One of the worst parts of holding an American passport, besides FATCA rules that impede financial privacy and freedom overseas in general, and the obligation to pay income taxes on worldwide income, is traveling among hostiles. I am not just talking about travel within Arab countries or places like Central America, Venezuela, Cuba, Russia and China where Americans are targets for kidnapping or being brutally killed. I am specifically talking about offshore tax havens like Singapore, Mauritius, Guernsey, Bermuda, Cook Islands and Andorra.
Earlier this year, the United States government literally flexed its muscled against the last country in this list and smashed Banca Privada d’Andorra by asserting that the bank had ties to money laundering. To avoid international exposure, local regulators took over the bank and has spent four or five months sorting out the “dirty” from “clean” accounts, the latter to be transferred by year end to a new bank called Vall Banc. In the meantime, all account holder assets have been frozen, excepting only small withdrawals under strict monthly limits.
I recently interviewed a Banca Privada d’Andorra bank official (in person) that told me how every offshore bank in Andorra and presumably the world is under high alert, worried that the same thing might happen to them. According to my source, so far no one has lost their money but the hassle, intrusion and loss of sovereignty for the tiny country of Andorra are significant.
Most of Andorra’s economy is financial tourism, with skiing a distant second. The Andorran case showed that the United States government can literally bring a bank or country to its knees at will, regardless of local politics. If the bank does not play by American rules it will be punished. We saw the same thing happen in Chile when FATCA was rammed down the throat of the Chilean banking system this year, violating Chilean privacy laws and making Americans second class citizens in terms of financial and banking rights.
Andorran banks see the hypocrisy in all of this rhetoric and action. The official mentioned to me that America has its Delaware and Nevada corporate havens and yet has demonstrated that it simply will not leave fiscal paradises elsewhere in the world alone. Who made the USA the banking watchdog of the world anyway? Does might make right?
Now, American passport holders have to face more than just extra scrutiny in normally friendly places around the world. They will also have to work to avoid local and commercial scorn by going on record to distance themselves from the evil feudal policies of the United States government.
Americans looking to place assets overseas need not worry about problems with Banca Privada d’Andorra, however, since, according to this article, one of the sanctions sought by and granted to the United States is that this bank will not be allowed to open accounts for American companies. Moreover, those that already have accounts will be placed under heightened vigilance and scrutiny. How pleasant! Still want to hang on to that American passport? Still happy that “Big Brother” is there watching out for your “best” interests?
For years I have suggested that expats coming to Chile not use Chile as a place to leave the bulk of their cash and assets, other than for gold storage and for its fantastic tax-advantaged life insurance products. For most financial holdings, offshore jurisdictions should be sought out instead. Places like Andorra were particularly interesting because all bank representatives speak Spanish and Andorran banks will open accounts using legal and company documents set up in Chile. Now all of that has come into question. Maybe it will be best to bring more assets to Chile and store physical gold in safe deposit boxes rather than risk using an offshore bank that will possibly be the next victim of United States government foreign policy,
One other bit of food for thought. As I left the interview and drove back over to Spain (there are videos on You Tube showing the border stations), I found that its customs agents are standing with the USA by becoming particularly ruthless toward anyone that looks like they might have visited a bank in Andorra, doing car and personal strip searches, scouting for cash and trying to make trumped up cases that people with Andorran bank accounts are really money laundering. In fact, I can think of few other countries with more pernicious, mean-spirited and nasty border police than Spain has, close behind the United States in characteristic thuggery and power-trip mentality–so common in the “land of the free” ever since the Waco, Texas massacre in early 1993.
Bottom line: if you are an American citizen that thinks your assets are “safe” in an offshore jurisdiction, think again. Not only do you need a Plan B country, you need a Plan B offshore bank. Diversification is important. If Andorra is not safe, then neither are Singapore, Panama, Jersey or Mauritius.