Banking abroad for Americans has been made difficult by new USA laws that deny SWIFT transfers and the use of USA Dollars to offshore banks who accept ‘USA persons’ as customers; further, the USA will fine foreign banks who do unreported business with ‘American Persons’. But only if they find out about it of course! For this reason, in banking circles, the term “toxic American” is now common.
People born in the USA are assumed to be Americans (i.e. USA Persons) even if they have the passport of another country. A US Person is any person with a “USA connection” who might conceivably have a tax liability in the USA.
Thus “USA persons” find that their accounts abroad, especially in the EU, are being closed unless they can arrange to be in full compliance with onerous reporting requirements. This is accomplished if their accounts are operated through (extra fees paid) to an authorized intermediary. Such “intermediary” arrangements are supposed to guarantee transparency and full disclosure of balances & reporting of all transactions to USA tax authorities. These arrangements also make it easy for such accounts to be seized arbitrarily by USA authorities.
Banks in the EU and in a growing list of countries generally don’t want as customers anyone with any USA connections. Rare exceptions are made by local banks–usually for long term, well known local legal residents. Most banks won’t take Americans or ex-Americans who have renounced citizenship even if they are willing to use an authorized intermediary. However, another exception is banks in countries unfriendly to the USA who!) Still have bank secrecy 2) do not deal much in dollars and 3) will not report any transaction for account holders to anyone. There are many such countries including Georgia (former USSR), and non EU countries of the former Yugoslavia. Some Singapore & Filipino banks, especially if they are Chinese-owned may take recommended clients.
A recent alternative “arrangement” involves moving physically to a USA possession, the Commonwealth of Puerto Rico. There, taxes are a small fraction of what they might be in the USA. All business dealings are reported to the Puerto Rican tax authorities, but not to the USA.
CAN YOU TRUST AN AUTHORIZED INTERMEDIARY?
Short answer? NO!
The USA (IRS) has an arrangement where a bank account is held in the name of “AN AUTHORIZED INTERMEDIARY” who is duty bound to report all transactions of the beneficiary to relevant USA authorities. We don’t recommend this arrangement. Why?
From the customer’s point of view, the authorized intermediary can easily run off with your money. In past cases many similar “authorized intermediaries” who were supposed to hold USA 1031 Real Estate Exchange proceeds until they were re-invested, were guilty of outright theft of customer funds. These outfits were licensed as authorized intermediaries by the IRS. But the IRS exercised no oversight and took no responsibility when accounts were stolen & disappeared. Thus we do not like these authorized intermediary arrangements. Why? We personally suffered a substantial loss of funds when one of these “trusted intermediaries” stole from us. Besides that, such arrangements provide for immediate, warrantless seizures by the USA and thus, any of the former advantages of distancing assets via an offshore account have vanished.
RENUNCIATION OF USA CITIZENSHIP?
There is no bank in the West or the EU that we know of who would accept a USA renunciation document as proof one is not still a “USA person” under their all inclusive, vague guidelines. Anyone physically living in the USA is ALWAYS going to be considered a USA PERSON.
Creating a convincing but false certificate of renunciation with Photoshop is easy. But, banks can’t afford to let you trick them. Thus all people with any USA connection however slight, are toxic Americans — persona non grata for banks.
American Residents? They may consider themselves prisoners, totally under the control of their guards. Any “contraband” i.e. money or other assets held by them anywhere in the world can be arbitrarily confiscated. How? The asset owner can be jailed for contempt until he turns over domestic or foreign assets. Low profile can minimize risks, but not eliminate them. Non-USA-residents are infinitely safer.
Although the USA illegally has sent kidnappers abroad to nab drug dealers, murderers and serious criminals, to my knowledge they have never done this in any lesser cases such as suspected tax evasion, traffic fines, or child support violations.
Alternative that works for the moment:
Someone else (your trusted straw man) opens an account in their name, gets online banking or brokerage; then the beneficial (real) owner changes all the passwords, etc. And the straw man fades away. He may be needed in the future to produce current identification documents when those used to open the account have expired. The charges for being a straw person on a large account are minimal.
This requires trust in the straw person who must be someone relatively wealthy preferably resident in a tax haven, usually a lawyer, who can justify having these assets & who has to be very careful to stay out of trouble himself. He or she should not have more than a few accounts in any particular jurisdiction or any particular bank. He must be very careful to do only good clean business with individuals who themselves are not into any activities that will bring heat upon them or the straw man.
Needless to say, USA authorities would look with disdain upon any such arrangements. But for persons who are no longer USA residents or taxpayers, straw man arrangements would be (in our view) entirely legal, and foolproof. The only risk is
1) If their someone who knows about the arrangements “talks”.
2) If the person involved is apprehended in the USA.
Related Topic — Judgment Proofing
Vacant land is easier to protect because it can be held secretly in the name of a corporation or land trust. BUT homes or condo apartments are different. If you are living in a place, and seem to own it, a local judge, if convinced by a judgment creditor that you have a financial interest in the property, can issue a “Master’s Deed” to that property & convey it free & clear of any debts he finds to be “questionable” or “phony” – Maybe it would work if the fake creditor or fake owner, person, straw man or trustee holding title (like a St Kitts & Nevis LLC; i.e. the beneficial owner or the foreign lender) comes in personally to testify & show documentary evidence to prove that the person who lives there is really not the owner & any debts are real.. not just “structures.” Unfortunately few if any foreigners are willing to come into a USA court and risk jail for perjury.
A judge has absolute jurisdiction over PEOPLE or PROPERTY physically within his jurisdiction. He can transfer assets and he can take away the freedom of people he suspects are not complying with his orders– or telling the truth. A judge can order the incarceration (for contempt) of any individual who does not comply with his orders –even in a civil case. Court orders to an American in local custody– to turn over American or foreign property– is common.
That said, complications resulting from title owned offshore and recorded mortgage loans will scare off most creditors who are not determined and well bankrolled. There will be extensive lawyering costs & they will need to hire a private investigator. It will probably take years & a trial to get to that point– But in the end, anything that is just a “structure” to make someone judgment proof is suspect. It probably won’t stand up to a dedicated, very tough collection guy with a good claim & the truth on his side. On the other hand, UNKNOWN ASSETS are just that. Unknown & unrecoverable by creditors.
There are lots of other things to consider, but taking out a real loan from a real lender on USA property and then putting that money beyond the reach of creditors, is the most foolproof way of reducing equity & becoming relatively judgment proof. A “real” sale and maybe a leaseback is okay too if the debtor wants to stay there as a tenant. That is also another possibility.
Sometimes loading up a property with 1st, 2nd & 3rd secured mortgage loans, and then disappearing is a way to “sell” property. It has some risks, especially if the debtor has other known assets (to the creditor) and/or is personally in the country. We can discuss those possibilities and how to minimize or eliminate risk. But leaving the home country jurisdiction and taking all your chips with you is the best move for a debtor with assets abroad.
I have discussed this with a few colleagues and so far, that is the consensus.
Known cryptocurrency holdings are irrelevant — really not going to be of much help in keeping a home or condo apartment if a judgment creditor hires a good investigator who sniffs around and says X looks like the owner, he was the owner, he still lives there and unless he testifies under oath and shows a bonafide sale (or loan) we ask the Judge to find that he is still the owner. Property can be taken by a determined & well-represented judgment creditor. The judge can evict the debtor & issue a “Master’s Deed”.
Note: In some places, primary residence homes up to a certain relatively low value, are exempt from seizure by creditors — aside from mortgageholders.
If a judgment debtor is still in the jurisdiction, he can be forcibly compelled to testify under oath, as to what he did with all assets he ever owned. If he fails to give satisfactory answers, he can & will be tossed in jail for civil contempt. He gets out only if he complies with the court’s orders.
This is the worst case scenario.
One can successfully pretend to be a pauper. This avoids most creditor claims and lawsuits. But it won’t work if he lives rent free in an expensive condo and spends like a millionaire.
J.Braswell, Puerto Rico 2021