Your Options for Offshore Banking

Welcome to Sovereign Confidential Weekly, where I answer your questions about the issues I cover in my monthly reports. Here’s a selection of recent letters:

In order to protect against the devaluing of the dollar, what offshore accounts do you recommend? Where are you and your subscribers opening up your offshore accounts?

As I’ve explained, the world of offshore banking has become much more complicated in the last decade. Thanks to Congress and the IRS, U.S. taxpayers are not the sort of account holders most foreign banks want right now. We bring too much hassle and risk.

The key variable is how much money we’re talking about, and what you want to do with it. If you have $100,000 to $250,000 or more, you can open a retail bank account in places such as Panama, Singapore, Uruguay or the Cook Islands. If you have $500,000 or more, you can open a brokerage account in Switzerland, Austria or Liechtenstein and have it invested by an independent portfolio manager.

On the other hand, if you’re after an account to hold a smaller amount, you have three options. First, you can establish some sort of relationship with a country — rent or buy a property, obtain a pensionado visa, start a business — which makes you eligible for local banking services. Second, you can open an i-Account, about which I’ve written before (August 2014). Finally, you can create a limited liability company (LLC), trust, foundation or other offshore vehicle, and have it open an account that you can use. Of the three, the last option is the most practical and secure these days.

I have Social Security and VA disability income payments. I would like to move to either Panama, Spain or Portugal. How do I arrange my banking to ensure my payments arrive in a foreign bank?

All three of those countries are eligible to have SS and VA payments sent electronically, direct to a foreign bank.  That’s the easiest route. Alternatively, you can have payments sent to a U.S. bank account. From there you can either draw on them directly via ATM or debit card, or have wire transfers sent to your foreign bank account periodically (which is expensive). Finally, you can open an account at a U.S. bank like Citi that has branches in your country or residence, have the payments deposited in the U.S. and transfer them internally to your foreign account at that bank.

We’re approaching retirement, and my wife would like us to spend time there in Cape Town, perhaps three months at a time. Is South Africa a good place to invest, say in a condo as a combination rental property/part-time residence? Also how easy is it to bank, perhaps put savings there?

Cape Town has a justly deserved reputation as one of the world’s most beautiful cities. It is built around a long mountain chain between two oceans — the South Atlantic and the Indian — and between “berg en see” as they say locally. There is so much to do that I can’t even begin to describe it. My own home there is a five-minute walk from the ocean, and when I’m there I fall asleep every night with the sound of the Indian Ocean rolling up onto the beach.

South Africa is hospitable to foreigners who come for extended visits, and Cape Town is especially popular with European expats and retirees. Condos and homes on the Atlantic coast near the main part of Cape Town can sell for millions of dollars, and rentals are at globally competitive levels. Even if you’re looking to invest less than that, excellent properties with great rental income potential can be had for as little as $100,000, generating rents as high as $1,000 a month or more, particularly during the summer.

South African banking is so-so. Retail services are OK, and you’ll get more or less the same treatment you’ll get from a U.S. bank. But the banking sector is highly concentrated and fees are high. I would frankly hesitate to save there since the South African rand is a weak currency. Foreign nationals can hold accounts in U.S. dollars or other foreign currencies, however, so you could direct any rental income to that. The upside of the weak rand is that right now, you can acquire property there at ridiculously low U.S. dollar prices.

Kind regards,

Ted Bauman
Editor, Sovereign Confidential