September 24

Offshore Banking

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Opening offshore bank accounts is a concern for many of our clients.

There are three types of accounts that we’ll be looking at:

-Personal accounts

-Business accounts

-Brokerage accounts

Let’s first talk about business accounts. There are a couple of variables here. When we talk about offshore it means that this bank account is outside of the country where you’re in.

The question is if it’s outside of the country for the business or for the person who owns the business? Or maybe both?

Let’s look at this through an example:

I’m from Canada. If I live in Canada where I have citizenship and I have a foreign company and if I want to open a bank account for that foreign company in Canada, that is different then if somebody from outside of Canada is trying to do the same.

What if I want to set up the company’s bank account in the country where I don’t live? For example, If I have a company in Hungary and want a bank account while not living there.

And finally, a combination where I live in one country, have a company in a second country and wanting to open a bank account in a third country.

All of these combinations are possible and doable, but there are various levels of difficulty in doing so.

You will want to minimize the level of difficulty, especially because of changing regulations it will be less likely that your accounts stay open. This is very important.

When you are a business owner you want to be able to do your business, and not run around opening new bank accounts all the time.

If you nor your company are residents of a country where you want to open a bank account this will be quite challenging.

Let’s say that you live in Germany and have a company in Gibraltar. Where to open a bank account? Very few countries will let you open a bank account in this case. In the past, you could easily open a bank account in Switzerland, but these days are gone. Today there are only a few places left that will let you open a bank account for an offshore company. Number of countries that allow this is decreasing and they are shutting these accounts down.

Somebody was asking us about offshore banks. Should you trust them? We wouldn’t advise you to. They are usually unstable financially, they will give you lots of hassle when doing due diligence, their services are not great, their infrastructure is not good either, and most importantly – if something goes wrong they will not be protected!

A few years ago, the Caledonian bank in the Cayman Islands had an unsolvable issue. If this happened to a big bank, such as Bank of America this would be certainly resolved. In the case of Caledonian bank, all the accounts got frozen and the bank went bankrupt. Fortunately, people mostly got their money back.

However, imagine the level of hassle and inconvenience you’d need to face if this was your only business account through which you were accepting payments. Now, all of a sudden everything gets frozen for six months, or even a year. This would make your business suffer lots of consequences.

Be aware of offshore banks. They might be easier at the beginning, might be way easier to set up an account, but you will not be safe in the long run. You should be looking for banks that have substance locally, so there is an incentive for the government to intervene in case of something going wrong.

If you are looking for foreign banks and countries to bank in, reach out to us and we’ll advise you on what’s best for your specific situation.

The best-case scenario, that we always recommend is to open a bank account in the same country where your company is. This still doesn’t mean that your banking solution will be sustainable.

A great example is Estonia. Back at the time, people used to open companies and bank accounts there. They have an option of E-residency, you could open a bank account remotely. There were plenty of advantages.

However, nowadays they only want to deal with companies that have an actual presence there. So, if you don’t have an office, staff, etc. in the country they won’t deal with you anymore.

This is a growing trend. More and more banks around the world are looking for actual local presence and substance in the country. This is a reason why we have to look at the bigger picture when planning to open a company abroad: we will look for places that have good access to talent, low cost, etc. We talked already about this matter in our Substance video.

This is what will give you sustainable banking. Simply registering a company is not enough anymore!

Another very important thing is your country of origin- if you come from certain countries it will be super hard for you to open bank accounts abroad. For example, if you come from Ukraine you won’t be able to open a bank account anywhere in the EU. A similar situation is if you come from Syria, lots of places won’t accept you, therefore, you’ll have to look for countries where you’ll be able to bank. Also, in countries where they will accept you, you will need to provide plenty of documentation: you’ll need Apostille of all of your company documents, register of shareholders, register of directors, certificate of good standing, you’ll need some proof of address, everything will need to be certified. It will help if you have some existing business from which you can show banking activity, bank statements, contracts, etc. You will want to show that your business is legitimate.

What about personal accounts?

Sometimes they are easier and sometimes harder to open. The real key here is if you have enough money to do private banking. This will open all kinds of possibilities for you.

In private banking, they are getting lots of fees from you. If you have 1- 3 mill$ you can put as a deposit, they will charge you 1-2% of assets under management. This makes it worth it for them to invest in due diligence, they will be more friendly if you have money coming in from crypto, etc. If you have money coming from some sort of business or deals that regular banks are scared of (crypto is a great example) private banking is the right choice for you. If you’re interested in this reach out to us and we will connect you with some private bankers, depending on your needs.

The final type of accounts we want to talk about is brokerage accounts. This type of account is way easier to set. In this case, you’ll need another account where you can transfer funds from. You usually won’t be able to transfer from a third party account into a brokerage account. You’ll need to have a personal account or a company account of the same name to transfer money to a brokerage account.

This is probably the easiest type of account to open. After that comes the private banking, and finally personal and corporate bank accounts.

If you have any questions about banking abroad feel free to contact us.


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