8 Tips to Successfully Open an Offshore Bank Account

Dateline: Kuala Lumpur, Malaysia

An Australian friend of mine called me recently to ask how he could open an offshore bank account.

He was in Singapore and knew that I had experience banking there, so he was asking for advice on where to go and what to do.

So, I told him and he started the process.

He called me later to tell me they wouldn’t open his account.

My friend had run into a few challenges that are common problems for nomads trying to open an offshore bank account. Issues that, with the right preparation, can easily be avoided.

Throwing in the word “offshore” can make people imagine some great level of mysticism, as if there’s some incredibly complex structure out there for going offshore.

You get the same effect when you throw the word “wedding” in front of photography. Suddenly, people are willing to pay triple the price.

But the reality around offshore banking is that it really isn’t that much different from banking onshore.

There are many different types of offshore banks and several different ways to go about opening them, but both onshore and offshore accounts can be opened by walking into a bank, downloading an app, or even doing the process through remote correspondence.

In this article, we’ll discuss what my Australian friend did wrong and then go over all the nitty-gritty details to know how to successfully open an offshore bank account in almost any situation.

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1. Understand Offshore Bank Expectations

First things first, let’s talk about physically going into a bank to open an offshore bank account. In many countries, you can simply walk in. 

I did this in Georgia. I didn’t need an appointment or an introduction. I walked in with my passport and address and they opened up the account for me.

Now, obviously, some physical banks require you to have an appointment and if you’re going to be opening a private or priority account, you may well want an appointment whether they require it or not.

If you’re opening an account in a traditional offshore center like the Cayman Islands, they may not take walk-ins as a rule.

I highly recommend calling ahead instead of walking in to learn the bank’s expectations and requirements for opening an account.

Find out if they accept foreigners without a residence or work permit. And if they do, find out what kind of deposit you’ll need to make.

Strict Know-Your-Customer rules are causing banks in countries all around the world to crack down on the practice of opening accounts for people just visiting the country.

They don’t want to take on people they see as a risk.

This is why countries like Singapore now want you to put $200,000 in rather than $1,000.

For $200,000, it’s worth the time to go through all the trouble of checking into who you are and what you’ve been up to. 

For $1,000 it just isn’t worth it for these banks to make sure you aren’t a risky client.

Call the bank. Figure out what’s required, what documents they want, if they accept people in your situation, and if they want you to make an appointment. 

Our team has a list of 900 offshore banks that we constantly update. That list includes information on which banks are accepting which people and what the required deposit is.

We have to do this because policies change often. Some banks will decide not to accept US or UK citizens. Some will refuse expats in general. 

If you work with the bank ahead of time, you’ll run into fewer problems.

2. Coordinate An Offshore Bank Intro

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The easy answer is that it depends on if you’re trying to open a personal or business account.

If you’re opening a personal bank account, you generally don’t need an introduction. If the bank you’re trying to work with requires one, it’s important to know that there are many other attractive banking options around the world that won’t need so much from you.

If you’re banking on a corporate level, introductions can be very important in helping you secure the account. Working with someone who knows what you do and can vouch for your business can be the difference between opening the account and getting rejected.

Requirements aside, a bank introduction can be helpful on its own in getting you past the junior-level bankers who don’t have a full understanding of bank policies. 

The right introduction can get you through the bureaucracy of the bank and into the hands of someone who really understands your situation.

3. How to Walk Into an Offshore Bank

Whether or not you have an introduction, you need to consider how you’re going to present yourself to your bank of choice. 

First of all, you will need to present a serious, respectable physical appearance. If you show up in a ratty looking t-shirt like my friend did, many banks aren’t going to take you. Particularly in Asia.

You need to look professional. 

You also need to present yourself as a good potential client. Know exactly why you’re going to open the account and have all of the particulars of your situation prepared beforehand.

If you walk into a bank in Singapore and tell them that you want to open an offshore bank account because you heard they don’t have any taxes on their bank accounts, they won’t open an account for you.

You’re presenting yourself in the worst possible light. 

Come prepared. The bank will want to know where you pay tax, if you’re a US taxpayer, what you want the account for, what you plan to do with the account, and what initial deposit you’re going to make.

You will also want to ensure that you enter the right branch of the bank.

If you end up in some suburban branch working with someone accustomed to people bringing in checks from their construction business to deposit, there’s a chance they just won’t know what to do with you and will send you away.

I strongly recommend going to the main branch of the bank because the people who work there generally have more experience and better knowledge of bank policies. 

Even then, if you do end up getting a new employee who tells you that  they don’t take people in your situation, you may just need to come back at another time and deal with someone else.

How you approach the bank is going to make or break it for you. Having your address, passport, and all the details of your situation ready and available to hand over will go a long way in helping you open an offshore bank account.

4. Be Prepared to Answer Their Questions

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One of the things that often throws people when they get into the world of offshore banking is how invasive some banks are with their questions. 

Money that stays within the country is much easier to track than money coming in from foreign sources. The bank doesn’t need to ask nearly as many questions for local clients in order to get an accurate picture of what exactly is going on.

When you go offshore, however, those tracking systems stop working so well.

All in all, the questions a bank is going to ask you can be broken down into three ideas. Who are you? Where is the money coming from? What do you plan on doing with the money once it’s in the account?

The big thing banks need to know about who you are is where you pay taxes. This helps them stay out of trouble and comply with reporting standards. Whether it’s FACTA for US taxpayers or the CRS for most other places, the bank needs to know who to report your account to.

They will also want to know if you’re a politically exposed person. Are you or do you have a friend, family member, or business relation who is a politician or diplomat? Banks want to limit the chance of any corrupt money going through their accounts.

Explaining where the money is coming from will help the bank understand the nature of your business and assess whether you pose any potential risks.

They’ll want to know things like where the money you want to move into the account is now. How much money are you going to be sending? Will there be consistent future income? And, if so, where will it be coming from? What does your business do? What do you do?

By having a truthful, simple explanation or story of what you do ready to go, you can build trust with the bank and more easily open an account.

Last of all, banks need to know how you plan on spending the money once it’s in the account. They will want to know how long you plan on keeping the money there and if you want them to manage it for you. They’ll also want to know if there are going to be transactions coming in and out of the account. 

Different banks and even individual bankers will have different ideas of what counts as acceptable risk, but the more prepared you are, the more successful you’ll be in opening the account you need.

5. How to Open an Offshore Bank Account Remotely

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Remotely opening accounts is not something I suggest because of the Know-Your-Customer rules many banks are following.

It’s just more difficult and time-consuming than physically going to a bank.

However, many people have done their own research on the offshore industry and are more interested in the remote process.

Working with banks like those in Belize, the Cayman Islands, Cook Islands, or Vanuatu, will mean that remotely opening an account will involve filling out forms, preparing a notarized copy of your passport, and then sending all that documentation to the bank.

The bank then does everything you would have done in a branch, but it all happens while you’re sitting at home on your sofa.

The challenge I have with this process is that, in many cases, it’s going to take them longer to open your account and you’re going to have to put up with higher fees.

But it’s certainly an option if you want to save yourself the trip.

6. How To Open App-Based Offshore Accounts

The other remote option is FinTech solutions. 

Whether it’s Neat, Lupe, Revolut, or Bunq, I think these app-based banks are very interesting. However, there are a few challenges that come with working through them.

Many are only open to EU citizens or residents, which excludes a very large potential audience (never mind that being an EU resident may not be the best path for someone trying to be tax-optimized.)

These apps also have some stability concerns. I’m not sure if I believe everything people are saying on this subject, but some of these accounts have closed people down. When this happens it can create a complicated and messy situation.

I once had an online bank account with Ally Bank in the US. I’d been logging in from overseas quite a bit (because I was living overseas) and eventually they sent me an email telling me that they were closing my account and sending me a check for the balance. 

They couldn’t verify my most recent address, so they sent my quarter million dollar check to some house that I had sold two years earlier. 

I was frantically calling my real estate agent and the people who bought the house from me to track down this check and put a stop payment on it, but no one I talked to was very helpful. 

They had a hard time understanding why I was trying to find a check while I was a world away in Romania. It was a really stressful thing to go through.

That wasn’t an online or FinTech account, but I think that both equally lack the robustness of physically setting up your offshore account.

I understand that a lot of people like them. They’re easy to use. You can send money. Fees are lower. But for me, opening an offshore bank account isn’t about saving a few bucks on fees.

I have an ATM card that lets me withdraw anywhere fee-free and I pay a spot rate on withdrawals, but that wasn’t my main purpose in setting up my banking situation.

If you’re looking for a basic kind of offshore bank account where you can park some money, though, these new app-based banks could work.

In most cases, you just download the app and scan in a copy of your passport.

One of the banks we tested had us do a live chat where you showed your passport along with your face. It was a difficult experience that ended with me getting shouted at.

Personally, I prefer traditional banks where you just go in and open an offshore bank account.

7. Avoid These Common Pitfalls

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Banks around the world operate differently from the ones at home. There are different requirements, cultures, and ideas of what good service is. Approaching an offshore bank the same way you would your local branch is going to create some avoidable difficulties.

Having someone local who understands the customs and the information the bank will be looking for will help you get an account more quickly.

The other problem we see people run into when trying to open accounts with banks that we’ve mentioned on our site or YouTube channel is that they sometimes run into product-pushing junior bankers.

A junior-level banker with a quota to meet might try and sell you on something alongside the bank account or tac an extra service on as a requirement for opening the account. Some people I’ve talked to have been told that they need to have a life insurance policy with the bank to open an account. These extras aren’t actually required. 

It even happens in some of the most attractive banking institutions. 

If it does happen to you, the junior banker either doesn’t know what to do with you and figures you’ll give up if they make the process difficult enough, or they want to sell you on enough other products that they can easily justify the decision to their higher-ups.

So, what do you do if you run into this problem? First of all, don’t walk out and tell yourself it can’t be done. Banks are bureaucracies. Often, all you need to do to circumnavigate a product pusher is come back later or try a different branch.

Preferably, one that deals with foreigners on a more regular basis.

8. Ensure Your Account Remains Open

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Because of increased government regulations, offshore banks want to avoid customers that are going to cause them trouble down the line. They just don’t have the same ability to understand you and your business the way an onshore bank does.

As time goes on and these regulations get stricter, banks are going to raise their standards. Anyone who isn’t keeping enough money in the bank to make their account worth keeping around or who doesn’t have a strong relationship with the bank to ensure trust is going to have their account closed.

Increased regulations and complications in the offshore business push many people to look for the “hack” that will minimize their taxes and give them all the privacy they could ever ask for. 

They’ll go and do something like open an offshore bank account for their business in a place like Samoa.

The reality is that there are no “hacks” in the offshore world. Cutting corners will only make your life more difficult down the line. Opening that Samoan account can be a great way to avoid taxes, but you’ll quickly find that many other banks don’t want to deal with a Samoan bank.

They don’t trust the jurisdiction. Samoa doesn’t require enough information from their clients. It’s too risky of a situation.

Instead of creating the conditions to go where you’re treated best, you will hurt your ability to open an offshore bank account in the future. And, even worse, your money will be trapped somewhere it isn’t useful for you.

If you want to avoid these issues and maintain your current offshore account or open future ones, you need to be able to clearly and concisely explain what it is your business does so a banker can feel at ease. 

You need to be opening accounts in reputable jurisdictions.

And you need to build out a banking portfolio so that if one account is closed, you have redundancies in place. 

Open an Offshore Bank Account

Offshore accounts in general are becoming increasingly more difficult to open and use because of government regulation on how you move your money.

Governments want banks to know their customers more than ever and are requiring more information to be shared.

The end result is that many banks don’t want to go through the hassle of working with customers who are tax residents anywhere outside of the bank’s jurisdiction. 

Whether you’re opening the account remotely or in person, there are plenty of hurdles you’re going to have to jump.

This means that successfully opening an offshore account will take some work and research on your side of things.

With the proper preparation, you can open an offshore bank account as a part of your strategy to go where you’re treated best.

On our site, we have articles and videos with the knowledge you will need to open accounts in specific places like Belize or Bermuda. I recommend giving them a read next.

Or, if you’re ready to create a holistic offshore plan for your banking, living, business, and investments, reach out to our team and we’ll help you get started.

Source: https://nomadcapitalist.com/2020/06/01/open-an-offshore-bank-account/