From Sovereign Man:
“Should we crawl into bed with the IRS?”
Thanks to the steady barrage of U.S. government regulation ranging from the obtusely insipid Dodd-Frank financial reform to the impossible-to-implement Foreign Account Tax Compliance Act (FATCA), banks everywhere have to make this decision.
In short, Congress has arrogantly passed legislation to control foreign banks on foreign soil. FATCA, for example, requires that every single bank on the planet enter into an information-sharing agreement with the IRS.
Banks that don’t comply will face severe penalties, including being subject to a steep withholding tax on funds sourced through the U.S.
In the long-run, Congress will have put the final nail in the coffin of the U.S. banking system as the market will simply establish an alternative destination to source, clear, and transfer funds.
For now, though, many banks are simply walking away from U.S. customers altogether… throwing their hands up and saying “we would rather not do business with this entire market rather than deal with Uncle Sam ever again…”
To be clear, this is a bank-by-bank decision that each one is making individually. And we’re seeing -a lot- of banks around the world, from Singapore to Panama to the Cayman Islands, say ‘thanks but no thanks’ to U.S. customers.
But, as the saying goes, whenever one door closes, another one opens. OK, maybe not exactly 1 for 1… but there are still plenty of options around the world where U.S. taxpayers can establish foreign bank accounts to diversify their savings abroad…