Offshore account? Think again.

Yuriy A's picture
Rank: Orangutan | 287

The primary response to the financial crisis by the U.S. government was to put in place many new regulations that covered everything from setting up a business to centrally clearing all derivative trading.

I was recently listening to a video blog posted by Peter Schiff, he was mentioning that he would like to expand his Europacific Capital business, but said that it is becoming increasingly hard to do so state side because of the massive compliance measures and regulations set forth by U.S. government entities that make it too expensive for Europacific and other businesses to create jobs here. The alternative is to set up the new business overseas which would take away any new tax revenue in the U.S. and more importantly any new jobs that the U.S. desperately needs.

Bloomberg wrote an article today that spoke about the difficulties offshore managers face when dealing with the new American wealth management client. A law passed in 2010 that will take effect on Jan 1st 2013 will require all offshore banks handling American PWM clients to disclose any income or accrued interest to the IRS. For these banks the trouble and extra work is not worth the potential gains that can come with managing Americans' money. The banks would have to set up entire new teams to deal with the account opening and trading compliance that would come with catering to American clients.

These examples along with the Volker Rule, Dodd-Frank, and other regulations are counterintuitive to the economic growth that the country needs by preventing new businesses from growing or even starting up. It is unfortunate that the regulations intended to protect the consumers are instead hurting the growth of the economy.

Comments (8)

May 9, 2012

The CFPB is another great example of this.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

May 9, 2012
Yuriy A:

A law passed in 2010 that will take effect on Jan 1st 2013 will require all offshore banks handling American PWM clients to disclose any income or accrued interest to the IRS.

What about those in Switzerland? Swiss banking secrecy is taken very seriously, but I wonder to what extent...

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

May 9, 2012
SonnyZH:
Yuriy A:

A law passed in 2010 that will take effect on Jan 1st 2013 will require all offshore banks handling American PWM clients to disclose any income or accrued interest to the IRS.

What about those in Switzerland? Swiss banking secrecy is taken very seriously, but I wonder to what extent...

I thought the War on Terror changed all this, don't they have to open their books now?

May 9, 2012

So you're saying it's impossible for an American to open an offshore account today?

May 9, 2012
IVY MAN:

So you're saying it's impossible for an American to open an offshore account today?

no, not saying it to an absolute extreme. Of course there are offshore banks that will have no issues taking a U.S. account. But as the people interviewed in the BBG article say, it is becoming increasingly harder for the offshore banks to comply with; and as compliance costs go up the willingness to take in these accounts goes down.

I am also certain that offshore firms will also have a premium service to take advantage of for American clients when more of the vanilla banks turn them away.

May 10, 2012
Yuriy A:
IVY MAN:

So you're saying it's impossible for an American to open an offshore account today?

no, not saying it to an absolute extreme. Of course there are offshore banks that will have no issues taking a U.S. account. But as the people interviewed in the BBG article say, it is becoming increasingly harder for the offshore banks to comply with; and as compliance costs go up the willingness to take in these accounts goes down.

I am also certain that offshore firms will also have a premium service to take advantage of for American clients when more of the vanilla banks turn them away.

On a related note, Dodd Frank also requires that all hedge funds that take in U.S investors to register with the SEC. I have been told that the onerous registration, compliance and reporting requirements are forcing a number of offshore funds to stop taking in U.S investors or cease fund raising efforts in the U.S. Does anyone here see the same development?

May 9, 2012

Peter's new office is in antigua and only serve non-US citizens.

May 10, 2012
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