We Americans have lost access to another big offshore bank – this time it’s ANZ, one of the largest banks in Australia, New Zealand and the South Pacific region. ANZ was a major player in the offshore banking and asset protection industry, especially offshore trusts based in the Cook Islands and gold held at the Perth Mint.
ANZ recently announced that, because of the high costs of compliance and risks to the bank from recent US laws, it would close all accounts associated with “offshore entities.” This means that ANZ is now off limits to anyone other than residents of the country where they wish to open an account and that all accounts associated with offshore trusts, companies, and structures are to be closed.
Because of the loss of this offshore bank, hundreds of employees will lose their jobs in the Cook Islands, Vanuatu (another major Pacific Island financial center), Samoa, Singapore and Hong Kong. ANZ has decided the costs and risks associated with their offshore business units outweigh the income it derives from investment management, trust administration, etc.
The loss of ANZ, and other banks closing their doors to Americans, is the result of the US IRS waging an all-out war on offshore banking and international financial privacy. Laws like the Hire Act and the Foreign Account Tax Compliance Act have made compliance so expensive, and the risks of not grabbing their ankles and taking it from Uncle Sam so grave, that many banks have elected to get out of the offshore industry all together.
Going forward, you can expect most large offshore banks will fall in line. No longer can you conduct business without America getting its cut…the US government is going to insist on being your “business partner” both at home and abroad. No longer is there any expectation of privacy or security in the worldwide banking system.
I am often asked why these offshore banks don’t stand up for their clients. Why don’t they fight the US, or put up even token resistance? The answer is simple: all of these international banks have branches in the US and do most of their business in US dollars. For example, ANZ has had a New York office since 1968 providing corporate services, investment banking, and international trade finance.
When you have an office in the US, American authorities can pull your license, freeze your accounts, and put you out of business if you don’t toe the line. They can also prevent you from transacting business in United States Dollars…which would be devastating to any major institution.
- Did you know that the US IRS can take money out of your foreign bank account if that institution has a branch in the US? For example, let’s say you owe money to the IRS, are living and working in Mexico, and have an account at HSBC in Guadalajara. The IRS can levy your Mexican account by issuing an order to any US HSBC branch!
In addition to putting the offshore bank out of business, the US can arrest bank employees around the world and hold them in prison until they comply with the governments demands. Think this sounds draconian? It happens all the time. The US has entered in to deferred prosecution agreements with the likes of HSBC, Barclays (regarding LIBOR fixing), American Express Bank, UBS, Standard Chartered, most Swiss banks in a global settlement, Royal Bank of Scotland / ABN, and others over offshore accounts and international transactions.
Basically, a deferred prosecution agreement means the US will not put bank employees in prison if the bank at issue pays a huge fine and agrees not to engage in the now prohibited conduct. Yes, if you have piles of cash, you can buy your way out of even an American jail sentence. For example, HSBC agreed to pay $1.256 billion dollars to keep its employees out of jail in December of 2012. For an article on the topic, checkout the NY Times from December 2012, arguing that allowing HSBC to buy its way out of prison was a dark day for the rule of law.
Finally, most of these large banks are publicly traded. When news of a battle with the US gets out, usually through the US DOJ issuing a press release, the bank’s stock price takes a dive. For example, when it became clear HSBC would settle with the US, its stock jumped and is now up 31%.
Is there any good news on the horizon? Anyone who might be willing to fight for the rights of their clients? There are a few small banks that may be up to the task, but the only big bank showing a desire to expand its offshore business is Bancolombia.
Bancolombia is a regional bank, the largest commercial bank in Colombia, and one of the major banks in Latin America. It’s headquartered in Medellin, was founded in 1945, and is a full-service financial institution. Bancolombia’s offshore units are in Panama, El Salvador, and the Cayman Islands.
In February of 2013, with HSBC dumping its offshore business units, Bancolombia bought HSBC’s Panama’s brokerage, fiduciary services unit, banking business and its insurance company for $2.1 billion, the most ever paid by a regional bank and the latest in a major expansion for Bancolombia throughout Latin America. Bancolombia has been running its offshore group from Panama for over 40 years, and the purchase of HSBC’s full service operation represents a major commitment to Panama.
Of course, there are the usual areas of concern. Bancolombia is traded on the NYSE, has a branch in the US to serve the large Colombian population in Miami, and the target on its back (read wallet) may grow as they expand their offshore activities.
These attacks on the world’s largest institutions have been a boon to the smaller banks without offices in the United States and which are not on the IRS’s radar. For example, most of the accounts held by ANZ Cook Islands will now move to Capital Security Bank. This private bank, owned by the SouthPac Group, offers investment management, currency exchange, real estate investments, and the ability to hold gold in allocated storage in Switzerland through Bank Coutts & Co.
Capital Security Bank is one of the few private banks that offers great customer service and doesn’t charge a fortune. Most private banks are forced to charge high fees because they are marking up the transaction costs they pay to their correspondent bank. I have found that Capital Security’s rates are on par with ANZ Cook Island. This means their fees are higher that a US bank but lower than other private banks.
If you are looking for a private bank closer to home with good customer service and allocated gold storage in Switzerland, I recommend Caye Bank, Belize. This bank offers both investment management and commercial banking services, which is rare in the offshore industry. They also have a network of correspondent banks around the world which allows them to offer a number of unique investment products.
You will find that Belize offers many of the same asset protection benefits as the Cook Islands, but at a lower cost. For example, a Belize Asset Protection Trust is about half of the price of a Cook Islands Trust, and Belize corporations are less expensive to maintain than Cook Island companies. The Cook Islands have a longer history in the offshore industry, but Belize has the more modern legislation and preferred investment and residency programs.
So, while most big banks are falling in line, there are a few bright spots out there. We may see some fight from regional banks like Bancolombia, and specialized private banks. Firms like Caye and Capital Security are sure to benefit so long as they minimize their exposure to the US.
If you are a US citizen living, working or investing abroad, Premier Offshore can help by incorporating your business, creating a custom asset protection structure, and/or ensuring you remain in compliance with the myriad of US filing obligations. We can setup your trust in Belize or the Cook Islands and open any bank or brokerage accounts you require. Please check out my website, or email info@premieroffshore.com for a free and confidential consultation.