Offshore Banking: An alternate solution, not just for the rich

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Banking for expats in recent years has become a rather tiresome problem. In the United States, especially, banks have recently tightened their requirements for accessing and sending money, all in the name of Wars on “Terror, Drugs, Money Laundering, etc… ad nauseum.” Uncle Sam is also wanting to make certain that everyone pays their taxes.

One result of these rules is that it is quickly becoming a real hassle to deal with banks in the United States. Accessing your money can become quite complicated when you are living overseas, and resolving problems is no longer very simple, often requiring in-person visits or mountains of paperwork. Wait a minute. Wasn’t the Internet supposed to make things simpler? Well, not with banking. With the US government, money in overseas accounts is money you are hiding. It is money that could be used for nefarious purposes. No matter the fact that you live abroad. No matter the fact that you have daily living expenses. YOU now need to prove that you aren’t doing anything wrong. It is not just in the United States, though. Many banks in the world now refuse outright to open accounts for US passport holders, or are closing accounts. Why? The reporting requirements demanded by the US government are tedious, expensive to implement, and often violate the local laws where the banks are located.

Standard Chartered

Standard Chartered

So, you decide to move, and you need someplace to keep your money. In the Philippines, many banks either forbid foreigners to open accounts, or make it difficult for foreigners, especially non-resident foreigners, to open accounts.

There are a number of reasons behind this:

  1. Foreigners who are non-resident are viewed as liable to abscond the country, leaving the bank holding debts.
  2. There are no credit bureaus here, so foreigners have a difficult time proving credit worthiness (Before anyone gives me any grief on this, banks in the USA usually require good credit to open even a savings account).
  3. If you are non-resident (Like on a tourist visa), the assumption is that you have accounts  elsewhere, so no need to open one here.
  4. The reporting requirements demanded by the US government require more expense than the bank deems beneficial to acquiring a customer.

So, it can be difficult to open an account here. Most banks in the Philippines, for permanent residents, will open an account once ample proof of income is provided. You can often also be added as a co-holder to a spouse’s account. As opposed to the USA, bank managers in the Philippines have an enormous amount of pull: A personal referral to a bank manager can open doors that are otherwise closed. Likewise, policies at one branch can vary from another branch of the same bank, depending on the strength of that relationship with the person referring the foreigner (If the referrer has a lot of business with the branch, THAT is taken into great weight in the unknown foreigner’s benefit, or detriment).

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So, what do you do?

My suggestion is often thought of as being only for the rich. The “James Bond” world of numbered offshore accounts, and so on: The reality is quite different. Offshore banking can be for everyone, but you need to keep perspective.

Twenty years ago, I opened my first account in the Bahamas. It took all of 15 minutes, my passport, and $100. Those days are long gone now. However, here’s some facts:

  1. The “secrecy” so often trumpeted is largely history now. Yes, some jurisdictions still offer numbered accounts, but courts have recently been requiring many of the old offshore banks to disclose ownership. In other words, if you are hiding from the tax man or other authorities, they eventually will find it.
  2. There are “semi-secret” banking locations that survive. Singapore, Hong Kong, and Macau are the three closest to the Philippines. (Singapore requires residency to open an account). The Philippines is not secret, but the banks here usually are not very cooperative with foreign officials unless ordered by the Philippine courts.
  3. High net worth is not mandatory, but it certainly helps.
  4. Most offshore banks offer ATM and Internet access to your funds.

So what brought this article on? Well, I’m not hiding anything. However, I was having great difficulty in receiving my salary here… Even with Philippine accounts. So, my solution was simple: Hong Kong.

I opened what is known as a Multi-Currency Savings Account with Standard Chartered bank in Hong Kong. Effectively, I can receive wire transfers in any currency, and I can then shift to a savings account in Hong Kong Dollars, or any other currency, at VERY minimal rates (Only a couple of basis points above Interbank rate). I have Internet banking that allows me to instantaneously issue a TT (wire) to anyone in the world, in any currency (So I can remit to Rebecca’s account, in Pesos, and she has the amount in her account next day). They gave me an ATM card for cash access, in addition.

What was nice was that I received the direct phone number to a personal banker. Any problems, I have a name to talk to, with the authority to fix things (They checked personally on my incoming wire transfers, with a phone call).

To set up the account, I needed a passport, and proof of residence (Anywhere… Not just Hong Kong). Easy. Took thirty minutes. The minimum was that you need to open the account with HK$10,000 minimum (Around US$1,000). BIG difference from many of the “Premier ” accounts with people like HSBC or Citibank.

Banks in Hong Kong can vary with access to foreigners. Some will open an account, but others will not. Some want personal referrals from other customers. Yet, as one of the premier banking centers in the world, there are hundreds of banks from which to choose… Just research a bit online and via Skype before you go.

This could be an attractive option for foreigners living here, especially those living on non-resident status. A quick visa run to Hong Kong is all it takes.

Post Author: JohnM (207 Posts)

John Miele is a Citizen of the World, having spent time in many locations around the globe. Currently, he finds himself in Manila, but travels throughout the Philippines. John joined the Live in the Philippines Web Magazine in mid-2008.


Comments

  1. says

    John – thanks for posting this.

    Can you send me an email on which branch you used in HK? Probably doesn’t make any difference, but sounds like you had a good experience. I may make a trip specifically to get an account set up. Also, what proof of residency did you use?

  2. kikas_head says

    Another thing to be aware of–transferring money out from the US. Despite declaring our bank account here to the US and paying taxes on the interest received, one of our US banks closed our account with no notice (after 15 years with them) due to money transfers to here. Since it was a primary account we had to fly to the US last minute and open new accounts with a different bank.

    • John Miele says

      Kikas: I’ve heard the same thing from a number of other expats. US banks are becoming far more trouble than they are worth. Problem is, if you have any USA business, you almost always need a US account.

  3. Paul says

    Thank you for the great article. I love HSBC. For over ten years now and access to financial investment products in Countries wherever an HSBC has branches. So you can invest for example in Stock, Bond and Treasury Markets in Australia, Europe, USA, Canada, South American, etc..no matter where your account is located.Keep your money in nine different currencies if you like.

    • John Miele says

      Paul: I personally had major problems with HSBC in the Middle East… However, I also know several people with HSBC who are really happy with their accounts, primarily at their head office in Hong Kong.

  4. Mark G. says

    Interesting article John. I suppose working as you do, traveling a lot etc. this was probably a good move for you. We keep a minimal amount in the wife’s ATM account here and do the rest via ATM from our US bank. If I had to start depositing a salary here that would probably change. I would think twice though as it would complicate my tax situation. The Hong Kong account sounds like a good way to address a myriad of issues.

    • John Miele says

      Mark: It worked well for me. The biggest hurdle you may face is if something like Kikas Head described above happens to you.

  5. Isagani Cruz says

    “…I have Internet banking that allows me to instantaneously issue a TT (wire) to anyone in the world.” Some questions:

    (1) Can you do it all online?

    (2) What are the fees for telegraphic transfer/ wire? Is it a fixed amount or does it vary from country to country?

    (3) In my experience, the receiving bank charges a fee when wiring $ from the US to a $ account in the Philippines. Have you had the same experience?

    • John Miele says

      Isagani:

      1. Yes… 100%

      2. Incoming wire is US$20… Outgoing around US$10. Receiving banks often tack on their own fees, though.

      3. Yes, same as my experience. However, My RCBC account adds no fees.

  6. says

    Hi John, another great article as usual.

    This is slightly off-topic but related none the less.

    With this being tax time in the US, there are a lot of articles that affect expats and their money (or should I say the IRS trying to get their hands on the expat’s money). One interesting article: “Americans living abroad ditching citizenship because of tax reasons
    http://www.abc2news.com/dpp/money/americans-living-abroad-ditching-citizenship-because-of-tax-reasons#ixzz1sQoFcPWz

    The article claims that a record number of expats (1,800 last year) simply renounce their citizenship in order to avoid a large tax burden.

    • John Miele says

      Rich: Correct… This is a trend, especially with dual citizens who may have never even set foot in the USA.

  7. DanielY says

    HSBC = Hong Kong and Shanghai Bank
    StanChar = Standard Chartered Bank of HK

    The above 2 privately owned banks are the only ones in the world that print official currency (money) in the world – HK Dollars. They both have presence in The Philippines.

    TT = Telegraphic Wire Transfers, also known as EFT (Electronic Fund Transfers) and the use the SWIFT system.

    • John Miele says

      Daniel: Correct on all points. I can also tell you from personal experience, particularly with small bank branches in the USA, that overseas TT can be problematic.

  8. Robert B says

    In case anyone is interested:
    I bank with WellsFargo in the US. I also have a BPI account here in Philippines.
    WellsFargo and BPI are sister banks and have an EFT agreement with each other.
    Although the set-up has always had challenges (usually on the BPI side), I am able to transfer up to $3000 US per day for no more than a $10,000 – 30 day rolling average.
    The cost of the transfer is $3.50 + USD to Peso conversion, usually about $25 per $3000 sent.
    If I send it before 3pm US time it is available in my BPI bank by 9am Philippine time.

  9. Bruce Michels says

    John,
    I will be using my navy federal credit union to hold my pensions and now that my Asawa is a dual citizen she will have and account with the PNB with me as co owner. I’ve talked to NFCU about the the transfer of funds and they said that their will be no problem they have and agreement with the PNB and as long as you have a overseas address. I trust credit unions more than I trust banks.

    • John Miele says

      Bruce: I’ve gotten to where I trust no US financial institutions. My experience is that things always seem to work well for a while and then “kaput”

      • Bruce Michels says

        John,
        Then my question would be can I have my pension checks deposited in firgien banks without any blowback by the US Gov and taxes?

  10. Francisco San Giorgio says

    Nonsense. Opening a bank account in the Philippines is not difficult at all. There is no proof of income requirement any banks here and, there is no requirement to show any credit standings.

    A great number of expats in the Philippines are SS benefit recipients and , Hong Kong is not an option for those benefits.

    As a foreigner, you’d have much difficulty in acquiring any bank debt. Any loans would most assuredly be co-signed.

    Opening an account in Hong Kong while on a “quick visa run” indicates that you’re using the temporary visitor visa as a permanent resident visa, which is more suspect than opening a foreign bank account.

    Renouncing US citizenship to avoid US taxes is a ridiculous statement…..Having dual citizenship has no bearing on opening a bank account here.

    • John Miele says

      If you bothered to read any of the article, you would have seen that I am on a permanent resident visa and hold accounts here.

      Many people have problems opening accounts in the RP which is why I wrote the article

        • Francisco San Giorgio says

          I read the article.

          The base premise is that it is difficult to open a bank account here and, an alternative would be to open in another country, such as Malaysia, Thailand, or Hong-Kong ( Many, many here have accounts for the SS benefits and that type of account is about the simplest to open. but it wouldn’t work in Hong-Kong).

          Residency status, nor time spent here, does not necessarily make one an expert, as I have learned over the years by observation and, of reading some of the dribble coming from sites like this one.

          Most all banks here require an ACR-I card, photo ID, passport with legal status here(temporary, permanent or, whatever), and a minimum deposit; what’s the difficulty in that?

          Saying a bank may refuse you on the grounds that you are a temporary visitor and don’t ”need” and account is ridiculous. Saying because of your temporary status, the bank may feel you will leave a bank debt, is equally ridiculous. Regardless of status, a bank debt by a foreigner would most assuredly need a co-maker.

          Saying a proof of income is needed has never been, nor is now, a requirement to open a bank account.

          Saying that renouncing your citizneship is a way of evading taxes, is also rediculous…..not that simple to renounce citizenship. Only way that happens is if you serve in the military of a enemy of the US, treason, and/or you personally make your wishes known, in a face to face with a US consular. Even gaining Philippine citizenship will not cause you to lose your US citizenship, as stated by the owner in a post a few years ago.

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