OFFSHORE BANKING A BLACK PAPER A REPORT FROM SOVEREIGNMAN.COM

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2 A REPORT FROM WHY SHOULD YOU OPEN AN BANK ACCOUNT? Here s the simple answer: If you bank in your home country, whatever that country may be, there are legions of bureaucrats who have the authority to freeze your accounts, and even dip into your funds and help themselves to a little taste without your approval. Governments at all levels, especially in North America and Europe, can freeze and confiscate your assets without even having to prove their case. They might just act on a hunch. In Greece, for A example, REPORT the government FROM there is so bankrupt that they began arbitrarily seizing money from people who were suspected of tax evasion. No due process. No trial. Straight to confiscation. From the Roman Empire to the Ottoman Empire, these tactics are nothing new. Bankrupt governments throughout history have always resorted to stealing from their own people. At least back then, though, they had to send tax collectors and armed thugs to steal your money. Today, any bureaucrat can take your money with a few mouse clicks. How would you feel like waking up one day with your credit cards not working and finding out all your accounts are frozen indefinitely? It can take months, or even years, of lengthy court hearings before you get your money back. How are you going to afford a lawyer if your bank accounts are frozen? A foreign bank account is an important diversification flag to plant abroad; for most people, simply holding a personal offshore account provides more security than 99.99% of the population can claim to have. Why? Because you re placing your hard-earned savings in a jurisdiction that is not controlled by your home government s bureaucrats. Think about it; if you live in Canada, England, or the United States, and you bank in Singapore, your government can t just freeze your account with a mouse click like they can do with your home banks. Most people think this is something that only the rich are capable of doing. But this is totally wrong. Its easy to do, and in some cases it s even possible to open a foreign bank account without leaving your living room. All you need to do is complete the proper forms and send them to the bank. Many banks have 2

3 A REPORT FROM low or even NO MINIMUM DEPOSIT requirements and allow you to hold your funds in multiple currencies so you can diversify your currency risk. It s really not much different than opening an account at home but provides a layer of protection between your hard-earned money and your home government. THE AGE OF KYC To be clear, the idea about shipping you money offshore isn t to hide it. That s not the goal, never was. Years ago, there were a number of tax havens whose sole existence were based on hiding people s money. Panama was a great example... you could cram so many bearer share companies on A top REPORT of a bank account FROM that nobody knew who the ultimate beneficiary was. These places don t exist anymore. There are no more tax havens in the world, at least in pure form. Now every place follows internationally recognized Know Your Customer (KYC) rules, courtesy of post-9/11 legislation. After all, if a bank doesn t have a copy of your passport, you could be a terrorist. I jest, of course. Typical KYC rules are up to individual banks and jurisdictions, but they typically include things like a copy of your passport, a proof of address like a utility bill, and some other such occasional nonsense like letters of reference. Needless to say, this has nothing to do with stopping terrorism. I honestly hate even using that word, but I know it s generally accepted so I ll keep on with it for now. Anyhow, it s not like a terrorist wouldn t be able to produce a utility bill or passport... or have someone else open up an account on his behalf. No, it has nothing to do with terrorism. Terrorism, and the ridiculously named war on terrorism is just another way they dress up the tactics to degrade our freedoms. Terrorism is what allows them to put their hands down our pants. This is the mentality that is slowly pervading the western world, people allowing the governments to get away with anything they want as long as there seems to be a good reason. DIVERSIFYING YOUR SOVEREIGN RISK Here s the bottom line - we live in a world where $100 billion spending package is no big deal. We live in a world where trillion dollar deficits are the norm. We live in a world where sovereign nations going bankrupt isn t even front page news anymore. And we live in a world where governments have the moral authority to do whatever they want because they can convince their constituents of A anything. BLACK PAPER 3

4 A REPORT FROM For this reason, I have long suggested moving some money offshore. By parking some cash overseas, you are unplugging from your home banking system that is entirely controlled by a bankrupt government. Economic and social deterioration is a long, gradual process... but there are a few things that can happen overnight. The one that worries me most is capital controls being passed. I suspect this would happen at a time when the market has rapidly diminishing confidence in the dollar. Some event - perhaps a federal or state default, or some other such financial catastrophe - would be the catalyst. With so many people abandoning the dollar, the government could emplace capital controls, effectively preventing the free flow of capital in and out of the A country. REPORT FROM Those with capital trapped within the country will have a difficult, if not impossible, time getting it out... and once it s trapped, it s doomed to be inflated away by central banks and politicians. Opening a foreign bank account is one of the best ways to mitigate this risk and stay ahead of the problem. If you have a foreign bank account, your savings cannot be commandeered or forcibly denominated in a rapidly depreciating currency. Moreover, foreign banks may be much safer than what you re accustomed to at home. Banks in places like the UK and United States are nothing more than wards of the state... the walking dead, relying on taxpayers and central bank funny money for their profits. Mainstream media sources talk about the financial crisis as if it s history... but does anyone really know what s on Citi s balance sheet? Can years of bad decisions and hundreds of billions of dollars in terrible loans be washed away so quickly? No chance. Many foreign banks have rock solid balance sheets and are in strong jurisdictions with transparent regulations and a record of safety. There are many great banks in many great jurisdictions, and what follows is a clear-cut guide of how to open an offshore bank account and who to contact across various jurisdictions. 4

5 A REPORT FROM AN EASY SHORTCUT: HSBC Most of the time, a foreign bank requires you to come to their office in person to open an account, as well as provide a seemingly endless array of notarized documents, stamped papers, and letters of reference. It is possible though to open a foreign bank account without leaving the country and manage your foreign account online from all over the world. Offshore online banking is a great way to manage your finances, no matter where you live in the world. There are some international banks that will be willing to open an account on your behalf in their foreign branch, and take care of all documentation requirements without you having to leave the country. HSBC Hong Kong is a great example, particularly because it has a presence in more than 80 countries, from Mexico to Sri Lanka to Singapore. You d be hard pressed to find a civilized country that does not have a branch. Among HSBC s many branches are offices in Los Angeles, Miami, Vancouver, etc. So first you call HSBC in Hong Kong, explain that you are a foreigner, want to open a bank account, and would like to certify all the paperwork through your local HSBC branch. There are presently three levels of personal accounts within HSBC, and there are no account opening or maintenance fees for any of them. The SmartVantage account has a minimum of roughly $1,200 (10,000 Hong Kong Dollars), the Advance account has a minimum of roughly $25,000 (200,000 HKD), and the Premier account has a minimum of roughly $125,000 (1 million HKD). The transactional pricing structure for each account type is essentially the same; sending a wire across the world, for example, will only set you back about $14. Each account type also has access to HSBC s gold deposit services, an unallocated paper gold solution without physical possession. The key difference among the accounts is increasing levels of prestige and service. Premier members are serviced at any HSBC Premier center around the world and have access to a global concierge. SmartVantage members wait in line longer. For the casual bank customer, the difference may be trivial. 5

6 A REPORT FROM HSBC HONG KONG APPLICATIONS [Check HSBC.com to find the nearest branch to your location.] At the branch in your home country, the bankers there will certify the paperwork on your behalf, after which you can send the packet to Hong Kong where your account will be opened. TIP The minimum deposit for an HSBC Advance account is roughly USD $25,000, and you can download the forms at: For a higher tier Premier account, the minimum is roughly USD $130,000, and you can download the forms at: When you have completed the documentation requirements, you should get in touch with the nearest HSBC branch in your home country and make sure they have international banking services available. The bankers in your home country will probably try to talk you out of opening a foreign account. They might even tell you that they can t do what you re asking. Don t believe them; it s just a sales tactic. They want your business, and they definitely don t want to see you sending your money away. Be persistent with them, and it WILL happen. 6

7 A REPORT FROM ANDORRA Andorra is an excellent place to bank. Compared to the nearby Spanish banks, which are so stuffed full of worthless government paper, Andorra is the financial promised land. Banking in Andorra is conservative; in fact, in Andorra s modern history there is only one instance of a banking failure, back in This was before there was even a banking regulator, so the other banks stepped in to guarantee deposits in order to preserve confidence in the system. Today, INAF (National Institute of Finance) regulates Andorra s banks, but their original conservative principles still stand. Liquidity and solvency ratios are high, and the banks earn their income by being wealth managers and charging transactional fees, not by making wild bets with other people s money and sticking taxpayers with the bill. The big draw of Andorran banking is privacy. Numbered accounts are still available, and the true identity of the account holder is known only to a handful of senior managers. This term is thrown around quite a bit in financial lore, so I ll explain fully what I mean below. There are only a handful of banks that operate in Andorra. Each of them requires that you turn up in person to Andorra to open an account, though in special situations, an alternative can be arranged. I recommend going there if you re interested in opening an account. Of all of them, I had the best experience with Banca Privada. Banca Privada only has one branch outside of Andorra; it s in Panama. There are no branches in Europe or anywhere else in North America aside from an affiliate office in Mexico City. To open an account, you simply need to make an appointment and show up with your passport. They will accept accounts from all nationalities, including the cursed US citizen. The actual process of establishing an account feels more like a conversation between friends. You have some coffee and talk about your financial goals, your background, your profession. The bankers want to understand how you have earned your money and what you do for a living so that they can responsibly say that they have met the KYC rules that the OECD has been so keen on imposing around the world. Afterwards, the paperwork is very simple and takes just a few minutes. There are two or three short forms, depending on your nationality, in which you agree to comply with the relevant laws in Andorra and your home country... and then a specimen signature. It s not like a standard commercial bank A BLACK where you have PAPER to fill out some long application. Here it s shockingly simple. 7

8 A REPORT FROM When you finish, the banker will bring you three things. First, you ll receive a small card with your account number and account alias. This is what people mean when they refer to a numbered account. The name on the account becomes some sort of alias or code... so if John Johnson opens a numbered account in Andorra, the name John Johnson would not appear anywhere. Instead, the name on the account may be something like Needless to say, the match between identity and account alias are kept secret and accessible only by the most senior bankers. Customers are A still REPORT issued an account FROM number, just like we all have bank account numbers at other banks. In Andorra, they use the IBAN system, which stands for International Bank Account Number. It s commonly used outside of North America, generally consisting of a 2-letter country code followed by 22-digits. In some countries it can be up to 30. IBANs are more secure, and in international transactions, they contain all the relevant information required to transfer funds. When you want someone to wire you money, you generally give them your IBAN and bank s SWIFT code. The banker will provide you with all of this information. The second thing that you receive is another card containing your Internet banking login ID. For security reasons, this is different than your account alias. You only use it when logging in to the website. The third thing you receive is an RSA secure token that acts as your password for the website. Through the Banca Privada website, you can send worldwide wire transfers, or transfer money within your own account to multiple currencies, including dollars, euros, Swiss francs, Australian dollars, yen, British pounds, Hong Kong dollars, and Canadian dollars. You can also sign up for a Visa credit card that is linked to your account. In the absence of a credit report for a numbered account, the bank requires a minimum of 6,000 euro (roughly $7,800) as a fixed deposit. This amount becomes your credit card limit, and you can increase this amount should you desire a higher limit. I mentioned before that the bank generates income on fees. The standard account fee is 360 euros per year. This fee applies regardless of the size of the account - there is no account minimum, or you could have tens of millions of dollars... the same fee applies, and it is the only fee that affects the entire A account BLACK regardless of PAPER what you do / do not do. 8

9 A REPORT FROM Other fees are transactional in nature, and they are all negotiable. For most people, the only other fee that generally applies is the wire transfer fee, i.e. what does it cost to send a wire internationally. You can reach the bank by ing [email protected] Aside from Banca Privada, I was favorably impressed with andbanc s strong balance sheet as well... though the English proficiency of their bankers was lacking. If you speak reasonable Spanish, you can contact Ms. Meritxell Reyes Mariscal of andbanc (meritxell.reyes@ andbanc.com ) to discuss opening an account there. IN ANDORRA - WHO IS IT RIGHT FOR? A good candidate to open an account in Andorra is someone who: 1. Can get on a plane and go to Andorra to open the account 2. Is looking to hold savings in a strong banking jurisdiction with excellent balance sheet fundamentals 3. Does not plan on doing much transactional banking from the account (i.e. frequent wires, bill payments, etc.) 4. Is comfortable with the annual fee 5. May want to take advantage of private banking investment products that the bank offers 9

10 A REPORT FROM AUSTRALIA Australia is a country with a robust banking system and strong currency that you may want to consider. On the available evidence, Australian banks today are among the best capitalized in the world; the last bank failure in which any depositor lost any money in Australia was during the Great Depression, in 1931, when depositors in the Primary Producers Bank of Australia lost a negligible amount of their deposits. Furthermore, in more than 100 years, not a single dollar of taxpayer money has been required to reimburse bank depositors in Australia. And, unlike in many countries, the Australian government s deposit guarantee (A$1 million per customer, per bank) is actually backed by something. If it were called upon, this insurance fund would actually stand a chance of paying. Australia has one of the lowest government debt-to-gdp ratios in the world. Indeed, it stands out as being exceptionally low, even when compared to other countries with strong currencies. It s lower than Norway s, lower than Switzerland s, and even lower than Singapore s. The country is richly A REPORT endowed with FROM natural resources. Its top 3 exports are iron ore, coal, and gold. Moreover, it s one of the only stable, low-inflation economies in the world where you can earn decent rates of interest on bank deposits these days. As of the present time, the Reserve Bank of Australia s (RBA) official cash rate is 3.75%, while the official inflation rate is at 1.6%. Most Aussie retail banks offer at-call savings products (demand deposits, or cash management trusts) that pay interest rates close to this amount. However, when it comes to opening accounts for non-residents, Australian banks are a mixed bag. Some will, some won t. As such, I m happy to announce that, through our contacts in Australia, we ve found a solution that should work for nearly all readers of this report. If you qualify, you can open an account with as little as A$1,000. And, you do NOT have to make a trip to Australia to do so. Our friend Greg Chalom of BBY Stockbroking in Sydney is able to work directly with several banks in Australia on your behalf to get your account open without you having to set foot on Australian soil. Greg has guided a number of non-residents through bank account opening procedures, and 10

11 A REPORT FROM his experience will make the process go much faster and more smoothly for you. In full transparency, Greg (or likely his employer) may be paid a small trailing commission on any business they introduce to local banks per standard industry arrangements. These details are disclosed in the Product Disclosure Statement. As is our standard policy, however, we at Sovereign Man neither receive nor accept any compensation from referring you to Greg, or to any bank. We are passing on this information, and Greg s contact details, purely for your benefit, not ours. If you want to reach Greg, you can do so through the contact information below: Greg Chalom, A BBY REPORT Limited FROM Phone Direct: [email protected] 11

12 A REPORT FROM AUSTRIA Traditionally, Austria has generally been one of the better places to bank in the world. Austrian banks are based on the Swiss model part bank, part broker, all wealth management center. Unlike Switzerland, though, Austrian banks tend to carry lower costs and an even lower profile. There is no Austrian bank stigma... no one will look at you leery-eyed and assume you are guilty of tax evasion if you say that you have an Austrian bank account. But let s briefly review the reasons why we bank internationally to see if Austria fits the bill. Remember, offshore banking isn t about hiding money. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is already giving governments access to their records of worldwide money transfers, making any attempt at true financial privacy within the banking system a frustrating exercise. Rather, the biggest reason that we bank internationally is for asset protection. Between out of control government agencies, lawsuits, shadow creditors, and trigger-happy judges, the threats to our savings are truly incredible. In terms of asset A protection, REPORT Austria FROM is a reasonable choice. Until 2009, Austrian banking privacy was among the strictest in the world. This has been reduced now as the Austrian government began a process to renegotiate tax treaties and information exchange agreements under OECD pressure. Customer information is still kept private, however the burden of proof to exchange information is much lower than it used to be. Asset quality is the big elephant in the room with Austrian banks. Throughout the 1990s and early 2000s, Austrian banks were expanding rapidly in the developing economies of the former communist Eastern block; this practice made a lot of sense to bankers during the boom years when Europe s emerging markets were roaring to the tune of 7% GDP growth per annum. By early 2009, Austrian banks were holding a full 20% of all outstanding loans to central, eastern, and southeastern European countries. The aggregate balances of these loans dwarf the entirety of Austria s economy. In a worst case scenario, a wave of defaults in the region could set off a chain reaction of losses to the Austrian banking system and wipe out the equity. So... does Austria have a deposit insurance agency? No. Austria has five deposit insurance agencies. Unlike the FDIC, they re actually solvent and not dependent on constant life support from the national government; the deposit guarantee limit on an individual account is 100,000 euros. 12

13 A REPORT FROM I have a long-standing relationship with a few banks in the country, one of which is Bank Austria. Bank Austria has number of advantages: 1) You can open an account through the mail. Unlike many banks in the region, you do not need to turn up in person to establish an account. And yes, they will open accounts for US citizens. 2) Bank Austria did not expand internationally as aggressively as its competitors like Erste Bank or Raiffeisen, so its asset portfolio bears substantially lower risk. On the downside, Bank Austria is owned by Italy s Unicredit... a disastrous financial institution that has become Europe s version of Bank of America. Bank Austria, however, is separately licensed to maintain A its REPORT own capital ratios FROM and reserve requirements within Austria. Profits kick up to Unicredit, but Unicredit s risks do not necessarily flow down to the shoulders of Bank Austria. As always, do your own due diligence to get comfortable with any bank s balance sheet before making a deposit, as well as the deposit guarantee limits. The staff members at Bank Austria s international division are incredibly kind and open people; they would be more than happy to discuss the bank s financial condition with you. 3) Bank Austria makes loans to its non-resident customers. You can apply for a credit card or even a mortgage... and interest rates in Austria right now are pitifully low... 3 or 4%. 4) The bank offers accounts in every major currency. Accounts of at least 350,000 euros are also eligible to be denominated in gold. 5) For non-us customers, the bank has solid wealth management and brokerage services to access worldwide markets. US citizens are not eligible for this. Bank Austria s international division can be reached at [email protected], or by phone at Their English is great, so there are no communication problems. 13

14 A REPORT FROM BELIZE As Latin American and Caribbean destinations go, Belize is a pretty reasonable place to bank; particularly if you live in North America, it may be a good situation for you, depending on certain circumstances. I consider the following to be advantageous: 1) Belize is a common law jurisdiction. This means that the courts are not an absolute circus, and that precedent generally has authority over personality. If the worst happens and you have to go to court (or if somebody sues you), what happens ultimately shouldn t be up to the whims of a judge, but determined by hundreds of preceding cases. 2) Banking in Belize is based on the British system. You might not find this such a benefit given what happened to British banks in the subprime meltdown but Belize, as a former British colony, inherited a stable, courteous, pro-business banking system that is leaps and bounds more professional than the bureaucratic institutions you ll find in much of the region. 3) The banks will pay you more. I know 4-5% isn t much to cheer about, but it s a major step up from the 0-1% interest rates up north and in Europe. 4) They speak your language. The bankers in Belize are native English speakers, and the offshore bank managers/officers often tend to be North American. the mail requesting that you close your account. 5) Belize is in compliance. The country s banking system is not the subject of an OECD witch-hunt, so you won t have to worry too much about getting a Dear John letter in 6) You don t have to go there. You can open a bank account from your living room, anywhere in the world. They don t need to see you in person in order to open up the account. You ll have to FedEx some certified or notarized copies back and forth, but there s no need to get on a plane. 7) Belize doesn t want your money. The government will not tax you on interest received in your bank account. Furthermore, there are no exchange controls in the country, and you re free to hold deposits in whichever currency you can work out between you and your banker. 14

15 A REPORT FROM As with anything, there are some disadvantages that I want to highlight: 1) There is no deposit insurance. If your account gets wiped out, it s between you and your banker to sort it out. Frankly I m comfortable with this sort of arrangement I d rather be forced to do the due diligence on my bank then wait for the government to bail me out with inflated/taxpayer dollars. 2) Sometimes size matters. Belize s banking system is small. The largest bank has far less than $1 billion in assets. By North American and European standards, this is so tiny it s practically cute. Consequently, the system simply cannot absorb large capital flows. 3) Big brother A REPORT is near. Belize FROM is definitely within the US sphere of influence. The US government routinely doles out grants and aid to Belize. Furthermore, the country lacks a diversified independent economy, and it s deep in debt. When the US says jump, Belize may not ask how high, but will certainly listen. 4) Bankers work bankers hours. Banking hours are generally much shorter in Belize. For many banks, it can take a few days just to get an response. 6) Higher fees. Because it has such a small banking system, Belize banks typically have to go through multiple corresponding banks for wires and the like. Wiring money from a Canadian bank to a Belize bank, for example, will likely go to New York first, then Panama, then to Belize. This means higher fees and longer waiting times to get your 5) There s a flip side to higher interest rates. Deposit rates are higher than what you might be accustomed to, but loan rates are higher as well. money. One bank in Belize that will open accounts through the mail for non-residents is Caye Bank. If you re interested in opening an account, you can contact JR Tash ([email protected]). I should note that Caye Bank requires no minimum deposit, making it a reasonable option to consider if you just want to get something open without moving much money. The downside is that Caye s customer service has often been lacking in the past, and many readers have experienced substantial delays in correspondence. 15

16 A REPORT FROM COOK ISLANDS The Cook Islands is one of the best asset protection jurisdictions in the world. Cook Islands law is one of the most difficult in the world for creditors to penetrate. Financial privacy is strict; there are no fishing expeditions, and local law forbids the enforcement of foreign judgments against a Cook Island entity. Capital Security Bank (CSB) is a small standard commercial bank that also provides investment accounts. They essentially hold a master broker account with a Swiss firm and create corollary sub-accounts for each investor. This is a common practice, many retail investment firms run their accounts through a single wholesale account at a larger brokerage. I ll also go out on a limb to say that their customer service is excellent - this is a tight ship run and staffed by North Americans, Europeans, and Kiwis, not a team of Pacific Islanders on maana time. As a bank, one of the unique characteristics about CSB is that they do not make loans. This gives them an effective solvency ratio of 100%. As a brokerage, CSB have no online platform...but these accounts are typically geared towards full-service investors anyhow. If you make trades in the range of at least $50,000 to $100,000, using a full-service broker pays for itself many times over: a good broker is able to gain much better entry points for securities by working directly with the market maker, and this works especially well for thinly traded stocks. Discount online brokers often make their money on the spread between what the market maker gives them and what the investors limit price is. With a good full-service broker, you can save thousands on this spread. When placing trades at CSB, you can either have their people in the Cook Islands execute the order, or you can use one of their registered investment advisors (perhaps the only regulatory requirement for North Americans). The bank has a long-standing relationship with Rochdale Offshore Investment Management in New York that can handle the trades. If you re interested in more information about CSB, you can contact John Evans, Operations Manager - [email protected], phone: (+682) 22505, fax: (+682) 22506, US free fax: (+1) , web: ( address: ANZ House, Maire Nui Drive, PO A Box BLACK 11, Rarotonga, PAPER Cook Islands. 16

17 A REPORT FROM HONG KONG Hong Kong has one of the most advanced, stable banking systems in the world, and it s backed by the full power of mainland China. In short, no Western government really has the teeth to really bully Hong Kong Monetary Authority (HKMA), the island s money and banking regulator. This is the reason why you don t see Hong Kong on any OECD black list the French and Americans simply cannot stand up to China. One of the advantages of Hong Kong is that it is one of the easiest places to bank outside of mainland China if you intend to held any of your wealth in renminbi. In fact, just about any bank that you could go to in Hong Kong allows you to open a renminbi cross border settlement account, along with a variety of other currency sub-accounts. You can even denominate an account in precious metals in a way, it s like having a GoldMoney. com account that s still plugged into the banking system. If you re looking for a bank that doesn t have any locations outside of Asia, you may consider Hang Seng Bank. Hang Seng is the second largest bank in Hong Kong by assets and deposits, and it focuses exclusively on Hong Kong and mainland China. Hang Seng will open accounts for most nationalities without hassle, including US citizens, however a personal visit to the bank is required. All you need to do is show up to any branch in Hong Kong, bring a passport and proof of address (driver s license is acceptable if it has your address on it), and you ll be out of there within 20-minutes. If going to Hong Kong is too cumbersome at the moment, then I suggest you consider HSBC. See the shortcut section of this text for more information about how to open an HSBC account remotely. As a final note on Hong Kong, if you re interested in a discount online brokerage with substantial access to Asian markets, I d recommend Boom Securities. You can go through most of the account application steps online at the company website ( You will need to send a notarized copy of your account application form and notarized passport copy. US citizens / residents cannot trade US securities, and at present they do not offer trading of Canadian stocks. Boom is a great choice if you want to trade Asian and Australian equity markets. 17

18 A REPORT FROM MONGOLIA What? Why would you even want to have a bank account in Mongolia? Well, because as a massive, resource-rich country with a tiny population, Mongolia is set to become a world class producer of copper, gold, coal, oil, rare earths, and much more. At present, there are tens of billions of dollars of development projects being invested in this country with a $6 billion GDP. Right now Mongolia is on the cusp of massive GDP growth. The definitive moment occurred in 2009 when the Mongolian government agreed to change the laws affecting mining operations and taxation, and this gave the green light to multi-national mining companies. Oyu Tolgoi, OT for short, will be one of the largest mines in the world, doubling Mongolia s existing GDP all by itself. OT and TT (Tavan Tolgoi, a nearby and equally massive coal project) are being increasingly discussed in the wider media, but not enough is said about the dozens of smaller projects in the works, which in aggregate are multiples of OT and TT. It s difficult to imagine the sheer enormity of capital expenditure taking place, and it s taking place in an economy that is minuscule in comparison. To be sure, the country s GDP is going to go vertical as more and more of its resource assets are developed and cash pours into the country. currency, the Tugrik, much higher. Mongolia is the least populous country on the planet per sq. km. The massive increase in per capita wealth that will come with the jump in GDP will combine to propel the Mongolian In 2009 the Tugrik bottomed out around 1600:1 against the dollar. It s currently trading at 1316:1. Oh, and not to mention that you can generate yields from 12% to 14% on your deposit in a Mongolian bank. First, in order to have an account in Mongolia, you have to throw out everything you know or think about modern banking. Like just about everything else in Mongolia, banking works a bit... differently. I ll explain. There are several banks in Mongolia, and I ll discuss four of them: Khan Bank, Golomt Bank, Xac Bank (pronounced Has, rhymes with loss), and Trade & Development Bank (TDB). To give you an idea of size, Khan Bank has just A shy of BLACK $1.5 billion in assets. PAPER This is considered quite large in Mongolia. By way of comparison, Bank of America has more than $2 trillion in assets, over 1,000 times the size. 18

19 A REPORT FROM Yet while Bank of America has been squandering its depositors savings on government and subprime debt, Mongolian banks are witnessing the biggest boom in finance that the world has seen for decades. Why? Because five-years ago, the average Mongolian was still living in a yurt. Today s/he probably has a job, a home, and a bank account. Moreover, 100% of GDP worth of foreign investment is flowing into the banking system year after year. Their capital base is legitimately growing. Wealth in the country is increasing. Foreign investment is constantly reinforcing their balance sheets. TDB s asset base, for example, has increased over 400% since Another major difference to bear in mind is that the business of modern banking in Mongolia is quite new. When you walk into a bank, you get the impression quite quickly that these people (particularly the front-line employees) are still new at their jobs. For example, a bank manager is constantly being presented with different problems and having to decide how to handle it on the spot. Bank tellers will scurry over and ask how to handle a situation if the customer doesn t have the right ID, or the signature doesn t look quite right. There is no giant regulation, no tome of procedures to follow. Some may describe this approach as maverick, others as more personalized. Either way, it s probably different than what you re accustomed to. Be advised. Now, what are the key benefits to banking in Mongolia? First of all, it s off the radar. There is no IRS field office in Ulan Bator, no entry on the OECD black list of evil countries. They don t know what a suspicious activity report is and think that money laundering is when you accidentally leave your wallet in your pants on Sunday afternoon. Second, it s open to everyone. These people have never head of FATCA, and they won t sneer at you because you happen to be from the United States. Or Pakistan for that matter. Third, it s... eh... loose. As I mentioned, there is no great book of procedures to follow, making the entire banking system fertile ground to strike a deal on a case-by-case basis to suit your needs. Fourth, as mentioned, the local currency (Mongolian tugrik) certainly seems poised to appreciate in the long-run. The rate of economic expansion and the amount of committed foreign investment flowing into A the BLACK country suggest PAPER that demand for the tugrik should remain high, long-term. Further, in an inflationary environment, the currency should appreciate. 19

20 A REPORT FROM Fifth, Mongolian banks maintain reasonable liquidity ratios. TDB, for example, maintains a full 30% of its customers deposits in cash. Including highly liquid securities, this ratio goes up to 42%. TDB is not alone - Golomt is holding 32% of their customers deposits in cash. By comparison, a US bank like Suntrust (according to most recent 3rd quarter 2011 filings) has $4.6 billion in cash on $123 billion in deposits... a ratio of just 3.7%. * Again, there is no such thing as risk-free. The audited cash levels at Mongolian banks are generally quite high, but you should still get comfortable with the balance sheets. Audited figures are available online for each of the major banks. Sixth, the currency diversification opportunities are interesting. In Mongolia, you can open an account A denominated REPORT in FROM currencies ranging from the US dollar and Mongolia tugrik to the Russian ruble and Chinese renminbi... not the exactly the standard menu of euro, pound, Canadian dollar. Seventh, interest rates are much higher than what you re probably used to. Deposit rates on fixed terms of 6 or 12 months can easily yield 13.5%. When I told people that I was getting 13% in my Mongolian bank account, nearly all of them were skeptical. They couldn t believe it, it must be a pyramid scheme. How can such a number be legitimate? Easy. If you think 13.5% on a 1-year deposit is high, imagine paying 24% on a car loan, or 18% on a mortgage. That s the reality in Mongolia, and it s all about supply and demand of local capital. It won t be this way forever, but we can take advantage of the opportunity now. So... how do you actually go about doing this? Golomt Bank offers a remote Certificate of Deposit (CD) program that you can open it online by going here: This is an incredibly convenient way to get some of the upside without the hassle of visa application or travel. At the time of this writing, the bank is offering a 12-month CD yielding 13.44% (in local currency) and a 6-month CD yielding an annualized 12.0% (also in local currency). If Mongolian currency isn t your thing, you can choose a US dollar 12-month CD yielding 6.6%, or a simple demand deposit A BLACK yielding 2.4%. PAPER 20

21 A REPORT FROM SAINT VINCENT AND THE GRENADINES St. Vincent and the Grenadines is a Caribbean island nation that is overlooked by many and easy to miss. However, it has something going for it when it comes to offshore banking. The jurisdiction practices bank secrecy and has a common law legal system. This means that legislation in SVG does not allow a bank to provide any kind of information to third parties and protects bank secrecy and confidentiality. SVG authorities will need an international court order formally issued by the demanding government, before evaluating any information disclosure request. The country, however, has tax treaties in place to share information and will do so readily if requested to do so. Another drawback for the country is its weak public finances. The 2011 budget deficit was 10.6% of GDP and its public debt in 2010 was a staggering 90% of GDP, both among the highest in the world. One bank that opens A accounts REPORT for all nationalities FROM in St. Vincent is Loyal Bank; you can open an account with Loyal Bank without having to travel to St. Vincent. You must provide a notarized copy of your passport and driver s license, a notarized copy (or original) of a utility bill or bank statement confirming your address, and a reference letter from your bank. You can find out more by accessing their site here: For people who are neither residents or citizens of the United States, Euro Pacific Bank Ltd ( is a full-service bank and brokerage set up by Peter Schiff that offers some interesting products. They are a boutique bank/brokerage firm that can open accounts for any clients that either do not want to deal with big banks such as HSBC or Barclays, or that do not qualify for those big banks. They offer a personalized banking service and a 24/7 phone line. They can open an account for you in USD, CAD, EUR or GBP with full online banking services. They also offer managed accounts, mutual fund accounts, gold investment account (with storage and physical delivery) and brokerage accounts (they are a Saxo Bank White Label partner). 21

22 A REPORT FROM The real kick here is that they offer the world s first true gold backed debit card. What this means is that you can purchase and store physical gold (no storage fees) through their established partnership with Perth Mint, and when you want to spend some of your gold, sell the amount you choose and load up your MasterCard. The minimum deposited amount to open an account is $500 with a $50 opening fee. If you deposit $5,000 or more, the opening fee is waived. They also offer self-directed or assisted brokerage accounts, both with a $2,500 minimum, and managed accounts with a $250,000 minimum and three available strategies: defensive, market or balanced. To open an individual account they require: 1) One certified copy of a photo ID (passport, driver s license, identity card) 2) Copy of recent utility bill 3) Bank reference letter or recent bank statements. To apply for a corporate account you also need to include: 1) A notarized copy of Certificate of Incorporation and Certificate of Good Standing 2) A notarized copy of Memorandum of Articles of Association/Incorporation 3) Corporate resolution detailing authorized person(s) Once all the required documents have been submitted and the compliance check has been met they can open an account for you within the same day. Once again, they do not accept US clients plus clients from Organization of Eastern Caribbean States members (Anguilla, Antigua & Barbuda, British Virgin Islands, Dominica, Grenada, Montserrat, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines). To get started or find out more, our best contact is Vincent Le. He can be reached at vincent. [email protected] 22