Without a doubt, offshore banking and how and where to open an offshore bank account is one of the most discussed, yet misinformed topics on the internet related to this industry.
We at GWP have spent years researching and digging into this topic. In the offshore company and offshore banking field, this is also a topic that remains in a constant state of change.
Since the full implementation of FATCA and the scandal outed with the Panama Papers, offshore banking continues to be a moving target. This report is up to date for the 2016 and 2017 year, and we will be updating this at least once per year (*disclaimer: due to changes in the industry, the information in this report may also change mid-year).
For some background, FATCA has effectively made every bank in the world the enforcement division of the US Treasury Department and thus the IRS.
We frequently hear non-US clients that claim FATCA does not affect them since they are not Americans. This cannot be further from the truth.
FATCA affects every bank in the world that chooses to conduct business in US Dollars and thus affects every person who has a bank account in a bank that conducts business in US dollars.
Furthermore, it affects anyone who banks with any bank that conducts business with any bank that transacts in US Dollars. Confused yet? Basically, every bank in the world is subject to FATCA so it affects anyone who has a bank account.
To simplify, the way it works is that any bank in the world that sends or receives wire transfers in US Dollars, must do so using the SWIFT system.
For a bank to access the SWIFT system, there must be a primary or a correspondent bank in the US that can facilitate wire transfers in US Dollars.
For example, a bank in Abu Dhabi wishing to send a $100,000 wire to a bank in Brazil, must send the US Dollar wire through a US bank like Wells Fargo, for example. In the example, Wells Fargo acts as the correspondent bank to facilitate the wire from the Abu Dhabi bank to the one in Brazil.
FATCA requires every bank in the world that conducts business in US Dollars be FATCA compliant. If the US Treasury department requests information from the bank in Abu Dhabi about all accounts related to US persons, the bank in Abu Dhabi must comply.
If the bank in Abu Dhabi refuses to comply, then there are essentially two options: 1. The US Treasury Department instructs Wells Fargo to end its banking relationship with the bank in Abu Dhabi therefore excluding the bank from the SWIFT system and making it impossible to conduct business in US Dollars; or 2. The US Treasury Department instructs Wells Fargo to withhold 30% of the value of the wire from the Abu Dhabi bank before further wiring the balance to the bank in Brazil.
Neither option is good for the bank in Abu Dhabi, or for the transacting parties. This also creates additional administrative costs to every bank in the world to fulfill mandatory FATCA compliance. And this cost is passed down to their clients in the form of lower interest rates or higher fees.
I wanted to give you some background because FATCA has effectively changed the way banking functions. It has also forced banks around the world to change and adapt – sometimes every couple of months. It creates a moving target that we at GWP closely monitor and work hard to provide the most relevant, up-to-date information.
With that said, we have several banking recommendations for a variety of circumstances. Provided are highlights and contact details for each bank as well as my opinion on the benefits of each bank. I will also advise whether a personal visit to the bank is required and if the bank accepts US persons as clients.
The banks are categorized by traditional bank, offshore bank, and fintech platform. Each will be explained by category.