The best countries to stash your cash.
While there is no perfect place, the better countries are easy
to choose: they must have banking secracy, no withholding
taxes for foreigners, or if there is a withholding tax, it must be
easily avoided as it is in Austria or Switzerland by means of a
"fiduciary account". A fiduciary account is simply an account
established for you at another bank by your own bank, and
kept in the bank's name. Also important , is political stability,
an unblemished history of honest dealings with foreign
investors, and a long tradition of no government confiscation
of private assets. There must be no information exchange
treaties or other arrangements with your home country and
none on the horizon. Obviously the bankers of your banking
country should be fluent in your language. Fortunately,
English is the universal language of international banking,
business and the airways as well. So unless you bank strictly
locally, any major international or offshore bank will have
officers that you can communicate with in English.
Outside of Europe, it is probably best to deal only with a
branch of a major bank whose home base is not your home
country. Your offshore bank preferably has no branches in
your home country that could be pressured to force them to
reveal your account details or worse yet, freeze your account.
Thus if an Englishman was going to have an account in the
Caribbean, first choice might well be a Swiss, Danish or Dutch
bank - never a British nor (for safety's sake) a one horse
local outfit. The account for a Brit for instance should be in
the Antilles (Dutch) not Cayman (British) If I were an American
I'd stay far away from any de facto American colony like
Puerto Rico or Canada, or any American bank like Citibank,
Bank of America etc. Come to think of it, even if I were not an
American, I'd stay far away from American Banks no matter
where located. They are all quite shaky. The Federal Deposit
Insurance Corporation is insolvent and American Banks (and
stockbrokers) are generally subject to the whims of the
current political administration at home. The largest banks in
the country, Continental Illinois and Bank of America, went
through the equivalent of insolvency in recent years. The
same instability would be true of all but the biggest Japanese
banks.
Never deposit two cents in a third world bank like Banamex
(Mexico), nor any Arab bank; and remember BCCI
(Pakistan)? The Muslim idea of banking is so foreign to the
English speaker that there is no common ground. Receiving
interest from a bank (or paying interest under some
interpretation of Islamic Law) is an offense that gets your
hands amputated or in some countries you might be shot. I
am not joking. This is the law in Iran. I would not deposit my
money in any offshore branch of a bank with such rules in the
home country. As to general morality and honesty, some
Mexican bankers I have known make Jesse James and John
Dillinger look like honest men in comparison to them. And
while I'm throwing stones, the Mexican Government has a
long tradition of luring in foreign investment and then
confiscating it. That leaves the major European banks as just
about the only serious choices for stashing serious money.
The best countries are Britain's offshore islands, plus
Luxembourg, Switzerland and Austria. Austrian banks and
Savings Institutions will even open a totally anonymous
passbook account where the bank itself doesn't know the
customer's name and address.(See our guide "Establish a
secret bank account before it's too late").
Banks of ex-communist countries are now courting this
offshore private investor business, and there are plenty of
banks pumping for "High Net Worth Private Clients" in places
like Hong Kong, Panama, Costa Rica, Malta, Uruguay and
Gibralter. The vast majority of people and politicians of most
of these countries are leftist, as in Mexico and most of South
America. When times get tough, the local politicians think first
of defaulting on their international obligations and second, of
confiscating the local assets of foreign depositors and
investors.
Where does one get the best interest rates and
management?: In recent years, interest rates in most
countries have gyrated from double or even triple digits to
low single digits. The "true rate of return" is generally
considered to be the interest paid less the (anticipated) local
inflation rate, less withholding taxes. Thus when the rate of
interest, for instance, in the USA is below 12%, with 6%
inflation and a 6% effective tax the American investor gets a
negitive return.
In 1992-93, some first class German banks paid 10% per
annum interest with no withholding tax and historically low
inflation. This is an all time high for Germany where the
inflation rate since 1945 has been under 3% per annum in
most years, and there is no withholding tax on interest paid to
foreigners. In the US, for instance, during the same period,
where infltion has averaged around 10%, interest rates hit
below 4%, an all time low. Thus the important thing to
remember is to read the financial papers, keep up with news.
Place your funds in bonds or for nice long periods like a year
or more when you are convinced that interest rates are
peaking out. If you buy medium to long term bonds, when
interest rates go down again, you can sell the bonds at a big
capital gain. Some investment letters have a good record at
recommending when to get in and out of bonds.
One reason that people are afraid of making a deposit or
buying a bond in a foreign currency is the "currency risk". As
long as the interest rate is good, you do not have to
reconvert on the sale of the bonds to the original currency
with which you bought the bonds until that currency shows a
profit advantage to do so.
The dollar sterling is recommended by many in the world,
and it is possible to have your deposit account held in
sterling even with foreign banks - in fact you often have a
choice of different currencies in which to hold your account.
To make exceptional yearly interest rates on your account
you first need a reasonable interest rate from the bank; have
no withholding tax deducted, and thirdly play the exchange
rates to add to your profit. We know of no bank anywhere
that offers a 20% interest rate, so to aim for an overall
interest rate of 20% plus requires the careful investment in
good bank rate, no tax on interest, and play to your
advantage the exchange rate differences when converting
from one currency to another.
