Many of our US readers are concerned about whether to ‘check the box’ on the FBAR (Foreign Bank Account Reporting) form, also known as  TD Form 90-22.1 There has been particular concern that the regulations covering FBAR reporting for last year, 2010, were not clear.

In our free Q Bytes newsletter this week, our resident non-resident banking expert Peter Macfarlane reviewed the new regulations, including a link to a detailed summary of the new FBAR regulations carried out by our friends at Mountain Vision. Since this is such an important topic, we decided to reproduce Peter’s article in full here on the blog.

On February 23rd 2011, the U.S. Treasury Department released its (new) final regulations regarding the obligations to file an FBAR. These final regulations follow the respective proposals issued roughly a year ago on February 26th, 2010. These new rules finalize and clarify several of the proposed provisions. As can be expected with any and all tax rules, they also leave a number of open questions.

Our friends at BFI have written a detailed practical analysis of the new rules here in a special Mountain Vision alert. We strongly suggest you read it. In the meantime, here are a few key things you should know:

• The final rules apply to financial accounts maintained in 2010 and require an FBAR filing by June 30, 2011.
• All LLCs formed under U.S. laws are treated as U.S. persons who are subject to FBAR reporting requirements, even limited liability companies that are treated as disregarded entities for U.S. tax purposes. This puts an end to the use of American LLCs from states such as Delaware, Nevada and Wyoming for international tax planning.
• Unallocated precious metals programs such as the Perth Mint Certificate Program or GoldMoney are now definitely reportable. Physical precious metals held in, for example, a Swiss or Austrian safe deposit box with relevant foreign private banks are also now reportable, at least in those cases where such safe deposit boxes are linked to the ownership of a bank account and a private banking relationship. This is a major change to the old rules.
• The new treasury FBAR rules still do not clarify whether allocated and segregated precious metals programs such as Global Gold or a personal overseas vault that is NOT linked to a banking relationship are reportable. At this point, BFI have concluded that the Global Gold program is reportable, at least in its current form, although there is an allocated segregated storage program run by Global Gold for institutional clients that may not be reportable.
• Only individuals, not entities, have FBAR filing requirements on account of “signature or other authority”. Individuals who merely participate in decision-making, or who instruct or supervise persons with signature authority, are not themselves treated as having “signature or other authority” that trigger an FBAR reporting requirement. This is very odd provision, that might be taken to create a huge loophole.
• Gold has been singled out specifically as reportable under the new regulations. Other precious metals would not appear to reportable on FBAR. Thus, silver, platinum or palladium held in the Global Gold program would be non-reportable.

The new rules on what constitutes a ‘foreign account´ that is reportable, once again raise the question as to what the true agenda behind FBAR rules really is. Is it really about the drug trafficking and terrorism they keep using to justify it? Or is to do with taxation and capital controls?

I’ve noticed that a lot of my colleagues who came out and said that the HIRE Act was not about capital controls when it was first released (refer to our article here) have now quietly changed their minds.

I will not beat about the bush. These rules are about the US government taking control of what American individuals do with their money. They are designed to deter the little guy from going offshore. In the meantime, they leave some big loopholes open for the big guys.

The reason for turning up the heat is that more and more little guys are going offshore. Because it make sense. The tighter they turn the screws, the more it makes sense to go offshore. Fortunately it is still possible within the rules to keep assets securely offshore legally. The Q Wealth Report will continue to bring you practical information on this. Meanwhile, we would advise you to seek urgent professional advice if any part of the Foreign Bank Account Reporting requirements and your obligations thereunder are unclear to you. Paid up Q Wealth members are entitled to free referrals to relevant professionals.

It’s almost a year since I wrote the original article How to Open an Offshore Bank Account in Singapore, and it has consistently been the most popular article on the blog archives almost since day one. I have been thinking for a while, therefore, that it was time to revisit the subject of Singapore offshore bank accounts. Then finally I was stirred into action by my friend Simon Black, who is in Singapore at the moment. Simon wrote an article this week on Why Singapore is the ‘Easiest Place to be an Entrepreneur.’

Do you want to open a bank account in Singapore? How can you do so as a non-resident? Do you need to go there or can you open your multi-currency account by mail? These are some of the questions I’ll be answering in this article.

The city-state of Singapore has developed in recent years into one of the best private banking jurisdictions. But besides targeting their traditional but fast growing market of wealthy Asian business people, the best offshore banks in Singapore today are also developing products and services tailored specifically for North Americans, Europeans and Aussies. Despite the big time zone differences, Singapore’s business culture and use of the English language makes this easier.

While in most of the world opening a bank account seems to be getting harder and harder, in Singapore it is actually getting easier!

Ask anyone in Singapore what the easiest way is to open a bank account as a non-resident, and they will almost certainly point you in the direction of one of the foreign banks. Citibank, for example, is a major player in Singapore and you can contact them via their site. They will return calls to wherever you are in the world.

I’ve always liked Citibank. Citibank is culturally very different from most American banks, having a much more international outlook. Back in 1897 they were the first US bank to establish international banking operations. Whereas most US banks don’t even allow you to send an international wire transfer online, today nearly half of Citibank’s branches and offices are outside the USA. Wherever they go they settle into local banking culture and generally offer excellent internet banking, credit cards, 24 hour call centers and the like. They are completely comfortable doing business in multiple currencies – something essential in Singapore’s business and banking environment.

Citibank, like other international banks that are big in Singapore – HSBC, ANZ or the British emerging markets bank Standard Chartered for example -  would be ideal for those who cannot travel to open an account. The process would be first to contact the Singapore offices, then ask about procedures for certifying documents in an overseas branch or affiliate that is located near to wherever you are. Big international banks can generally arrange this – even more so if your investment is substantial enough to qualify for a premium service like Citigold ($1 million minimum in Singapore) or HSBC Premier.

However, if you are looking at banking offshore for privacy reasons, you’ll probably want to avoid American banks. Citibank will, for example, require a social security number from US citizens or a National Insurance number from British citizens, and will likely make you sign a waiver of Singapore banking secrecy law, allowing them to make reports to your home country authorities, as a condition of opening the bank account.

Whilst I hope none of you would be unsophisticated enough, given all the how-to info on this site, to rely on banking secrecy to hide or fail to report a personal account… I still think it’s undesirable that you should have to waive legal rights that are there for your protection, if it’s not absolutely necessary.

One international player that might be less subject to pressure from foreign governments in Standard Bank, a South African bank that has established a significant presence in emerging markets from China to South America. Standard Bank should not be confused with Standard Chartered Bank by the way – they are different institutions.

Ultimately, however, the best confidentiality is to be found with local or Asian market banks. OCBC Bank for example (Overseas China Banking Corp) would be a good place to start. They also have an excellent online trading portal, iOCBC. Last time I asked, they did still accept offshore brokerage accounts for US citizens, though given the provisions of the HIRE Act, who knows how long this will last.

During the coming year I’ll be focusing more on Singapore banking. I’m looking forward first to Simon Black’s Sovereign Man workshop in Panama in February, which is a chance for those from the American continent to meet Singapore bankers in person without flying right around the world. Then, I’ll likely be attending the Shorex Singapore event for offshore professionals in April. If you are going to be in the area, let’s meet up.

If you are not yet a subscriber to our free weekly Q Bytes newsletter, be sure to sign up here right now, and I’ll inform you via the newsletter as soon as our updated Singapore report is available. In the meantime, paid up Q Wealth members are welcome to contact our offices for referrals to more discreet private offshore banks that wouldn’t want their names publicized here. We also now have a great provider for opening accounts in Hong Kong and we can make referrals on request.

One of the things that went relatively unnoticed last week was the revaluation of the Singapore dollar. But as a global or offshore investor, you should certainly be concerned about this. It has significant implications for both the US dollar, the euro and the global economy, as well as practical implications for those of you who are interested in offshore banking in Singapore. More on that below.

Note that here we are not talking about devaluation – that’s what’s going on with the dollar, euro and sterling. We are talking about an upward revaluation, because the markets demand it. At the risk of oversimplifying, I’ve often said that a country’s currency is rather like shares in its overall economy. Singapore is going up, while the ‘developed’ world is in a dreadful downward spiral, leading to ever more desperate measures such as currency controls.

By the way, to sidetrack for a moment, a few people have sent me for comment pieces by other writers disagreeing with my recent articles interpreting the HIRE Act’s provisions as capital or currency controls – including some opinions by highly respected analysts. It seems to me these analysts don’t get my point: Yes I know these don’t look like currency controls! They are certainly not typical old-fashioned exchange controls. The Obama administration may be stupid and arrogant enough to believe they can control foreign banks, but they are not so stupid as to try to introduce Venezuelan style currency controls. No my friends…. these are stealth or back door currency controls specifically hidden under other justifications.

A dictionary definition of capital is: wealth in the form of money or property owned by a person or business and human resources of economic value. ‘Control’ I don’t think needs much definition. In my book, anything that seeks to control your free and unrestricted use of your capital, is a capital control. Doesn’t matter an iota if it doubles as a measure to increase tax compliance or catch criminals. To give you another example, AML (anti money laundering) laws are also a form of capital control. The HIRE Act’s provisions in my opinion place major obstacles in the way of free movement of capital. Hence, they are, logically, capital controls. My full analysis is in QWR 54. Ignorance and denial is bliss. ‘Nuff said.

Back to Singapore… Consider the context. There’s been a lot of political haggling about the status of the Chinese Yuan. Singapore is Asia’s major money hub. Serious commentators are suggesting that Singapore allowing its currency to float upwards is a precursor to China doing the same thing. Indeed, Singapore’s Prime Minster Lee Hsien Loong himself has suggested that is what should happen next.

Many commentators have been focused on the Yuan as a purely geopolitical issue, as if the Chinese had full control over the matter… and assuming that it’s in China’s interests to keep the Yuan artificially low in order to export its products cheaply. They forget that China is also a huge importer of resources and raw materials, that are typically paid for in US dollars. After a plunge in the value of commodities, many are racing up again.

The fact is the Chinese no more control the global economy than the Americans do. They can try hard to manipulate currency values in the marketplace, but doing so is a losing battle, besides being very costly.

The upward revaluation of the Singapore dollar, therefore, could well be the beginning of a trend involving other Asian currencies… and another nail in the coffin of the US dollar. Oil and coal producers, for example, will only be too delighted to set their prices based on Asian demand, accumulating those newly strengthened currencies in the process.

This can only serve to strengthen Singapore as a regional international banking centre. We’ve seen a huge upsurge in interest from our readers for offshore bank accounts in Singapore of late. Singapore banks have traditionally targeted the Asian and Australian markets, but increasingly they are looking to attract deposits from Europe and North American clients. The attraction is plain: a stable, English speaking economy with strong banks and an international outlook.

Less obvious, perhaps, but an equally good reason to invest in Singapore is the level of access to Chinese banks. As a foreigner  you cannot open accounts directly in China – and you probably wouldn’t want to. But Singapore offers a lot of the Chinese upside, without the control-freak-government downside.

One of the reasons North American and European clients have not done more banking business in Singapore in the past is simply the distance, and the fact that Singapore banks have traditionally insisted on a face-to-face meeting with clients.

This is changing. As the best offshore banks are taking multi-jurisdictional approaches, it is more likely that your banker can be sitting in an office in your time zone, not too far away for a visit, while managing your account on the other side of the world. We are seeing more and more banks deliberately adopting this diversification strategy. Such banks also have contingency plans in place to shift your account to a different jurisdiction, within the same bank, at very short notice, if a particular jurisdiction should become unfavorable for any reason. This is the ultimate protection for your assets against all forms of currency controls – stealth or otherwise.

I’ll be writing more about this, and Singapore, in an upcoming issue of the Q Wealth Report, as well as summaries in Q Bytes. If you are not yet on the Q Bytes list, be sure to sign up here. It’s free, without obligation, and we respect your privacy.

by Peter Macfarlane

Issue 54 of The Q Wealth Report, the leading privately-published newsletter on freedom, wealth, asset protection and privacy is now available online. Members may download their copies here: Current Issue 54 of Q Wealth Report You will need to be logged in as a member to access this file. If you are not yet a member, check out our list of membership benefits.

Here’s a sneak preview of some of the highlights in issue 54:

• Opportunities Abound: introduction by Dr Richard Cawte
• Private Placement Insurance Policies – a review of this rather boring but extremely functional offshore tax planning and asset protection tool. Discover how you can use PPLIs to your advantage.
• Credible evidence that chipping people increases Cancer Risk
• Mediterranean Mix’n'Match: Detailed article on the use of Cyprus offshore companies and offshore banks – an onshore/offshore combination that makes a very attractive privacy and tax planning tool for Americans and Europeans alike. Includes practical examples. Cyprus banks offer multi currency accounts.
• Interconnectedness: Richard Cawte explores the feeling world we live in… and how to act on intuition and inspiration to achieve  balance, poise and achievement in your personal and business lives.
• Green Technology: Investing in the Future – with an offshore element of course
• Peter Macfarlane’s detailed review of the dire implications of the HIRE Act. Peter predicts economic isolation of the United States and presents detailed advice to protect yourself, your loved ones and your assets from the devaluation of the dollar.
• Full details of the June Q Advantage Seminar and a preview of our September Strategies for Success event.

We hope you enjoy Q Wealth Report!

Frank. When I think of America I always keep a pocket of optimism alive somewhere in my soul. To be honest, I think this bill [the Healthcare bill] is the straw that breaks the camel´s back. We are already technically insolvent, and yet keep inventing ways to spend money (and raise taxes). This Healthcare bill precedes a debt downgrade, massive inflation, and the demise of the dollar. What was likely to happen is now written in stone. Seeing what is ahead, I am now afraid.

This article by Frank R. Suess is reproduced by kind permission of BFI’s Mountain Vision newsletter.

HIRE, FATCA, QFFI – BEWARE OF RAMPANT LAWS IN RESPONSE TO RAMPANT SPENDING

My friend´s concerns in the quote above are a reflection of the concerns and fears many of you may be experiencing these days. Here at BFI, we get numerous e-mails and comments that express a growing concern over government insolvency, debt, inflation and the increasing fiscal repression found in most of the G7 countries.

Indeed, over the past few weeks, an amazing sequence of laws, treaties and acts have been put in place to facilitate more deficit spending and more big brother powers. None of these laws enhance your liberties. None of them are aimed at protecting fundamental rights of freedom, property, or privacy. None of them enforce government fiscal discipline and accountability. On the contrary, they are tailored toward a continuation of out-of-control Keynesian madness — more public spending, more deficits, more debt, and of course, more taxation.

Instead of fixing fiscal and monetary issues at their roots, an internationally concerted crusade against ‘tax evaders´ and ‘offshore investment strategies´ has been launched. However, what may be considered as enforcement of law has long become a game of capital controls, protectionism and taxation horror.

In the UK, for instance, as part of the UK 2010 Budget, the British government last week decided to come down yet a little harder on offshore tax evasion. Penalties for offshore evasion were increased to a maximum of 200% of the unpaid tax. Penalties of up to 150% will apply where exchange of information is on a “upon request” basis rather than automatic. The stiffest penalties apply where non-compliance arises in jurisdictions that have not signed exchange information agreements with the UK.

Meanwhile, in Germany, the Anti-Tax Evasion Act was passed. This Act, approved by the German Federal Council, entails new regulations that deal with tax evasion and “unfair tax practices” (translation: low-tax jurisdictions with healthy balance sheets, such as Switzerland). Even in Israel, the Parliament permanently approved regulations for “enhanced” reporting requirements, as well as regulations against “aggressive” tax planning measures.

Finally, the worst — and most amazing — law of all was passed in the US under the very marketable title (you have to give them that) of ‘HIRE´. I briefly discussed this phenomenal law and particularly its section on foreign accounts in the last Mountain Vision Update.

After reviewing HIRE again and thoroughly studying its implications, I am convinced this law could actually be a blessing. I will tell you why in just a moment. But first, a bit more background…

HIRE – or simply another layer of hidden capital controls

Last month, President Obama signed into law possibly the “worst bill ever” (Wall Street Journal, November 1, 2009). Some predict that it will inevitably lead to full-scale socialized medicine. Then, shortly after the Health Care Bill had passed, Obama slipped in another silent bomb.

On March 18th, with little if any pomp and circumstance — downright unnoticed by most — he signed off on the US$ 17.5 billion ‘Hiring Incentives to Restore Employment Act´ (H.R. 2487), in brief ‘HIRE´. Amidst a long mire of legal gibberish that few would ever bear the pain of reading, provisions on ‘Foreign Account Tax Compliance´ (FATCA) were hidden.

With these provisions, the noose on capital mobility has certainly tightened a little more for Americans. But, the implications are much broader and may well, and possibly should quickly, affect the wealth management decisions of investors worldwide.

In brief, these provisions require that foreign financial institutions (so called FFI´s — and not just banks!) not only withhold 30% of all US source capital flows (remitting the collection promptly back to the US Treasury) but also to disclose the full details of non-exempt accountholders to the US and the IRS. In order to avoid the 30% withholding tax, an FFI would have to agree to become a QFFI (a Qualified Foreign Financial Institution). Of course, under such circumstances, a QFFI must fully report all “non-exempt US accountholders”, i.e. give up any and all client confidentiality against US tax authorities.

A concise and understandable summary of the law is provided by Withers at this link. Let there be no mistake, this latest AMERICAN law may have implications for ALL of us. It may very well affect YOUR portfolio very soon. Therefore, I strongly recommend that ALL Mountaineers study this thoroughly!

So, why on earth would I consider this horrific new law a potential blessing?!?!

The FATCA provisions are draconian. America´s current administration leaves George Bush looking like a whimp. These guys really push a heavy pencil. In fact, these laws are so blatantly coercive and outrageously encumbering for these so-called “Foreign Financial Institutions” (FFIs) that I don´t think they will accept it. In fact, I think there is a considerable chance of an international backlash. And that backlash might well severely impact US financial markets.

After pushing their QI (Qualified Intermediary) rules down the throats of banks worldwide, the US Administration now aims at creating a ‘co-operative´ global network of QFFIs (Qualified Foreign Financial Institutions). In other words, this network of institutions would administer America´s desparate search for tax dollars in every nook and cranny, spying and reporting on their client´s in the interest of squeezing that wealthy taxpayer lemon yet a little harder.

I don´t think this will happen. To use my friend´s words at the beginning of this Update, I believe this law is the straw that breaks the camel´s back. Even if all these FFIs were highly willing and dedicated to supporting America´s wild goose chase, the problem is that they would not know how to do it, and even if they did, they might not be able to afford it.

First of all, these rules are not practicable. For instance, these rules would require a hedge fund with QFFI status to identify on each subscription to the fund whether the ultimate beneficial owner is a ‘US person´. Now, this might be fairly straight-forward in a constellation where the investor is an individual who subscribes directly to the fund. However, what if another fund invests in this fund? And then, what if the investor in the second fund is not an individual but rather a foundation? What if this foundation is held by an international conglomerate of corporations? You get the idea.

Secondly, let´s assume that via the proper standards, procedures and, of course, in conjunction with the required IT systems, FFIs worldwide could in fact fulfill Mr. Obama´s daydreams, most FFIs would not be able to afford it. And many will not be WILLING to afford it.

I´ve discussed this with several top Swiss bankers and legal experts. They all agree that this law leaves many unanswered questions. If indeed the US is hellbound on pushing this through as defined, there will be a backlash, and soon. As stated in our last Update, non-US banks, asset managers, insurance companies, hedge funds and financial advisors may — once and IF the law is implemented as foreseen — very well simply stop investing in US assets altogether.

There´s a world of investment opportunities that are non-US. Why bother with American markets?!?!

Further reading: Peter Macfarlane has also written at length on this topic in edition 54 of The Q Wealth Report, which will be released in the Members Area shortly. If you are not yet a member and would like to find out what you are missing out on, please check our membership benefits page.

I’m reminded today of the phrase “Get Your Money Out of the Country, Before Your Country Gets Your Money out of You.”  The expression was coined years ago in one of the old PT books, I forget exactly which. Specifically, you have a deadline: December 31st, 2012, when most of this legislation is due to come into force.

“This is in fact the capital constraint legislation that seasoned economic experts have been predicting” says one commentator.

I’m not easily shocked, but after reading the HIRE Act (Hiring Incentives to Restore Employment Act) just passed a little over a week ago by the US Congress, I am convinced that the US has already introduced currency controls. That was even sooner than I expected and this is an extremely serious concern for anyone who holds any assets in the USA, or even in US dollars (read on to find out how this also affects you even if you are not American and have never even set foot in the United States…)

The HIRE Act sounds harmless enough, right? It sounds like something to do with job creation, yet another round of incentives. It was passed quickly and quietly by Congress around the same time as all the hullabaloo about Obama’s healthcare reforms. Healthcare reforms are another of those things I honestly don’t understand, and I haven’t yet met anybody who does… that’s why I didn’t write an article about it adding to the noise. Suffice to say it’s definitely bad news. But this HIRE Act is even worse. It introduces strict currency controls in all but name.

I’ve read some of the HIRE Act and if you download the pdf file here and skip to page 27, you will see my reason for concern:

Title V – Offset Provisions

Subtitle A: Foreign Account Tax Compliance …

Taxes to Enforce Reporting on Certain Foreign Accounts

The Act adds a whole new chapter to the 1986 Internal Revenue Code, which introduces a whole new tax… a tax on foreign bank accounts. In a nutshell, here’s what it says:

Any funds transferred from the US to any overseas account are subject to a new tax equal to 30 percent of the total amount of the payment – unless the payment is sent to a foreign bank that has agreed to report all American-owned accounts automatically and electronically to the US government.

What kind of payments are included? Almost anything. The act specifically mentions “interest, dividends, rent, salaries, wages, premiums, annuities, compensations, remunerations … and any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States… ”

This is incredible stuff. The section after the section about foreign bank accounts goes on to talk about foreign financial assets, including for example stocks, not just offshore bank accounts. Any holdings of foreign stocks over $50,000 will have to be reported by US taxpayers. And this provision kicks in earlier – starting with the next tax year.

It then continues to talk about foreign trusts, dividends… before drawing to a sudden close, and disappearing to where it came from!

It’s early days yet to give you a full analysis of this new law. We will have a detailed article on this topic in the next edition of Q Wealth Report, which is due out next week (if you join now you will receive it automatically… and see what else you are missing if you’re not already a member). But it’s clear that Americans have serious decisions to make – and fast!

If you are a regular reader of our reports, this news won’t come as such a surprise to you. A group of our readers discussed this very scenario earlier this month at our Strategies for Success event in Cancun. And we’ve been predicting this kind of extreme measure for some time – it’s a sign of sheer desperation. The US government must surely understand that they are fighting a losing battle with free markets – but they are certainly determined to fight to the bitter end. And believe me, the worst is still to come.

As the effects of this legislation sink in, a lot more Americans will be looking for second passports as a first step towards renouncing citizenship.

There will be a huge knock-on effect too, however, for foreign banks and their account holders. Bankers have tolerated a lot, even the new far-reaching qualified intermediary (QI) rules imposed by the US. But how much more will they tolerate? Is continued access to the US financial system from 2013 onwards worth the price the US government is now charging? I would think for many offshore banks, this is just one step too far. A lot of banks will now be saying “to hell with the US government.” Is compliance even possible any more?

We’ll have more detailed analysis as promised in the Q Wealth Report very shortly. But in the meantime our advice is:

• Don’t panic – stay calm
• If you don’t have an exit strategy for getting all your assets out of the US, start planning one now. You need to protect your assets against burdensome taxation and the devaluation and decline of the dollar.
• Consider expert advice and invest in self-education about these matters. Don’t rely on the mainstream media as they won’t give you the full story.
• You have the rest of this year – nine months – to have appropriate offshore asset protection structures in place. Consider things like offshore gold bullion and international real estate investing.
• Don’t waste time. Don’t procrastinate.
• If you haven’t already, sign up now for Q Bytes, our free weekly newsletter, in which we will give you lots of additional tips gratis.

Related article on a Panama blog here: Disturbing new U.S. law aims to end individual foreign bank accounts