Before that extended break I took, I was blogging about U.S. government reporting requirements related to offshore safe deposit boxes.

A recap would probably be helpful at this point.

On April 14, I asked the question- do offshore safe deposit boxes have to be reported? I concluded:

From what I take away from all this, the offshore safe deposit box itself does not have to be reported.

However, since overseas bank safe deposit boxes are generally associated with a bank account, reporting requirements may come into play.

Plus there’s the matter of the assets being stored in the boxes.

On April 15, I talked about one of the possible reporting requirements- Report of Foreign Bank and Financial Accounts, or FBAR. What exactly is FBAR? From the Internal Revenue Service website:

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR)…

And who must file it? The IRS says:

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

On April 16, I discussed the other potential U.S. government reporting requirement for offshore safe deposit boxes- Form 8938. From the IRS website:

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.

I also looked into FATCA. According to the IRS:

Foreign Account Tax Compliance Act

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

FATCA focuses on reporting:

-By U.S. taxpayers about certain foreign financial accounts and offshore assets
-By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which
-U.S. taxpayers hold a substantial ownership interest
-The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

And that’s where I stand right now in my ongoing investigation into possible U.S. government reporting requirements for overseas safe deposit boxes. As I mentioned in that April 16 post:

FBAR? Form 8938? FATCA? A lot to digest, right? Not to worry. All of this should be clearer for readers by the time I’m done blogging on the subject of U.S. government reporting requirements as it relates to offshore safe deposit boxes.

I still believe this holds true. The next time I take up this topic, I plan on picking apart FBAR and Form 8938.

In the meantime, due to Memorial Day Weekend, I will not be publishing any new material Monday- except for a short holiday message.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

(Editor’s note: A qualified professional should be consulted regarding this subject. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/editor of this site is not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information contained herein.)

I’ve only started discussing the Foreign Account Tax Compliance Act, or FATCA, just recently. On April 16, I blogged:

Let’s go to the IRS Foreign Account Tax Compliance Act web page. Here’s what it states:

Foreign Account Tax Compliance Act

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

• FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

• FATCA focuses on reporting:

By U.S. taxpayers about certain foreign financial accounts and offshore assets

By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

• The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

According to the U.S. Department of State, 7.6 million Americans live and work abroad. And from what I understand, an increasing number of overseas banks are refusing to do business with them. So I’m not surprised that on the eve of FATCA taking full effect- July 1, 2014- a serious legal challenge is being mounted against the Foreign Account Tax Compliance Act. Ralph Hallow reported on The Washington Times website on May 5:

Jim Bopp, the hard-charging lawyer who persuaded the Supreme Court to strike down crucial elements in the McCain-Feingold campaign finance law, has a new target in his legal sights: a bank and taxation statute that hits Americans overseas.

Mr. Bopp is assembling a legal attack on the Foreign Account Tax Compliance Act, which he and other critics say intrudes on financial privacy and scares banks from doing business with Americans living overseas.

“The U.S. Constitution protects every citizen’s liberty and freedom, while FATCA undermines both,” Mr. Bopp told The Washington Times. “This astonishingly bad law manages to thumb its nose at the Constitution.”

(Editor’s note: Bold added for emphasis)

“Attorney takes action for Americans with foreign accounts”
The Washington Times Video

I highly recommend reading the entire article, which you find on The Washington Times website here.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Earlier this week, I continued to blog about potential U.S. government reporting requirements for offshore safe deposit boxes.

I “picked apart” FBAR and Form 8938 using the “Comparison of Form 8938 and FBAR Requirements” table (last updated February 10, 2014) on the Internal Revenue Service website, taking away the following:

• Foreign currency, precious metals, and personal property (“such as art, antiques, jewelry, cars and other collectibles”) which are “held directly” are not required to be reported via FBAR and Form 8938.
• “Held directly” means not in a financial account.
• A safe deposit box at a foreign financial institution is not considered a financial account by the IRS.

So, for example, if an individual has an offshore safe deposit box (either at a bank or private vault) and has “directly held” bullion bars, collectible coins, and some foreign currency in it, then it’s my understanding there are no potential U.S. government reporting requirements for the container or its contents.

That being said, where privacy is concerned, note what I blogged back on April 14:

Consider what Laura Saunders reported on The Wall Street Journal website on September 20, 2013. From her article, “Offshore Accounts: No Place to Hide?”:

While safe-deposit boxes don’t have to be reported, they are often tied to bank accounts that could be.

(Editor’s note: Bold added for emphasis)

One more thing. Going back to that IRS comparison table, note what’s specified under “What is Reported?” for Form 8938, Statement of Specified Foreign Financial Assets:

Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets

And for FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR):

Maximum value of financial accounts maintained by a financial institution physically located in a foreign country

What exactly is a “foreign financial institution?” From the IRS web page entitled, “FATCA Information for Foreign Financial Institutions and Entities”:

FFIs include, but are not limited to:

• Depository institutions (for example, banks)
• Custodial institutions (for example, mutual funds)
• Investment entities (for example, hedge funds or private equity)
• Certain types of insurance companies that have cash value products or annuities

My understanding of the above is, an offshore bank would be considered a foreign financial institution by the IRS, while an offshore private vault would not be.

So there your have it. A basic rundown of potential U.S. government reporting requirements for offshore safe deposit boxes- at least as it stands right now.

Please read all my posts on the topic to-date for a better picture of what’s required and involved:

“Do Offshore Safe Deposit Boxes Have To Be Reported” (April 14)
“Report Of Foreign Banks And Financial Accounts (FBAR)” (April 15)
“Form 8938 And Foreign Account Tax Compliance Act (FATCA)” (April 16)
“Recap Of Ongoing Investigation Into Potential U.S. Government Reporting Requirements Related To Offshore Safe Deposit Boxes” (May 23)
“Picking Apart FBAR And Form 8938” (June 2)

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

(Editor’s note: A qualified professional should be consulted regarding this subject. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/editor of this site is not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information contained herein.)

I’m back from my “summer vacation” and ready to start blogging on Offshore Safe Deposit Boxes again.

While away, I happened to come across two articles out on the Internet that I thought readers might be interested in.

Back on March 19, I published “Taking Money Out Of The U.S. For The Offshore Safe Deposit Box.” From that post:

Just how much money can be taken out of the country?

From the U.S. Customs and Border Protection website:

Money and Other Monetary Instruments

You may bring into or take out of the country, including by mail, as much money as you wish. However, if it is more than $10,000, you will need to report it to CBP. Ask the CBP officer for the Currency Reporting Form (FinCen 105). The penalties for non-compliance can be severe.

“Money” means monetary instruments and includes U.S. or foreign coins currently in circulation, currency, travelers’ checks in any form, money orders, and negotiable instruments or investment securities in bearer form.

Andrew Henderson over at the Nomad Capitalist website discussed other options for legally transporting cash overseas in a June 16 article.

And any readers remember me mentioning the name Laura Saunders before? I blogged on April 14:

Consider what Laura Saunders reported on The Wall Street Journal website on September 20, 2013. From her article, “Offshore Accounts: No Place to Hide?”:

While safe-deposit boxes don’t have to be reported, they are often tied to bank accounts that could be.

(Editor’s note: Bold added for emphasis)

Another offshore-related article from Ms. Saunders just appeared on The Wall Street Journal website on June 20. Entitled “Offshore Accounts: What To do Now,” she talked about the Foreign Account Tax Compliance Act (FATCA) and the importance of July 1, its potential pitfalls for law-abiding U.S. citizens, and the annual Foreign Bank Account Report (FBAR) and Form 8938, among other topics. Saunders also touched on offshore safe deposit boxes. She noted:

In general, nonfinancial assets such as real estate or collectibles like jewelry or art don’t need to be reported unless they are held in a trust or other entity. But safe-deposit boxes often are linked to reportable accounts.

Sound familiar?

You can read the entire insightful article on The Wall Street Journal website here.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Yesterday was July 1, 2014- the day the United States government insisted foreign financial institutions begin complying with the requirements of the Foreign Account Tax Compliance Act, or FATCA. Michael Cohn reported on the website of Accounting Today:

FATCA was enacted as part of the HIRE Act of 2010 to target noncompliance by U.S. citizens of tax obligations using foreign accounts. Since that time, the Treasury noted that FATCA has gained broad support among the U.S.’s international partners, including many of the world’s largest financial centers, and is poised for a strong start. Tuesday, July 1, was the date when foreign financial institutions that have not taken steps to comply with the law’s requirements run the risk of tax withholding penalties of up to 30 percent on their U.S. source income…

(Editor’s note: Bold added for emphasis)

In case any readers aren’t familiar with FATCA, from the Internal Revenue Service website:

Foreign Account Tax Compliance Act

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

FATCA focuses on reporting:

-By U.S. taxpayers about certain foreign financial accounts and offshore assets
-By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which
-U.S. taxpayers hold a substantial ownership interest
-The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

So what does FATCA “kicking in” have to do with offshore safe deposit boxes?

While already increasingly difficult for U.S. citizens to open an account with an offshore bank- and by extension, obtain a safe deposit box from the same institution- yesterday was basically the deadline for foreign financial institutions to decide whether or not to service new and existing American customers.

That decision would be reflected in their being listed on the FATCA Foreign Financial Institution List on the IRS website.

For those looking to rent a safe deposit box at an overseas bank, it’s important to check a prospective FFI against the most recent version of this list. If the bank’s name appears on the list, it’s possible Americans are still welcome to open an account there. And by extension, a safe deposit box- if the option is provided.

You can visit the FATCA Foreign Financial Institution (FFI) List Search and Download Tool here on the IRS website.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Source:

Cohn, Michael. “IRS Updates FATCA Foreign Financial Institution List.” Accounting Today. 1 July 2014. (http://www.accountingtoday.com/news/irs_watch/irs-updates-fatca-foreign-financial-institution-list-71208-1.html). 2 July 2014.

With the deadline for foreign financial institutions to comply with the Foreign Account Tax Compliance Act having recently passed, there’s still a significant amount of discussion going on about the U.S. initiative.

A good deal of it is negative. Such as the claim that FATCA is merely one more way the U.S. government is implementing capital controls on its citizens.

I noted in a March 31 post:

Uncle Sam claims they are going after American tax evaders.

Others suspect the U.S. government is implementing capital controls in advance of another major financial crisis…

One of these “others” is the American financial writer, publisher, and filmmaker Addison Wiggin. Wiggin argued on The Daily Reckoning website on July 8:

One of the most insidious measures to keep your capital from fleeing overseas became law in spring 2010. Almost no one noticed. It was tucked into a “jobs bill.”

Maybe you’ve heard of it by now — H.R. 2847, the Foreign Account Tax Compliance Act, or FATCA…

The congressional Joint Committee on Taxation figures FATCA will generate $8.7 billion over 10 years. So that’s an average of $870 million in a single year… or a whopping 0.18% of this year’s federal budget deficit.

We’re no conspiracy theorists, but upon examining the evidence it’s easy to conclude FATCA was never about raising revenue or cracking down on “tax cheats.” It’s about control. It’s about keeping you trapped in U.S. banks and the U.S. dollar if a Cyprus-like crisis comes America’s way…

(Editor’s note: Bold added for emphasis)

Wiggins went on to suggest three options for Americans who want to protect themselves “from a sinking U.S. dollar and shaky U.S. banks.” An offshore bank safe deposit box was one of them. From the piece:

Choice #3 Gold. If you keep it in a safe-deposit box in an overseas bank, this too does not qualify as a “foreign financial asset.”

Sounds reasonable enough, but as Mr. Wiggin pointed out on Agora Financial’s Daily Resource Hunter website back on July 13, 2011:

For starters, you can keep gold in a safe-deposit box in a foreign bank. Many banks are willing to do this even if you don’t have an account. That’s because under IRS rules, gold in a safe-deposit box does not qualify as a “foreign financial account.”

Sounds great… until you start to think about the logistical hoops you have to jump through to make this happen. You have to buy the gold and then make arrangements for it to arrive at the bank of your choice, where it will then go in the safe-deposit box.

That creates its own paper trail. And good luck trying to do it yourself, transporting a significant amount of gold outside the United States…

“Many banks are willing to do this even if you don’t have an account”

It’s been my understanding that offshore banks generally don’t offer safe deposit boxes unless a client also has a financial account with that institution. Guess I’ll have to look into that and get back to readers.

Of course, there’s always the offshore private vault route.

So is FATCA part of some larger capital controls scheme being carried out by the U.S. government? Maybe. I wouldn’t be surprised if that’s the case.

I do know this, however. Wiggin won’t be the last high-profile individual in the financial world to claim FATCA is really about Uncle Sam “circling the wagons” on American citizens and their assets.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Sources:

Wiggin, Addison. “Another Brick in the ‘Virtual Berlin Wall.’” The Daily Reckoning. 8 July 2014. (http://dailyreckoning.com/another-brick-in-the-virtual-berlin-wall/). 15 July 2014.

Wiggin, Addison. “Three Offshore Havens to Protect Your Hard-earned Bucks.” Daily Resource Hunter. 13 July 2011. (http://dailyresourcehunter.com/three-offshore-havens-to-protect-bucks%E2%80%A6/). 15 July 2014.

If you’re a U.S. citizen, I understand it’s getting darn near impossible to open a safe deposit box at a foreign financial institution these days. From The Wall Street Journal’s Laura Saunders (who I’ve mentioned before on this blog) a couple weeks back:

Americans living abroad are being cut off by banks and brokerages as financial institutions seek to steer clear of a U.S. crackdown on money laundering and tax evasion…

Several factors are contributing to the squeeze. One is the Foreign Account Tax Compliance Act, called Fatca. Congress enacted it in 2010 after learning that foreign banks, especially in Switzerland, had profited by encouraging U.S. taxpayers to hide money with them abroad. The main provisions of Fatca took effect in July.

As a result, foreign financial firms must report to the Internal Revenue Service investment income and balances above certain thresholds for accounts held by U.S. customers. Nearly 100,000 banks and other companies have registered with the IRS. If they hadn’t, all their customers would have 30% withheld from income received from U.S. sources, such as interest and dividends.

Still, many registered firms are closing accounts for Americans abroad or declining to open new ones, in order to avoid increased compliance costs and the consequences for potential errors…

(Editor’s note: Bold added for emphasis)

Seeing that safe deposit boxes are typically offered only in conjunction with accounts at such foreign financial institutions- no account, no box.

Siri Srinivas added on The Guardian (UK) website on September 24:

Scared of running afoul of US banking laws, foreign banks are taking extreme steps to limit US citizens to a narrow range of services.

The result for expats has been a chaotic brew of closed bank accounts, mysterious excuses and a scramble to find local banks that would allow them to park their money…

(Editor’s note: Bold added for emphasis)

At least a non-bank safe deposit box in an offshore private vault may be an option for the disenfranchised.

Sources:

Saunders, Laura. “Expats Left Frustrated as Banks Cut Services Abroad.” The Wall Street Journal. 11 Sep. 2014. (http://online.wsj.com/articles/expats-left-frustrated-as-banks-cut-services-abroad-1410465182). 16 Oct. 2014.

Srinivas, Siri. “‘I was terrified we’d all lose our money’: banks tell US customers they won’t work with Americans.” The Guardian. 24 Sep. 2014. (http://www.theguardian.com/money/2014/sep/24/americans-chased-by-irs-give-up-citizenship-after-being-forced-out-of-bank-accounts). 16 Oct. 2014.

Back on October 24, I began comparing/contrasting offshore bank safe deposit boxes with their private, non-bank counterparts. I noted both types share the same function in that they’re secured containers rented to store valuables in. I added that most Americans needing safe deposit boxes overseas would probably look at foreign financial institutions (e.g., banks) first due to the following:

• Private vaults are still somewhat of a novel concept here.
• A number of Americans attach a Hollywood/mainstream media-induced negative connotation to private vaulting facilities.
• For the most part, U.S. banks have a decent reputation when it comes to their safe deposit box operations, which likely influences their selection of the type of facility to store their valuables abroad.
• Finally, private vaults- both here in the United States and overseas- have suffered from some bad publicity lately.

On October 29, I expanded on that negative publicity. I blogged about two incidents in the last few years that have made some question the private vault model- the 24/7 Private Vaults kidnapping/robbery of April 14, 2012, and Operation Rize, where British police confiscated thousands of London safe deposit boxes in June 2008. Pointing out recent crimes targeting safe deposit boxes in financial institutions, I noted bank safety deposit boxes are just as vulnerable as their non-bank cousins in many instances to seizure by criminals or the government.

On November 4, I talked more about safe deposit box vulnerability. I discussed Britain’s Operation Rize at more length, writing:

So Safe Deposit Centres, the vault company that was raided, allegedly wasn’t following through with “their responsibilities under legislation covering money laundering and the proceeds of crime.” Hence the clamp down.

As for those private vaults that have “played ball” with British law enforcement on thwarting money laundering and other criminal activity that could be carried out using these storage containers- they’ve avoided similar confiscation to my knowledge.

I eventually concluded:

So are private vaults in more danger these days of having their safe deposit boxes seized by government/law enforcement? Well, private vault operators joining forces with law enforcement to thwart criminal use of these containers might make it more difficult for an unjustified raid to be carried out. And the outcome from Operation Rize (only 146 arrests and 30 convictions out of 6,717 boxes raided) could make government and law enforcement think twice before undertaking what some have called a “fishing expedition” in the case of Safe Deposit Centres. But in an environment of global financial chaos where governments find it exceedingly difficult to pay the bills- all bets are off. Valuables in both bank and non-bank safe deposit boxes could be in more danger of seizure than at the present time. That being said, so might bank accounts, retirement funds, and other assets possibly.

Which brings us to today’s post, where I’m going to start talking about bank safe deposit boxes- even offshore ones- possibly being easier targets than non-bank boxes for a government bent on seizing private assets.

Consider what I penned on the “Why Offshore Vaults?” page on this blog’s sister site- Offshore Private Vaults:

Critics argue that government and the banks don’t pose a threat to personal assets. However, recent events suggest concerns about wealth confiscation by these entities aren’t unfounded:

• Argentina, October 2008, private pension funds nationalized
• Ireland, March 2009, national pension fund assets used to help pay for EU/IMF bailout
• France, November 2010, national pension fund assets used to pay for welfare system debts
• Hungary, November 2010, private pension funds nationalized
• Bulgaria, January 2011, private pension funds partially-nationalized
• Cyprus, March 2013, banking system “bailed-in”
• International Monetary Fund, October 2013, talk of a “capital levy” in IMF’s October Fiscal Monitor Report, a “one-time tax on private wealth” possibly at “a tax rate of about 10 percent on households with positive net worth”
• European Union, December 2013, agreement by EU finance ministers to implement Cyprus-style “bail-ins” in the event of future banking crises
• Spain, July 2014, all bank account deposits subject to blanket taxation rate of 0.03 percent
• Germany, July 2014, plans approved for creditor (may also mean depositor) bail-in of banks beginning in 2015, a year earlier than required under European-wide plans setting rules for failing financial institutions

Considering the steady devolution of the United States as an economic superpower and the federal government’s refusal to significantly curtail borrowing and spending, no one can say for sure that personal wealth won’t be confiscated in some future major financial crisis…

While funds in financial accounts at particular institutions or system-wide (think Spain example) have been targeted, valuables in domestic bank safe deposit boxes have so far been spared during the more recent bouts of confiscation.

Who’s to say that will still be the case going forward though?

So government confiscation of private assets is currently taking place. And notice the involvement of the banks in this latest bout of seizures..

While safety deposit boxes and their contents have not been confiscated en masse in any one country, the U.S. government has clamped down on these storage containers in the past. Specifically, on boxes located in banks. Wealth preservation expert Mark Nestmann wrote back in February 2008:

One of the most important precautions is not to keep precious metals in a U.S. safety deposit box. President Roosevelt ordered all safety deposit boxes sealed when he issued his March 9, 1933, gold confiscation order. My grandparents couldn’t retrieve their holdings from their safety deposit box until government thugs had rifled through it.

(Editor’s note: Bold added for emphasis)

Okay, so say an individual doesn’t use a safe deposit box in a domestic financial institution, and decides to store his/her valuables in a bank overseas. That’s enough to protect one’s assets in case Uncle Sam goes rogue, correct?

Well, seeing that financial institutions worldwide generally don’t rent safe deposit boxes unless an account is first opened with them, in an era of increased reporting requirements and information sharing between countries, asset protection via an overseas bank box at some future time where “legalized theft” by the federal government is occurring will be difficult to achieve. Consider what Laura Saunders reported on The Wall Street Journal website on September 20, 2013. From her article, “Offshore Accounts: No Place to Hide?”:

While safe-deposit boxes don’t have to be reported, they are often tied to bank accounts that could be.

(Editor’s note: Bold added for emphasis)

I’ve discussed offshore safe deposit box reporting requirements quite a bit on this blog.

Finally, just like in that 1933 gold confiscation order by FDR, what’s to prevent a future U.S. government from treating Americans’ personal wealth as their own? All it might take is one of those now-infamous Executive Orders and voila! “Certain/all contents of personal bank safe deposit boxes located both inside the United States and outside the country are now considered the property of the federal government. Have a nice day.”

And considering the close relationship between the U.S. government and banking system- both here and abroad (as evidenced by many overseas financial institutions playing ball with the U.S. in its recent implantation of FATCA)- such a situation is certainly plausible in my opinion.

Uncle Sam shouts “jump!”, and the banks might continue to respond with “how high?”

For Americans looking to offshore bank safe deposit boxes for protecting certain personal assets against potential future government confiscation, it might be wise to look elsewhere.

More next time, when I wrap up this series of posts.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

(Editor’s notes: Part 5 published here; a qualified professional should be consulted regarding this subject. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/editor of this site is not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information contained herein.)

Sources:

Nestmann, Mark. “Keep Your Hands off My Gold! [Part II].” The Sovereign Investor. 5 Feb. 2008. (http://thesovereigninvestor.com/diversified-investments/keep-your-hands-off-my-gold-part-ii/). 26 Nov. 2014.

Saunders, Laura. “Offshore Accounts: No Place to Hide?” The Wall Street Journal. 20 Sep. 2013. (http://online.wsj.com/news/articles/SB10001424127887324807704579085511331606786). 26 Nov. 2014.

Earlier this week, I was reading an article on The Nestmann Group’s website entitled “Why FATCA Is a Train Wreck Waiting to Happen.” Offshore expert Mark Nestmann was discussing the Foreign Account Tax Compliance Act (targets tax non-compliance by U.S. taxpayers with foreign accounts by focusing on taxpayer and foreign financial institution reporting) when he wrote:

Not surprisingly, FATCA and numerous other laws that require FFIs to enforce US money laundering, anti-terrorism, and securities regulations have led most of these institutions to fire their US clients. Perhaps one in 10 – and possibly fewer – non-US banks still permit US citizens or permanent residents to open accounts…

(Editor’s note: Bold added for emphasis)

None of this should come as a surprise to regular readers of Offshore Safe Deposit Boxes. I blogged back on October 16, 2014:

If you’re a U.S. citizen, I understand it’s getting darn near impossible to open a safe deposit box at a foreign financial institution these days. From The Wall Street Journal’s Laura Saunders (who I’ve mentioned before on this blog) a couple weeks back:

Americans living abroad are being cut off by banks and brokerages as financial institutions seek to steer clear of a U.S. crackdown on money laundering and tax evasion…

Several factors are contributing to the squeeze. One is the Foreign Account Tax Compliance Act, called Fatca.

Congress enacted it in 2010 after learning that foreign banks, especially in Switzerland, had profited by encouraging U.S. taxpayers to hide money with them abroad. The main provisions of Fatca took effect in July.

As a result, foreign financial firms must report to the Internal Revenue Service investment income and balances above certain thresholds for accounts held by U.S. customers. Nearly 100,000 banks and other companies have registered with the IRS. If they hadn’t, all their customers would have 30% withheld from income received from U.S. sources, such as interest and dividends.

Still, many registered firms are closing accounts for Americans abroad or declining to open new ones, in order to avoid increased compliance costs and the consequences for potential errors…

(Editor’s note: Bold added for emphasis)

Like I said later on in that same post:

At least a non-bank safe deposit box in an offshore private vault may be an option for the disenfranchised.

Still, when it comes to common banking needs (financial accounts), it sounds like a number of Americans- particularly those studying or working abroad for an extended period of time- might be out of luck if there’s no overseas branch of a U.S. bank nearby.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Source:

Nestmann, Mark. “Why FATCA Is a Train Wreck Waiting to Happen.” The Nestmann Group. 20 Jan. 2015. (http://www.nestmann.com/why-fatca-is-a-train-wreck-waiting-to-happen#.VMcT0C6PP48) 29 Jan. 2015.

I’ve read/heard a lot about the following lately:

Wealth confiscation. The War on Cash. Capital controls.

But after reading two articles by Doug Casey and Ted Bauman the other day, I’m wondering if a War on Gold related to capital controls has begun as well.

From Doug Casey on his International Man website recently, concerning his experiences with transporting silver coins outside various jurisdictions:

I’ve gradually accumulated about a dozen one-ounce silver rounds in my briefcase, some souvenirs issued by mining companies, plus others from Canada, Australia, China, and the US. But when I left Chile a couple of months ago, the person monitoring the X-ray machine stopped me and insisted I take them out and show them to her. This had never happened before, but I wrote it off to chance. Then, when I was leaving Argentina a few weeks later, the same thing happened. What was really unusual was that the inspector looked at them, took them back to his supervisor, and then asked if I had any gold coins. I didn’t, he smiled, and I went on.

What really got my attention was a few weeks later when I was leaving Mauritania, one of the world’s more backward countries. Here, I was also questioned about the silver coins. A supervisor was again called over and asked me whether I had any gold coins. Clearly, something was up.

I haven’t seen any official statements about the movement of gold coins, but it seems probable that governments are spreading word to their minions. After all, $10,000 in $100 bills is a stack about an inch high; it’s hard to hide, and clearly a lot of money. But even at currently depressed prices, $10,000 is only nine Maple Leafs, a much smaller volume. Additionally, the coins are immune to currency-sniffing dogs, are much less likely to be counterfeit, and don’t have serial numbers. And if they’re set aside for a few years, they won’t be damaged by water, fire, insects, currency inflation, or the complete replacement of a currency. Gold coins are in many ways an excellent way to subvert capital controls. And I think they’ll become much more popular in that role…

(Editor: Bold added for emphasis)

Then there was this from Ted Bauman over on The Sovereign Investor Daily website (a publication of The Sovereign Society) just this Monday:

Recently, however, I’ve been hearing reports that some foreign countries are starting to ask more questions, and require more searches, when someone declares that they are transporting gold or other precious-metal coins. For example, some countries in Latin America — including financial basket-case Argentina — are reportedly quite interested in any unusual coins you’re carrying — even if they’re under the limits and therefore not declarable. Seeing them in an X-ray of your bag may be enough to trigger a search and interrogation…

(Editor: Bold added for emphasis)

Think he’s read/heard about Casey’s experiences too? Bauman went on to surmise:

What’s going on? My guess is that the U.S. and other governments are starting to put in place the elements of a capital controls system. We already know that the Foreign Account Tax Compliance Act (FATCA) is building the infrastructure for capital controls in banking. That leaves cash and precious metals as the two remaining methods to transport value physically. Transporting large amounts of cash is already heavily regulated, leaving one more — gold and other precious metals. It’s not paranoid at all to think that the U.S. government is quietly working with other customs agencies to increase “awareness” of the gold-movement “problem.”

(Editor: Bold added for emphasis)

Bauman is not alone here on his thoughts concerning U.S. capital controls. Others- including financial writer/publisher/filmmaker Addison Wiggin and senior editor of International Man Nick Giambruno– also suspect Uncle Sam is already implementing capital controls in anticipation of a coming major financial crisis. I addressed this subject shortly after launching Offshore Safe Deposit Boxes. I wrote on April 3, 2014:

Should Americans really be concerned about capital controls?

I think it’s a legitimate concern.

Why? Because the idea that it’s permissible for government to restrict the free movement of an individual’s money is no longer taboo among monetary researchers and policymakers.

Two examples illustrate this.

First, back on December 3, 2012, an IMF Survey online piece entitled “IMF Adopts International View on Capital Flows” appeared on the International Monetary Fund website. The subject of the article was capital flows, and the IMF developing “a comprehensive, flexible, and balanced view on the management of global capital flows to help give countries clear and consistent policy advice.” Stated within the piece was the following:

For countries that have to manage the risks associated with inflow surges or disruptive outflows, a key role needs to be played by macroeconomic policies, as well as by sound financial supervision and regulation, and strong institutions. In certain circumstances, capital flow management measures can be useful…

(Editor’s note: Bold added for emphasis)

I read that last part as saying, “In certain circumstances, capital controls can be useful.”

Then there’s this from the Federal Reserve. Scott Davis (Dallas Fed) and Ignacio Presno (Boston Fed) published a Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Working Paper entitled Capital Controls as an Instrument of Monetary Policy in February. From their abstract:

Large swings in capital flows into and out of emerging markets can potentially lead to excessive volatility in asset prices and credit supply. In order to lessen the impact of capital flows on financial instability, a number of researchers and policy markers have recently proposed the use of capital controls. This paper considers the benefit of adding capital controls as a potential instrument of monetary policy in a small open economy.

(Editor’s note: Bold added for emphasis)

Their conclusion?

Traditionally, capital controls have been thought of as one leg of the Mundell-Fleming “trilemma of international finance”. Capital controls were necessary for macroeconomic stabilization since they provided a degree of monetary independence for a country with a fixed exchange rate, but if the exchange rate was allowed to float, capital controls were unnecessary and stabilization could be achieved through monetary policy. However, recent experience has shown that surges in capital inflows and outflows can lead to financial instability even in countries with a floating exchange rate and an independent monetary policy. In a DSGE framework, this paper shows that the benefits of capital controls are present even when monetary policy is determined optimally. Due to the financial instability caused by fluctuations in capital inflows and outflows, there may be a role for capital controls to exist side-by-side with conventional monetary tools as an instrument of monetary policy.

(Editor’s note: Bold added for emphasis)

Granted, the United States is not a “small open economy.” But notice how the idea of implementing capital controls is no longer shunned. It’s even prescribed by “a number of researchers and policy makers” to tackle the above scenario, where financial instability is brought about by large swings in capital flows.

Once again, I feel Americans should be concerned about capital controls being implemented in a future period of financial turmoil.

And then along came FATCA. After digesting an Addison Wiggins July 8, 2015, Daily Reckoning piece arguing FATCA’s real goal is “keeping you trapped in U.S. banks and the U.S. dollar if a Cyprus-like crisis comes America’s way,” I added on July 15:

So is FATCA part of some larger capital controls scheme being carried out by the U.S. government? Maybe. I wouldn’t be surprised if that’s the case.

I can’t say definitively that a capital controls program currently exists in the United States. However, considering I’m in the camp that believes significant economic upheaval is on its way, I suspect the foundation for such a scheme is very likely being constructed.

As for a War on Gold both in the U.S. and abroad as part of a capital controls program, I have my suspicions here as well something might already be in place.

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Sources:

Casey, Doug. “Crossing Borders with Gold and Silver Coins – a Glimpse of Things to Come.” International Man. (http://www.internationalman.com/articles/crossing-borders-with-gold-and-silver-coins-a-glimpse-of-things-to-come). 1 Oct. 2015.

Bauman, Ted. “It’s Time to Get Your Gold Out of the U.S.” The Sovereign Investor Daily. 28 Sep. 2015. (http://thesovereigninvestor.com/gold/time-to-get-your-gold-out/). 1 Oct. 2015.

I’ve noticed Switzerland has been making financial headlines lately regarding more stringent reporting requirements for non-Swiss citizens and their assets stored in the country. Well-known financial analyst Martin Armstrong criticized Swiss policymakers Sunday about the development. He wrote in his blog:

Switzerland has completely capitulated its historic safe-haven status to the entire world. Switzerland was born from a tax revolt against the Hapsburg dynasty in Austria. The tax collector made William Tell shoot an apple off his son’s head with an arrow. Switzerland then remained neutral in war and religion, serving as a safe-haven for those who would be religiously persecuted. All of that is now gone forever. Switzerland has surrendered its integrity and its heritage… The Swiss Senate has passed the resolution to exchange ALL information on anyone who has any assets in Switzerland…

Armstrong added the following Wednesday:

As of January 1, 2016, Switzerland is handing over the names of everyone who has anything stored in its Swiss freeport customs warehouses. For decades, people have stored precious metals and art in Swiss custom ports — tax-free — as long as they did not take it into Switzerland.

Now any hope on trusting Switzerland is totally gone. That’s right — the Swiss handed over everyone with accounts in its banks. Now, they must report the name, address, and item descriptions of anyone storing art in its tax-free custom ports. This also applies to gold, silver, and other precious metals along with anything else of value…

One might think private offshore asset protection may no longer be possible in Switzerland, after reading Armstrong’s words.

However, consider the following.

First, Armstrong declared in that December 6 post:

The Swiss Senate has passed the resolution to exchange ALL information on anyone who has any assets in Switzerland…

Actually, from what I understand, this exchange pertains only to non-Swiss citizens utilizing services provided by Swiss financial institutions- such as banks. Private, non-bank vaults do not fall under this category.

The Swiss Broadcasting Corporation’s swissinfo.ch website reported on December 2:

The Swiss Senate has sealed the end of banking secrecy for foreign clients, following the House of Representatives in accepting the legal groundwork for the automatic exchange of information…

Currently, Switzerland sends data about tax evaders to foreign governments and institutions upon request only. However, the latest decision by the Senate makes it possible for such information to flow automatically to certain countries, among them Australia and the 28 European Union nations, with whom Switzerland has already concluded automatic exchange agreements. Switzerland has already signed a similar information exchange deal with the United States – the Foreign Account Tax Compliance Act (FATCA)…

(Editor’s note: Bold added for emphasis)

Armstrong wrote himself Wednesday:

That’s right — the Swiss handed over everyone with accounts in its banks…

(Editor’s note: Bold added for emphasis)

Second, it sounds like privacy still matters greatly to the Swiss. On his company’s website Tuesday, offshore expert Mark Nestmann discussed the 5-year prison term given to Hervé Falciani, a former employee of HSBC. In case readers are not familiar with Falcani, John Letzing wrote on The Wall Street Journal website back on November 27:

Hervé Falciani, a former employee at the Swiss branch of HSBC Holdings PLC who widely dispersed once-secret data about the bank’s clients, was handed a five-year prison sentence in a federal criminal court in Switzerland Friday.

Mr. Falciani, who worked for HSBC in Geneva, was convicted of aggravated industrial espionage. The court found that he had sought to offer stolen data about HSBC’s clients to a handful of banks in Lebanon.

In addition, the court found that Mr. Falciani tried to provide the data to France’s National Division of Financial Investigations, Germany’s Federal Intelligence Service, and Her Majesty’s Revenue and Customs in the U.K….

Nestmann remarked about the Falcani incident:

Is Swiss secrecy really dead? Only if you’re determined to cheat the taxman or are trying to use funds of criminal origin to fund your account. Otherwise, the Swiss government has demonstrated once again its determination to protect the data of legitimate bank customers from thieves, kidnappers, or extortionate governments…

(Editor’s note: Bold added for emphasis)

He also offered up these reassuring words later on in the piece:

All in all, if you’re looking for a secure place to stash some of your wealth outside the US, and you want it in a country that takes financial secrecy seriously, Switzerland is definitely worth considering…

(Editor’s note: Bold added for emphasis)

By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)

Sources:

Armstrong, Martin. “Switzerland Abandons Its Historic Principles.” Armstrong Economics Blog. 6 Dec. 2015. (http://www.armstrongeconomics.com/archives/39983). 11 Dec. 2015.

Armstrong, Martin. “Swiss to Give Up EVERYTHING & EVERYBODY.” Armstrong Economics Blog. 9 Dec. 2015. (http://www.armstrongeconomics.com/archives/40251). 11 Dec. 2015.

“Senate vote lays groundwork to end banking secrecy.” swissinfo.ch. 2 Dec. 2015. (http://www.swissinfo.ch/eng/data-exchange_senate-vote-lays-groundwork-to-end-banking-secrecy/41813770). 11 Dec. 2015.

Letzing, John. “Former HSBC Switzerland Employee Hervé Falciani Handed Five-Year Jail Term.” The Wall Street Journal. 27 Nov. 2015. (http://www.wsj.com/articles/former-hsbc-switzerland-employee-herve-faciani-handed-five-year-jail-term-1448642802). 11 Dec. 2015.

Nestmann, Mark. “The Swiss win a big victory for bank privacy.” The Nestmann Group. 8 Dec. 2015. (http://www.nestmann.com/the-swiss-win-a-big-victory-for-bank-privacy#.VmtFV0orLIU). 11 Dec. 2015.