by Peter Macfarlane for the Q Wealth Report

Do Panamanian banks open multi-currency accounts? The answer is yes, but only in very special circumstances. See below for an explanation.

First, however, I owe an apology to regular readers for our failure to update the blog in a long time. Frankly, things have been very hectic over the summer. What with my research into Montenegro’s new economic citizenship (second passport) program, our upcoming event in Ireland and keeping on top of numerous requests from consulting clients concerned about capital preservation and international asset protection, I simply haven’t found the time to blog. From now on, things should be a little more back to normal – as far as is possible in this financially topsy-turvy world!

Anyway, readers know we are still keen on Panama as an offshore financial centre. Panama’s Private Interest Foundations offer some of the best asset protection there is. But a recurring concern of readers is Panama’s dependence on the US dollar. Whilst in theory Panama has its own national currency, the Balboa (currency code PAB) this has not had much financial significance for years.

Panama used to mint real silver and gold balboa coins, but the Balboa has always been at parity (one to one) with the US dollar, and balboa coins today only exist in the form of small change. Up until recently, dollarization was seen as a sign of the stability of Panama. No doubt the stability and low interest rates afforded by the dollar have contributed a lot to Panama’s success in the past. Today, however, it is seen as a threat by those who are going offshore for capital preservation.

Many clients have asked me how I can recommend Panama, considering its economy is based on the dollar, that is losing its value so fast. The answer is that I recommend the country, not the currency. Panama has a productive and diversified economy, and a good legal system. Panama corporation laws have stood the test of time since the 1920s and still provide great privacy and protection today.

But what about multi currency bank accounts in Panama? Up until recently, the dollar was king on the entire American continent. Banks simply did not have much demand for accounts in other currencies. Even currency exchange businesses like casas de cambio are rather thin on the ground in Panama.

In recent years, demand for banking services in other currencies in Panama has soared. Some of the larger retail banks, particularly Multibank and HSBC, are now routinely offering accounts in major world currencies like the euro, the yen, the pound sterling and the Swiss franc.

Unfortunately, foreign currency bank accounts are still far from the standard of sophistication you might expect if you are used to banking in Europe. Each account has a separate number, and in the case of HSBC, I was shocked to learn that the accounts can’t even be linked! That is, if you have a dollar account and want to open a euro account, you have to submit a whole sheaf of paperwork again – passport copies, bank references and the lot, just as if you were a new client walking through the door for the first time. If their IT system really can’t link accounts, it sounds like a criminal money launderer’s dream to me!

But things are changing. In the past year I’ve found three Panamanian banks that will open real multi-currency bank accounts. By this, I mean one account number you can log in to via internet banking, and in which you can keep different balances in different currencies. Switching currency or adding a new one to your portfolio is a matter of a simple mouse-click or two.

All three are Panamanian subsidiaries of established European banks. They will even open accounts where the beneficial owners are US citizens – something undoubtedly of value to our American cousins who are being turned away more and more from banks around the world – always provided that a Panamanian corporation or foundation is the legal owner.

The downside is that none of these three institutions are interested in small accounts. These are not accounts you can open with a small balance ‘in case you need them.’ You’re expected to put at least six figures on deposit, possibly more. If you are looking for an offshore safe haven, however, you couldn’t do much better.

Whether you are looking for a private banking experience such as these financial institutions offer, or a more run-of-the-mill offshore bank account, remember that your Q Wealth membership (click here to see the benefits and costs of joining) comes with a copy of the Practical Offshore Banking Guide 2010. At the back of that guide you’ll discover how you can take advantage of our free personalized banking referral service.

We’ve previously mentioned Das Safe, the well established safe deposit facility in Vienna, as a place where you can open an anonymous safe deposit box to store gold bullion, important documents etc.

But we always warn you not to keep all your eggs in one basket. Readers in the Americas have often asked us about safe deposit facilities in Panama City, Latin America’s financial hub… but up until the beginning of this year there was no such facility. The safe deposit box business in Panama was controlled by established Panamanian banks, who required clients to go through a bueaucratic account opening process and then join a waiting list for a safe deposit box to become free.

That’s all changed with a new safe deposit facility in Panama City, Panama that opened earlier this year. Peter Macfarlane recently visited this facility and was given a detailed tour by the owners. And, he says, it compares very favourably with other safe deposit boxes worldwide. Peter, for example, takes the credit for having suggested putting shredders in the private viewing rooms, a suggestion which management immediately adopted.

Best Safety Boxes is located on the ground floor of the Credicorp Bank building. For those of you who know Panama City, that’s the big green building on 50th Street (Panama’s “Wall Street”), near the Global Bank Building. It’s in the best area of town, and being surrounded by banks make the security excellent. Best Safety have their own top notch security. They offer five different box sizes ranging from $400 per year to $1250.

Now here’s a hot privacy tip! You cannot rent safe deposit boxes anonymously in Panama, but you can do the next best thing: a Panama corporation with nominee directors can rent a box for you. Provided you are present when contracting the box, you (not the nominees who sign the contract) would get the secret code necessary to enter the vault, as well as the two physical keys necessary to enter the box.

If you are interested in getting a Panama corporation with a box set up, contact Peter Macfarlane directly, via the Q Wealth Offices.  If you would simply like to rent a box in your personal name, drop by the facility or contact Scott LeRoy for an appointment

It’s also worth noting that located at the entrance to the safe deposit facility is a casa de cambio (money exchange house) that aims to offer good rates on currency exchange in Panama. Because the country uses the US dollar in daily circulation, not too many people need to exchange money in Panama. But when they do – for example Europeans who arrive in Panama with Euros, Pounds Sterling or Swiss Francs – the rates of exchange have typically been terrible. So much so that you will see signs saying “Compro Euros” (We buy Euros) fixed to utility posts all over Panama City – but this kind of black market exchange is risky. We are delighted, therefore, that the people at the Best Currency Exchange are trying to break this mould by offering the best rates for Euros etc.

Editor’s note: the above article was originally published in Q Bytes, our free weekly e-mail newsletter. If you would like to receive more privacy, wealth and freedom tips like this every weekend, please be sure to sign up for your free subscription here.

We write a lot of articles about Panama as an offshore haven here. This is not an accident, nor an unreasonable bias. We still consider Panama to be an excellent jurisdiction in which to set up an IBC, Corporation, or Foundation… and possibly an offshore bank account. But a reader asked me a question the other day which made methink back to basics… what is the real advantage of a Panama corporation? And what kind of services to Panamanian banks really offer?

The most obvious advantage is that Panama offshore corporations are completely tax free. That’s right – as long as they do business internationally (as opposed to in Panama) they don’t even have to file a tax return, let alone pay any taxes. Some people love the simplicity this offers.

Perhaps surprisingly, however, tax is not normally the major motivation for my clients who choose to go offshore in Panama. This is partly because most major jurisdictions these days have so-called CFC or “Controlled Foreign Corporation” legislation that severely limits the tax advantages of doing business in offshore havens these days.

No, most clients these days are not tax evaders. Instead, they are looking for offshore asset protection or wealth management strategies – diversification out of the US dollar for example. (This may seem strange given that Panama’s national currency is the US dollar, but please indulge me for a moment – more on this below)

Panama Private Interest Foundations are an ideal vehicle for ‘family office’ type asset protection applications – similar in many ways to a common law trust, but with a strong offshore privacy advantage. Panama Private Interest Foundations are the instrument of choice for those seeking to pass on their hard-earned assets securely to future generations.

Panama Corporations are often used for trading activities – like import/export, consulting, or – increasingly – e-commerce. You’ll find lots more on these topics in my articles and free reports on this subject in the Members’ Area. You can start with my Report on Panama Offshore Corporations and Banking that you can download immediately for free, with no obligation – right now!

But what about setting up a Panama Corporation, Foundation or Panama LLC?

The initial process is straightforward. The cost can vary from about US$1,500 to US$5,000. You might find some a little cheaper, but many law firms in Panama have an unpleasant habit of adding hidden charges later for documents you didn’t know you needed – so beware. More on this topic too in the free report mentioned above.

Not nearly as straightforward, however, is the process of opening a bank account in Panama. Let’s compare this to the USA for a moment. The USA is still one of the easiest places in the world to open a bank account. Answer a few questions, sign some forms, and, hey presto, you’ve got yourself a bank account.

However, the OECD, American and G20 wars on terror, taxes, drugs, and money laundering have made opening corporate bank accounts in Panama very difficult. These days, Panamanian banks view opening an offshore bank account not as a right but a privilege – especially if you are an American! Expect to jump through hoops.

Up front, you will probably be asked for two bank references. If you have only one bank account currently, you can probably substitute a letter
from a credit card company for the second bank reference. You will also
need at least one local professional reference – in other words an introduction from a Panamanian law or accountancy office. “Who you know” is very important in Panama.

A really good introduction might even avoid the need for the bank references, but then your introducer had better be a personal friend of the bank manager! I’ve seen it done (and, yes, I know how to do it for my clients in need)

Then you will need two forms of government-issued ID with photo: your passport of course, then a second ID, such as a driver’s license.

Armed with those documents, make an appointment to meet with a bank
representative, and prepare your trip to Panama. During your meeting (which will seem more like a job interview), expect lots of questions. Why are you opening this account? How much money will you be depositing initially? Where is that money coming from? How much money do you expect to receive into the account on an ongoing basis? What will be the source of those funds? How much will you be withdrawing from the account each month?

Can you open an offshore bank account online without traveling to Panama? Yes, in certain special circumstances…but it is frowned upon. It is highly preferable to make the effort to get to know your banker face-by-face.

You might however question if you need a bank account in Panama at all. Of course, most Panamanian lawyers will want to sell you a Panamanian bank account. But do you really need one? If your aim is to diversify out of the dollar, for example, it makes a lot more sense to take your Panama Corporation or Foundation, then go ahead and open your account in an offshore bank in another jurisdiction – maybe Uruguay for example. You’ll find more on this and similar pieces of advice in my Panama Report available absolutely free for instant download. Click here to claim your Free Panama Report.

It probably won’t have escaped you that, although we are a global wealth building and wealth management newsletter with our roots in the United Kingdom,  in recent years we have developed a distinct Latin American bias. That is no accident.

It is in Latin America that we have found freedom, wealth, and privacy – in the form of governments that have no particular interest in keeping the residents of their countries under surveillance. They say power corrupts, absolute power corrupts absolutely. Well it seems to us that Latin American governments have power, but not absolute power – because their systems are less developed than those further north. So the fact that these governments don’t have the financial resources to employ high-tech methods of spying on their citizens is certainly a blessing.

The Republic of Panama stands out in Latin America as a major offshore tax haven and financial hub. Offshore bank accounts, IBCs (Panama Corporations), Private Interest Foundations and other similar privacy tools make for a business-friendly environment. The recently elected Martinelli government promises to continue with Panama’s liberal economy at least for the next five years (whether conservatives hold power after that will depend on whether Martinelli can deliver on his promises.)

But besides being a good place to incorporate or open bank accounts, Panama is a very liveable place. Sophisticated capital Panama City has some beautiful areas and, despite a real estate boom in recent years, remains relatively inexpensive. You can still get a good meal with a local beer for $5. But if you want to pay $100 for a top-class trendy sushi dinner, you can do that too. You have the choice.

Banking services in Panama are getting better too. Traditionally Panamanian banks have had a ‘take it or leave it’ approach to new business, and pressure from the US has made it particularly difficult for US citizens and residents to open bank accounts in Panama. One of my favorite articles about Panama banks is here. In the last year or so I have seen this changing, with more product differentiation and even something that’s never been seen before – Panamanian banks such as Multibank (the locally owned bank formerly known as Multi Credit Bank) and London-based international giant HSBC competing with each other agressively in the local market, trying also to steal away market share from more expat-oriented banks like Credicorp.

So these days, it is getting easier to open bank accounts, customer service is getting better (think shorter lines in bank branches), and probably most importantly for our global readership, internet banking and credit/debit card services are becoming much more developed.

One of my clients, for example, now has an airline miles credit card linked to his Panama company account and spends tens of thousands of dollars every month buying goods for resale all over the world. The goods move through the Colon Free Trade Zone and are sold on worldwide. The credit card works in US dollars without surcharges, allows 30-50 days interest free credit, and as a bonus my client can fly almost anywhere he wants to go for free, using the miles accumulated.

At the same time, Panama banking privacy is good, and the country is one of the few that still allows offshore corporations with bearer shares, much to the chagrin of the G20. But they can’t say too much because Panama has one huge strategic card to play – the canal – which the Chinese would happily buy up at any time. But that’s another story…

Further resources: Peter Macfarlane has authored an e-book entitled “EIGHT IMPORTANT THINGS YOU SHOULD KNOW ABOUT GOING OFFSHORE IN PANAMA THAT YOUR LAWYER MAY NOT TELL YOU!” You can obtaihn this ebook free, right here and now, simply by visiting our Panama Banking for Corporations and Foundations page. You’ll also find further information on banking in Panama together with a range of other worldwide financial centres in our Practical Offshore Banking Guide.