by Nick Giambruno
13 April 2016
Nick Giambruno is
Doug Casey’s globetrotting companion and is the Senior
Editor of Casey Research’s International Man.
He writes about
economics, offshore banking, second passports, value
investing in crisis markets, geopolitics, and surviving
a financial collapse, among other topics.
He is a CFA
In short, Nick’s
work helps people make the most of their personal
freedom and financial opportunity around the world
Financial privacy is dead.
You should assume that, sooner or later, all the details of your
financial life will land in a government computer - if they haven't
already - and plan accordingly.
A record of pretty much every penny you earn, save and spend is
permanently stored somewhere. And the government could retrieve that
information if it wanted to.
It's not a comfortable or happy thought. Knowing you're financially
naked and exposed to an insolvent government hungry for revenue
might make you feel like you just ate rat poison for lunch.
But don't try to illegally hide your income or skirt reporting
requirements. It's a fool's errand. The draconian penalties make the
cost/benefit analysis easy…don't even think about it.
The U.S. can access information about any account virtually
The Foreign Account Tax Compliance Act (FATCA)
is a wildly unpopular U.S. law that forces every financial
institution in the world to report information about its American
clients to the U.S. government.
The law imposes huge costs on foreign
financial institutions and, in effect, forces every foreign bank to
become an unpaid agent of the IRS.
The U.S. can enforce FATCA in foreign countries because it controls
the world's reserve currency and has threatened to effectively cut
off access to the U.S. financial system for countries that don't
This is why a country like Mexico could never impose its own version
of FATCA on the world. Few countries would care about losing access
to the peso-based Mexican financial system.
Unfortunately, U.S. success in enforcing FATCA has inspired other
bankrupt countries to band together and push for a sort of FATCA on
This is where the Organization for
Economic Co-operation and Development's (OECD's)
plans for a "global standard" of automatic information exchange -
informally known as
GATCA - comes in.
Rather than having each country mimic FATCA and tediously create a
web of information-exchange agreements with every other country, the
leaders of this supranational institution are pushing to make the
exchange of financial information automatic among all countries.
It's safe to assume the OECD will successfully blanket most of the
world with its new global standard. In the near future, it's very
likely that no citizen from any country will be able to "hide"
financial assets anywhere.
Every financial institution in the world
will automatically send information on foreign account holders to
FATCA and GATCA mean there's no escape (for north
american citizens...). Unless you
plan to bank in Cuba, Iran or North Korea, count on your home
government automatically finding out about your foreign accounts.
This doesn't mean
an offshore bank account is pointless.
Offshore banks are often much safer and better capitalized than most
banks in the U.S. Additionally, your home government still can't
seize a foreign bank account at the drop of a hat.
Also, offshore banks usually allow you to diversify out of the U.S.
dollar and access markets in countries you otherwise might not be
So, despite the lack of financial
offshore banking still has many
When All Else
Even if you manage to somehow escape the global FATCA/GATCA dragnet,
your private financial information is still very vulnerable.
If it comes down to it, governments can and will use alternative
means to get the information they want. They might engage in
economic espionage, bribe bank employees or pay freelance hackers to
steal ostensibly secret financial information.
Take Sina Lapour, for example. Lapour was an assistant to a
private banker at Credit Suisse.
In 2007, he stole the private
information of about 2,500 clients. Then he sold it to a middleman,
who sold it to the German tax authorities, who presumably shared it
with other governments.
This was not an isolated incident.
In 2008, a thief stole data from LGT
Group in Liechtenstein and sold it to tax authorities in various
Before he was an NSA contractor, Snowden
worked for the CIA. Snowden was posted in Switzerland. He says his
job there was to put Swiss bankers in compromising positions so the
CIA could collect secret financial information.
Snowden encouraged a Swiss banker to
drive drunk, hoping he would be arrested. Then the CIA would offer
to help get the banker out of jail and legal trouble… for a price:
divulging secret financial information.
And then there's the hacking and leaks of a number of offshore
centers in a sort of WikiLeaks-style operation, which revealed
confidential information on over 122,000 trusts, companies and other
The 260 gigabytes of formerly private
information was used to publicly identify more than 130,000 people
in 170 countries.
the Panama Papers incident, in
which a popular offshore service provider was hacked and
confidential information was compromised.
A Bright Spot
When you consider the combined effects of FATCA, GATCA and
governments engaging in bribery, blackmail and hacking, it would be
foolish to assume your finances were private.
This is why, when I hear people argue about 'which country or
which convoluted offshore structure is best for keeping secrets'...
from Uncle Sam, it reminds me of two bald men fighting over a comb.
Privacy for financial assets like bank and brokerage accounts is
dead. However, nonfinancial assets like foreign real estate are a
completely different story.
Owning foreign real estate is one of the very few ways Americans can
legally keep some of their wealth abroad while still keeping their
Compared to fiat currencies,
foreign real estate is often an excellent long-term store of
Foreign real estate is a hard
asset outside the immediate reach of your home government.
Foreign real estate can't be
easily confiscated, nationalized, frozen or devalued with a
couple of taps on the keyboard.
But foreign real estate also has a rare
and notable feature that foreign financial assets - like offshore
bank and brokerage accounts - do not have, which is... privacy.
If the foreign real estate is held directly in your name (i.e., not
in a trust, LLC, real estate fund, partnership, etc.), you don't
have to report it to the IRS.
This means it's possible to use foreign real estate to diversify
some of your savings abroad and keep your privacy.
In that sense, foreign real estate has become the new Swiss bank