by Mark Emery
He made it look attractive but his request made absolutely no business sense whatsoever and bells were going off everywhere of course.
Naturally wary, I called my banker to send a representative to my office to review the check with me in person and discuss the matter.
There was no way I would try to deposit this without their pre-approval. I was not going to jeopardize my account for some flim-flam man and stupid greed. I certainly knew better than that.
So the girl from the bank comes over. My first cause for concern was about the bank itself and not the check. Her reaction when she saw the check in the amount of $100,000 was, ‘Ohh, that’s too much!’ I was like, ‘What?’ What do you mean ‘too much’? This is a business check for business purposes, from Chevron (supposedly).” I was thinking, ‘so you are an international bank catering to business and you’ve never seen a check for $100,000?’ I was taken aback by that, but this is the state of banking these days. People you expect to be professional and know their job, ‘aren’t and don’t!
So we get over that and discuss it further. I told her point blank, “I will not deposit this if there is any doubt or hesitation by the bank or if it comes back as a bad check to have consequences against me and my account.
She assured me that in no way would I be held responsible if the check were not good. If it didn’t clear, it would simply be returned without consequence and that would be that.
“You’re sure? You’re absolutely sure and you promise me that your supervisor agrees?” We called the supervisor and she agreed.
So I reluctantly deposited the check and they processed it. It was fraudulent and they immediately closed my account without discussion.
De-Risking (and lying) at the customers expense!
Lesson learned. Unless you’re dealing with the bank president or highly experienced and seasoned V.P. don’t ever trust anything ever told to you by ‘supervisors’ or ‘managers’ as they are generally low level clerks with absolutely no business experience or street savvy whatsoever.
I cannot tell you how many times I’ve had to instruct clients how to train their own local bank personnel on how to properly initiate a simple international bank wire transfer. Most people working in the U.S. banks below the V.P. level simply have no clue whatsoever on much of anything. You pretty much need to tell them how to do their job. Be warned.
Banks Dealing with Foreigners
As a part of this De-Risking process where most international banks were previously standing with their arms open to welcome the business from foreigners in years past, they are now changing their tune.
When I started getting to know Panama, around the turn of the century (that sounds so old, doesn’t it?) it was a banking, tax and privacy haven ‘par excellence’. Being the crossroads of the world and a global commercial and financial center due to the canal, shipping, trans-shipping, a global logistics center etc. foreigners were flying in, getting their business and banking set up and flying out again and it was almost like the banks had revolving doors which were spinning constantly. “Sign here, give us a copy of your passport make a deposit and get out of here, next!” Those were the days.
I remember when there were upwards of 180 international banks registered in Panama. Banks like UBS, Duetcshe Bank, Citibank and all the big names with plenty of smaller banks making a run for the money as well. It was a banking and financial haven. In contrast there might be only 45 today with banking mergers, acquisitions and market shakeout.
Beyond Panama I’ve opened business accounts in Hong Kong, Sweden, St. Kitts, British Virgin Islands, Belize, Costa Rica, The Republic of Georgia, Chile and various other jurisdictions. Most of those I didn’t even step foot in the country. It was all done online and documents sent by courier. Typically, you set up a company in that country and through your registered agent for the company you establish a local registered address and then through whatever your official capacity might be you set up the company account and start doing business.
The Ultimate PT Bank Account Opening
I remember attending a financial conference in Chile in 2012. I was an American passport holder, a Panama resident, visiting Chile as a tourist and I was able to sit with a representative of a bank in the Republic of Georgia where I opened an account for my business in Hong Kong and it was as though I were ordering a new phone service. Fill this out, sign here, send a couple things next week, and you’ll have your account! Cool! And this was not so long ago.
There are still places you can do it this way, but the more prominent jurisdictions are shunning that old type of business and favoring local businesses run by local residents and in any event, a personal visit is required.
I had one favorite bank in Panama and had a great relationship there for several years. I knew the bank manager personally and we met frequently so we knew each other well. One day the bank just decided they didn’t want clients with American passports anymore and they shut me down without so much as a ‘Thank You’. This was around the time that FATCA was approved. I couldn’t believe it.
So now that you are thoroughly convinced that offshore banking may not be for you, let’s shift gears and discuss some solutions and ways to ‘work around’ some of these issues.
Proxies and Nominees
When searching for a legal service provider to help you set up your corporate, banking and other legal affairs be sure to ask them about ‘Nominee Directors’ and if they provide that service. Typically nominee directors are used to seed the corporate board of directors and their names would appear (not yours) on the formation documents and hence the public registry.
It’s not very common that a nominee director would be used to set up the bank account but it is a possibility to discuss. First of all they don’t know you or how you’ll handle your business and they don’t want any liability for what idiot clients might do since banking and finance is a sensitive issue. Secondly, you don’t know them and they are typically mid to lower level employees of the legal firm and they may not have the proper professional profile to best represent your business or handle your banking and if their employment terminates with the firm, you’d need to pay legal fees to appoint a new director and update the registry. But still, it might be something to discuss and explore.
I have known cases where the client has a good and long standing relationship with an attorney or other trusted professional and that person is appointed perhaps with a limited power of attorney to set up and/or manage the banking function which keeps the client ‘off the books’ per se.
Most all of the normal banking functions can be done by the person with the internet access codes and if that person is you or the designated ‘person in charge’, then you don’t have much to worry about with the nominees since they don’t have that access. They are there in name only in the formation documents and for the public registry and little more.
Checks and Balances for the Nominee Directors
One way to protect against possible malfeasance by nominees is to have them tender signed but undated resignation letters. With these in hand, any unsavory act which might occur can be rendered as being ‘without authority’ and thus criminal by you dating the resignation letter appropriately and putting them on notice. This could get someone into some pretty hot water under the right circumstances and is a good insurance policy although you’d likely never need it.
With many years of experience and having dealt with many firms in various countries, I’ve never heard of this ever being necessary. It’s more of a psychological crutch than a necessity which is ever used. But, just as you hopefully have never used the guardrails on a curvy mountain road, they still serve an important role.
Power of Attorney
It’s typical that when using nominees who are locals in the jurisdiction of registry that they serve their role for privacy purposes only and generally have no other role or activity in the c
ompany unless you’ve appointed them to have a role.
They can sign a corporate resolution from time to time and this is coordinated by your contact in the law firm anyway so they generally don’t know anything about the company nor are involved in any way. That’s your job!
The directors would typically pass a resolution and then issue a General Power of Attorney giving you full authority for anywhere from 1 to 3 years to do any act on their behalf to provide company management. You then become the ‘attorney in fact’ and can run the company. The POA is a private document in most cases although it can be put in the public registry if needed for business purposes.
It would then be entirely appropriate for you to sign your name with the title, ‘Your Name - attorney’. Most people don’t know the difference between ‘attorney-at-law’ and ‘attorney-in-fact’ and by merely seeing that you are listed as the ‘attorney’ for the company they rest on their own limited knowledge and make their own assumptions and presumptions. Your statement was correct. Run with it! You can usually get a wider berth operating that way, if you know what I mean.
Share Certificates
The company formation process requires the issuance of the share certificates to show beneficial ownership and this is clearly noted in the formation documents. Transparency is now a key word in everything including company ownership. Gone are the days when company ownership could be concealed with ‘Bearer Shares’ which belong to whoever holds the certificate that moment and there is no ‘name’ of record as the ‘owner’. I remember those days and they were great.
However the OECD has made sufficient threats and done enough brow beating on the countries previously known as ‘tax havens’ so that having a company with ‘Bearer Shares’ is now considered taboo and is no longer done for the most part. Where it is still allowed there are restrictions and you can’t get a bank account without putting the bearer shares in the custody or on deposit with either the bank or the attorney and have the owner of record on file.
One way to thumb your nose at the OECD is to use nominees on the board and have the share certificates issued to one or more of the board of director nominees. He/they then would simply endorse the back of the share certificates gifting them to ‘_____’ and the registered share certificate then becomes a ‘bearer share’ by virtue of a blank endorsement. It’s just like endorsing a check made out to you, over to a third party.
In this case the share was not ‘issued’ as a bearer share so it’s fully compliant, but circumstances surrounding the ‘transfer’ have subsequently converted it privately and legally. This only gets noted on the corporate books when you want it to be. In a closely held company they could be held in this state indefinitely. Just be careful to keep them safe.
Professional Trustees
This is one of the better options if you’re seeking a local contact person with an address and with local personal and professional history to initiate and/or manage corporate finances and banking. Being registered and/or regulated and certainly licensed puts them at a high level of risk if they should do anything contrary to their mandate and/or the interests of the company and/or you.
The Ultimate Beneficial Owner
In view of today’s requirements for ‘transparency’ one can no longer hide behind a company or any type of fictional legal entity. At some point the ‘individual’ behind the business must be identified and do KYC when dealing with banks or financial institutions.
For example in Panama, when dealing with a law firm to set up a Foundation of Private Interest, or an S.A. or any type of entity, law now requires that a form be filled out to properly identify the U.B.O. (ultimate beneficial owner) Thankfully, this does not go on the public record and can remain private from the public but the law firm must keep it on file privately and if there’s ever an official investigation that information must be made available to appropriate authorities when requested.
Fair enough. We can manage that. It’s a legal requirement which most privacy jurisdictions had no interest in to begin with but they implemented it to satisfy the OECD and stay off the ‘grey lists’. It really has little practical meaning so long as you never invite a full legal investigation due to some nefarious activities and if your business activity and banking are set up in other jurisdictions there is very little any local authorities would be able to do in any event. You don’t live in the same jurisdiction as the company, the banking is in a 3rd jurisdiction and the clients and business activity come from the 4th 5th and 6th jurisdictions. So for practical matters, it’s a moot point.
So now you see how the five flag strategy is working for you in practical terms.
Setting Up a Global Network
Let’s just say you have a company set up in Chile. Most of your clients and business comes from the USA. But you want to trade cryptocurrencies on a European platform which only accepts Euro and not USD.
You might be wise to have an LLC and bank account in the USA to receive local funds from customers there.
Your main holding account is in Chile so perhaps once or twice a month you sweep the USA LLC account and send those funds to Chile.
A portion of those funds you want to go to the trading account in Europe. Most Chile banks allow you to do business in Euro, USD or the Chilean peso. So your USD from the USA goes to Chile where it can be converted to Euro and sent to your European trading account.
Problem, many banks now are looking for invoices to document the purpose and legitimacy of the transfer and this gets to be a royal pain when it’s your own money going from one corporate account to another.
Problem solved: One thought is to have all of these companies with the same or very similar name. When you transfer from one entity to another with the same or similar name, you can merely chalk it up as an ‘internal corporate transfer’, which it is and nobody bats an eye.
For example: The USA LLC does sales and sends funds to the parent or ‘holding company’ in Chile. The holding company has a subsidiary in Europe or the U.K. which is set up for ‘asset management’ and it does the trading. All are interconnected and serve a common business purpose while performing separate roles. Different branches to the same tree, if you will.
The issue you’ll have to solve is the KYC requirements for each. Many financial institutions want to see that the principal can offer proof of residence, proper ID etc. etc. Ideally, there would be one person in each local jurisdiction whom you could call on for this role. Most institutions do not require the UBO to be a local resident so search this out when selecting your service providers but keep this in mind in your planning.
But with that being a common issue, we’ll have a solution for that in the next chapter.
Just the Beginning
These are just a few ideas and some basic points to get you thinking. The list of possibilities and strategies is endless and limited only by your imagination. The beautiful thing about living as a PT in the international arena is that whatever obstacle you might be dealing with as a result of any BS anti-privacy legislation and the intended restrictions on your freedom and rights, there is always a way to defeat it and STAY FREE!
Remember….the politicians who pass these laws to control ‘you’ always leave an ‘open back door’ for themselves! Regulations are only for the idiots who can’t think. Never forget that.
We have more to come. Keep reading!
The question isn’t ‘who is going to let me’; it is ‘who is going to stop me?’
- Ayn Rand
9
The mystical magical suit Which is ‘preferably teflon’
A recurring theme which I continually hit on in many of my teachings is that we must ‘know who we are’. As simplistic and parochial as that may sound on the surface, it is actually a profound study which provides the fundamental basis from which all other thoughts, concepts, analyses and acts must emerge. Get this wrong, and eve
rything else you do will be wrong or at least ‘askew’ when compared to your full potential.
This is a deep subject and in no way will I be able to properly address it here but let’s at least touch on the surface and get you started in thinking about it.
Being ‘dressed in a teflon suit’ is a metaphor for the idea that ‘nothing sticks to you’. To achieve this status you must understand the operation of law.
We’ve already discussed practical examples of how I’ve avoided;
Traffic tickets - because I had no contract as a ‘resident’ or ‘citizen’.
Income taxes - because I have no income and am not a ‘taxpayer’ and thus not required to file.
This concept operates on multiple levels.
One level is such that we can ask ‘who am I as it relates to the social compact and my legal status with ‘a’,’b’,’c’ government?’
Another level, among others, is when we ask ourselves, ‘Who am I as it relates to my being here on this earth and what is the purpose and mission of my life?’ Or said another way, ‘What is the nature of my relationship (contract) to my creator?
As you can see, we’re starting to deal with the issue of ‘legal status’.
The bible recognizes this concept clearly in Matthew 17:25 when Jesus spoke:
“What do you think Simon? From whom do the kings of the earth take toll or tribute? From their sons or from others? Simon said, ‘From others’. Jesus said to him, “Then the sons are free.”
So we can say with confidence that ‘legal status’ is everything.
Back to the operation of law:
There is ‘natural law’ which is universal and endowed upon all of mankind by our creator. We all have an innate awareness that is built within us to know what personal human rights are. We don’t need to go to school for that. We just know it inherently as it comes from our creator and is in our DNA and is reflected in our customs and culture which has been passed to us through the centuries. It is the inherent knowledge of right and wrong.
