How And Why To Open A Bank Account Overseas
I recommended that you consider opening what I term an international bank account–that is, an account at a bank that isn’t necessarily located where you’re living. In fact, it can be better if it’s not. This bank account, typically with a bank with offices around the world, is the best first step for any overall diversification plan. It’s a place to park assets and capital privately and safely.
And it’s a separate thing from the other bank account you’ll need in the country where you eventually decide to retire. That local account is an operating account, out of which you’ll pay your local living expenses.
Should you open this local operating account before you arrive in your new country? You may not be able to. It’s harder and harder to open a non-resident account most everywhere in the world. Most any bank you approach as a non-national these days is going to want you to produce some proof of some connection to the country before they’ll allow you to open an account with them.
In some countries, proof that you own a real estate investment property can work. Short of that, you’re going to have to show that you have a local address (most widely accepted proof of this is a utility bill at a local address–an electric or cable bill, for example, for the address where you say you’re residing) or that you’re in the process of applying for a residency visa (this doesn’t always work, but some banks are happy with this as proof of connection sometimes).
If you want to open a local operating account in advance of taking up (and being able to prove) local residence, an option can be what’s called a “fiduciary” account or a private bank. When we purchased our apartment in Colombia last year, we needed to open an operating account to facilitate the renovation and paying the ongoing expenses of ownership. Eventually, we may reside in that apartment. Meantime, we couldn’t produce proof that we’re not non-residents, so, at the time, no local bank would open an account for us. A local fiduciary firm called Alianza Valores, however, did.
We’ve since, by the way, been successful in opening a local account with a Colombian bank, thanks to a personal introduction from our attorney. This is another thing to keep in mind when approaching a local bank in a foreign country. Often, you’ll be wasting your time if you don’t have a referral.
The point is that, depending on where you’re going and your circumstances, it may be necessary for you to wait until you’re physically resident in your chosen destination overseas before you’ll be able to open a local bank account there. That said, you want to start the process as soon as you’re able. The first thing to understand about opening a bank account in another country is that, like most everything else, it’s probably not going to be accomplished the way it would be accomplished “back home.”
In the United States, for example, opening a checking account at your neighborhood bank is a straightforward process. You walk in, sit down with an account representative, answer a few questions, fill out some forms, and, in no time, you’ve got a bank account. That’s not how it works in most of the rest of the world. The U.S. wars on terror, offshore havens, offshore banking, drugs, and money laundering have created stress on banks worldwide to comply with U.S. “know-your-client” standards. As a result, these are increasingly onerous and more onerous for the American abroad than for anyone else. It is ever-more-challenging worldwide to obtain an account as a non-national, but it is especially difficult in certain hot zones (such as, unfortunately, Panama right now).
Furthermore, some countries view opening a bank account not as a right but as a privilege.
Every country’s requirements are different, and every bank processes the requirements in its own way. Bottom line, you’re going to have to jump through hoops. Depending on the jurisdiction, the process can take weeks or longer.
Generally speaking, you’ll need two banking references. If you have only one bank account currently, you might be able to substitute a letter from a credit card company for the second bank reference. You’ll also need at least one local professional reference, from an attorney or accountant, for example, in the country. The attorney helping with your residency visa work or the purchase of real estate (if you’re buying) should be happy to help.
You’ll need two forms of photo identification, typically your passport and a second ID, such as your home country driver’s license. And, as I’ve explained, you’ll need proof of local residence (your local utility bill). Armed with those documents, make an appointment to meet with a bank representative. Yes, you need an appointment. Most banks are going to want to see you in person. Better, as I’ve mentioned, can be an introduction or personal referral from someone already doing business with the bank (your local attorney, for example). During your meeting (it 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 sources of those funds? How much will you be withdrawing from the account each month?…
The paperwork involved will be far greater than for opening a U.S. bank account (to continue our comparison). Expect reams of forms, required signatures, even fingerprints. This is all part of creating your file. Once your file (or dossier, as it’s called in France) has been compiled, it must be reviewed. You’ll be told this review process will take a week, but in many countries it can take much longer. Don’t be afraid to contact the bank every day to check on the status of your file, lest they lose track of it.
Opening a corporate account is an even greater challenge. For this, you’ll need considerably more documentation, and you may have to schedule a personal interview with each of the company’s named officers. Your file in this case will be reviewed by a committee. The committee’s job is to ask for more documentation. No matter how much paperwork you’ve provided, it won’t be enough. Week after week, you’ll receive additional requests for further material–additional reference letters, corporate financial statements, financial information on the principals involved with the business, etc. Expect the entire process to take at least two to three months in most countries, even if you’re proactive and following up regularly. It took us three months to open a corporate account for my business in Panama City, even though we’d had a personal account with that bank for years.
While I recommend that you have more than one “international” banking relationship (so that you can diversify available cash over more than one bank and so that you can obtain ATM, debit, and credit cards from more than one institution), one local operating account should suffice.
How do you choose which local bank?
Sometimes, you may not have a choice. Only one bank may be willing to open an account for you. However, if you do have options, here’s how to consider among them…
You want a local bank that:
- Will give you an ATM or debit card. Not many local banks offer this service. If you find one that does, that’s your bank…
- Offers online access. This almost certainly will be more limited than the Internet banking service you’re enjoying from your international bank. However, if you find a local bank that supports any online access (even if only to check your account balance), again, jump at it…
- Provides customer service. Any customer service will do…because you’ll be appalled by the traditional lack of it…
- Will allow you to keep your money in some currency other than the local one (if that’s what you want to do). Ask if you could have a U.S. dollar or euro account, for example. You may want to exchange money into the local currency as soon as you transfer it into the country…or not, depending on which way the exchange rate is moving…
A friend from the States, Andrew, decided recently to divide his time between California and Panama City. He came to Panama to outfit his new apartment, and he needed cash to buy new furniture and appliances, to pay the painter, etc. So he went to the Panama City bank where he’d held an account for more than a year to make a withdrawal.
Alas, he’d forgotten his checkbook back in the States.
No check, no cash, the bank teller explained…
“What do you mean?” Andrew asked incredulously. “I have money in my account. I’d like to withdraw some of it, please.”
After an extended back and forth, finally an option was offered. Go stand in that line over there, the teller told Andrew, and get a cashier’s check.
Andrew did as instructed. He stood in line for an hour-and-a-half for the privilege of paying US$10 for a cashier’s check drawn on his own account. Then he stood in another line for another 30 minutes to cash it.
“Maybe you should move your account to another bank,” I suggested when Andrew told me his sad tale.
“Oh, no, no,” he replied, “this bank has much better customer service than my previous bank here.”
In other words, all banks in Panama City, indeed, all banks in this part of the world, are inconvenient to deal with. Living and doing business here, you learn to take this as a given and to expect that every banking experience will be frustrating and nonsensical. You adopt this position, or you put your sanity at risk.
I’ll note here, in the interest of fairness, that a new bank has opened in Panama City, Unibank, that is making customer service a priority. We’ve switched our local Panama accounts and are now Unibank clients.
Important Note For American Readers
If you’re an American and this local operating account is your only foreign bank account, you can avoid having to file an annual FBAR with the U.S. IRS if you keep the balance below US$10,000 at all times.
No matter who you are, I recommend that you keep the balance in your local bank account below US$10,000 anyway. Remember, this is an operating account, not a place to park capital. Keep only one or two months’ of local expenses in the account at any time. That way, should something happen with the bank (things can happen…), your exposure is limited.