The big draw card here is that you can save yourself a flight to Singapore, which you would typically have to do in order to open an account with a lower deposit.
.

Unless things have changed since I was last in Singapore, it is difficult to open an account as an American, esp if you are non resident.

OCBC bank was the only one I found that would open an acct for an American non resident. But they would only do SGD accts. No multicurrency accts.

DBS "may" open an account for a non resident but only if you have a SG registered company with an acct at DBS (which is also not so easy to do now).

I would agree that SG banking is very good. Just not that easy to do.

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[illmasterj]

Unless things have changed since I was last in Singapore, it is difficult to open an account as an American, esp if you are non resident.

OCBC bank was the only one I found that would open an acct for an American non resident. But they would only do SGD accts. No multicurrency accts.

Yes I completely agree with this GW. Though I am not an American myself and I have not done it personally, I suspect the best chance (never say never - but you also need to know when it's not worth the time spent) for an American to open an account in Singapore is with OCBC Premier. DBS seem very closed off nowadays. If you have over a million to deposit, that may change but not suitable for OP.

Dan1, something you should know is that jumping on a plane goes a long way to opening an account at the right bank. Banks have strict "KYC - Know Your Customer" requirements nowadays. To a lot of banks, meeting you in person tells them you are serious.

With that said, remote opening is still possible. Though I know this list to be flawed, it does provide a good starting point on where to enquire: https://www.streber.st/list-of-offshore-banks/

 

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[tigerscent]

Yes I completely agree with this GW. Though I am not an American myself and I have not done it personally, I suspect the best chance (never say never - but you also need to know when it's not worth the time spent) for an American to open an account in Singapore is with OCBC Premier. DBS seem very closed off nowadays. If you have over a million to deposit, that may change but not suitable for OP.

Dan1, something you should know is that jumping on a plane goes a long way to opening an account at the right bank. Banks have strict "KYC - Know Your Customer" requirements nowadays. To a lot of banks, meeting you in person tells them you are serious.

With that said, remote opening is still possible. Though I know this list to be flawed, it does provide a good starting point on where to enquire: https://www.streber.st/list-of-offshore-banks/

I lived in Singapore and opened my account in person, so not sure how you'd get on as a non resident. In my experience it's pretty much impossible to open any sort of account in Sg without first having your IC/FIN card (residence permit issued by immigration). I wouldn't advise just jumping on a plane without doing your homework. Sg is very much a "computer says no" place and you can argue until you're blue in the face with customer service folks to no avail. See https://the-international-investor.com/investment-faq/open-offshore-bank-account-singapore

One thing that shocked me is the relatively low deposit protection insurance level in Sg - only SGD50k for DBS (GBP25k), whereas UK banks offer GBP75k. I guess this reflects local wages in Sg. So while I would say Sg banks are safer i.e. more conservative with capital reserve requirements, that doesn't count for much if their guarantee only covers you for loose change.

I've experienced one of my banks going bust (not in Sg) and I'm honestly not sure there are many answers except to spread the money around different banks covered by different licences - again not easy with all the M&A going on in the banking world. It seriously makes you consider the old money under the mattress trick - or gold.

 

[Gregory Diehl]

I'm a full time traveler who has planted in flags in several countries, including the incorporation of my business, my residency, citizenship, property ownership, and bank accounts. I'm also an American, so that limits my options a bit. But I found Georgia (the country, not the state) to be a good option, at least as basket among many to park your eggs in. TBC Bank opened two accounts for me in one visit with nothing but my passport, for both company and personal use.

 

[Evil_Jester]

A couple of days ago Warren Buffet talked about doing his own 'run on the bank' if the negative interest bank rates come to the US.

 

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[GlobalWealth]

A couple of days ago Warren Buffet talked about doing his own 'run on the bank' if the negative interest bank rates come to the US.

I would hate to have the majority of my assets sitting in US banks now. Way too risky.

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[David Young]

Not familiar with USA banking- can you spread you money around to ensure it is all covered by a federal insurance scheme?

Under the European Deposit Guarantee Schemes Directive EU governments guarantee savers money upto about £75K in case of bank collapse.
It would be worth seeing if that applies to foreign investors as well.

 

[GlobalWealth]

Not familiar with USA banking- can you spread you money around to ensure it is all covered by a federal insurance scheme?

The US FDIC (deposit insurance), insures up to $250,000. And while that seems great, it is not all roses.

A little known part of the Dodd-Frank act that passed to prevent "too-big-to-fail" banks from getting bailed out had a very significant change...

Depositors no longer own their deposits. Deposits become assets of the bank and depositors are actually now unsecured creditors. So basically if a bank fails, you are wayyyy down the line to get your cash.

Of course the FDIC insures up to $250k as previously mentioned. The problem is the FDIC only has less than .1% of the money to cover its insured losses. Read that again.... LESS THAN .1%.

It paints a rather bleak picture. Also keep in mind that US banks keep around 3% of deposits as reserve. In other words, if you deposit $100k, the bank loans out $97k.

In Europe the minimum deposit guarantee is eur50k, but it varies by country. Some as high as eur100k.

However, under current EU banking laws, they are required to keep 8% reserves, but most keep much more. For example, several banks in Northern Europe keep around 25% reserve.

I am not saying that EU banking is great, but it is in slightly better condition than US banking for sure. Personally, I would not advise anyone keep any significant amounts of cash in ANY bank ANYWHERE.

 

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[MTF]

Personally, I would not advise anyone keep any significant amounts of cash in ANY bank ANYWHERE.

For sums lower than enough for a real estate investment (that's what I consider a significant amount of cash) precious metals then? Money market funds? Physical cash?

 

[GlobalWealth]

For sums lower than enough for a real estate investment (that's what I consider a significant amount of cash) precious metals then? Money market funds? Physical cash?

Anything beyond cash needed for transactional use, I would suggest money market funds, currency etf's, precious metals or physical cash.

1- precious metals. This is not an investment. It is a physical asset that is a store of wealth. It should only be used as excess savings.

2- physical cash. Get a safe. Boom.

3- Money market funds. These are essentially a series of short term government bonds held in a fund. It is not treated the same as cash on deposit. It is guaranteed as it is a government bond. Plus brokerages cannot legally consider this an asset, unlike banks that consider deposits as an asset.

4- Currency etf's. Similar to money market funds. But a good way to hedge currency risk. (not a recommendation) for example, if you have 100k, keep 25% in USD ETF, 25% in NOK ETF, 25% in HKD ETF, 25% in AUD ETF. (again, not a recommendation, just an example).

 

[MTF]

3- Money market funds. These are essentially a series of short term government bonds held in a fund. It is not treated the same as cash on deposit. It is guaranteed as it is a government bond. Plus brokerages cannot legally consider this an asset, unlike banks that consider deposits as an asset.

Considering that most governments are broke, is it really that much safer than a bank deposit? I understand the point about brokerages and banks, but still - I'd rather loan money to a stranger online through P2P lending than to a broke government.

I remember you recommending to keep no more than 10% in precious metals. Have your views changed and now you recommend more?

Are all of these only recommendations for smaller sums and do you recommend to keep the rest in real estate (including foreign real estate)?

 

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[GlobalWealth]

Considering that most governments are broke, is it really that much safer than a bank deposit? I understand the point about brokerages and banks, but still - I'd rather loan money to a stranger online through P2P lending than to a broke government.

I remember you recommending to keep no more than 10% in precious metals. Have your views changed and now you recommend more?

Are all of these only recommendations for smaller sums and do you recommend to keep the rest in real estate (including foreign real estate)?

It is much safer than in a bank, no question. I don't think it's the best option, just better than bank deposits.

I also like certain p2p platforms and consider it a better option than deposits.
I am not a gold bug and don't consider gold anything more than a form of savings.

I do consider real estate a preferable option now for larger wealth. Look at the world's wealthiest families. Real estate is always a big part of their wealth.

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