Author Archives: Alex

THE BANKING PASSPORT

In the course of writing The Passport Report, we interviewed lawyers who used the term “Banking Passport“. Until then, we had never heard of it. But after our initial rejection of the concept as something possibly illegal, we have had a change of thinking. Especially for people who live in unfree countries, the concept of having a second Banking Passport now seems quite reasonable.

For example:
Let’s say that Mr Smith is a citizen of the UNITED STATES OF ARRESTIA. As you know, ARRESTIA, hereafter called US, or “A” for short, has all sorts of currency laws and restrictions. “A” makes the unreported transfer of cash abroad a major felony-crime of “money-laundering”, punishable by 25 years in the pokey. It makes having a secret account abroad to preserve assets against government confiscation (by inflation or otherwise) a crime. Incredibly, failure to file detailed reports of all activities four times a year and pay one- third or more of your income to “the State” is also a crime. One can file all these reports and pay, but such disclosure defeats the whole purpose of most Arrestians to have a nest-egg that is judgment proof, and above all, government proof. There are persistent rumors that the US will follow the example of its mentor Russia and simply declare all banknotes over $20 to be null and void because cash is something only used by criminals and drug dealers. Confiscation of private property is the logical solution of bureau-rats to all conceivable civic problems. In our example, Mr Smith is an Arrestian who has wangled the right to travel abroad freely. He also makes an occasional deal where profits could be paid into a foreign account. He would probably be glad to pay a reasonable tax on such profits. But if he did pay a tax and revealed the nature of his foreign business (or publicly reported where he keeps his assets), he would never have anything squirrelled away for emergencies or retirement. So he stashes his cash and unwillingly accepts the risk of being a “criminal” by depositing his wealth outside of US. Thus, Smith wants to be low profile.
Offshore Financial Advisers” tell Mr Smith that he can control, yet conceal, secret assets by means of trusts, holding companies, Foundations, and other expensive legal enitities requiring annual costs of £2000 or more to set up, and at least £1000 per annum for care and feeding. The disadvantage of such arrangements (necessary for active businesses, in our opinion, but a waste of money for mere asset management) is that not reporting such activities is illegal anyway. To make things worse, with offshore trusts or other vehicles:
A)    Someone else knows your business! Those persons are not necessarily: i) Discreet ii) Honest, nor iii) Cheap to feed.
B)    Your advisers (or new partners in crime) will say they “need” to be able to sign checks (to insulate you, they say) and control your funds. But all too often the adviser:
i) Makes bad business decisions, ii) Makes mistakes, iii) Is not available when you need him, iv) Steals, or at best, v) Gets into difficulties unrelated to you and to save his hide, gives you up. You can’t sue anyone for telling your secrets without stirring up an even bigger can of worms!

HOW TO STAY INFORMED WHEN THE LAWS CHANGE

As laws change constantly you should either inquire with the local embassies of countries you plan to visit before departure or, at the very least, find some other way of getting the facts straight. A very useful publication is the ABC World Airways Guide (published by Reed Travel Group, Church Street, Dunstable, Bedfordshire LU5 4HB, UK. The size of two phone books, this monthly guide lists not only all scheduled arriving and departing flights, transfer connections etc at all airports, worldwide, but also gives constantly updated information about not only currency control regulations (if any) in all countries but also useful additional information about social norms, “do’s and don’ts” (never show the soles of your shoes in a Moslem country, for instance). Cost is about US $500 per year.
Cheaper yet is TIM, the Travel Information Manual. This volume omits airline schedules and the do’s and don’ts. Because of this, it is far slimmer and thus far less expensive, too. TIM is a green A5 format paperback of about 400 pages, with a new edition every month. It lists currency rules, visa requirements, duty free allowances, etc. A free copy of last month’s issue can probably be begged from your friendly neighborhood travel agent.
As long as you are able to convince authorities that you are merely a tourist you may get away with importing, carrying and exporting cash in amounts far bigger than those “allowed” by local law. It is always better to be regarded as merely an ignorant and slightly daft tourist than a local. Local citizens are always considered fair game for police and customs officials alike. Take the example of British comedian Ken Dodd. Dodd was indicted for tax-evasion after authorities got wise to the fact that he kept very large amounts of money in his house, in cash. Dodd’s explanations that he quite simply does not trust banks failed to convince Big Brother-investigators. Fortunately for Dodd, he was able to convince the jury and was acquitted of the charges.
American authorities are notorious for flat-out confiscation of large cash sums found in the possession of private citizens. In 1991, a woman in Florida was pulled over by a motorcycle cop on a minor traffic violation. When searching her purse for her driving license, the officer noticed that it was overflowing with large denomination dollar bills. She was immediately arrested on suspicion of being a drug dealer. Her money was confiscated. In reality, she was on her way to a real estate broker in order to close a property deal. The cash she carried was the intended downpayment. Only after several months of court battles was the money returned to her. No apology was offered, of course. Her lawyer probably got one third as his fee.
So, be smart. Carry more money than you ordinarily would need, and carry it right – on your person. If you need to transport large sums of money, avoid air travel if possible – even domestic flights. Americans get a particularly hard time from their government if found in possession of even relatively modest amounts in cash (about 1000 dollars and up). If you need to move huge sums in cash OUT of your country, the most intelligent way of doing so is, if possible, by boat. If you are worried about moving huge sums of cash out of the United States by plane, why not consider taking the Queen Elizabeth II to UK? This way, at least, you will not have to explain the origins of the cash in plain view of US Customs officials, as might be the case if the money was found in your car when crossing the border into Canada. Or, simply declare any reasonable sums you are going to export before you cross the border.

HOW TO ELIMINATE ALL RISKS OF CASH

Is it “risky” to carry about serious money in cash? Not if you do it right.
First of all, when staying in hotels you may make use of the safety deposit box during the night. If no safety deposit box is available in the hotel, you may keep cash in your room with you at night, putting a wedge under the door to prevent night prowlers from entering. A makeshift wedge may be produced by slightly mangling. Simply travel with a plastic wedge, available in most hardware stores. In addition, put a couple of small coins on top of the door handle and place a glass or a plate underneath. This will wake you up if anyone ‘forgets to knock.
Second, even if you carry cash on your person at all times, most pickpockets and muggers do not frisk their victims. You may carry several thousand dollars, Swiss francs or pounds sterling quite unobtrusively in a Velcro-fastened pouch around your ankle, thigh or in a money belt around your waist. Some currency has metal strips embedded and these can set off airport security alarms. If you are frisked after walking through a metal detector, security personnel may oblige you to show the contents of the pouches around your ankles or shins. You never know who may be watching.


In theory metal strips may show up but in practice there is so much other metal around in and on the human body, detectors are not really a concern. More worrying is the work of the US government agency which produces paper money and is researching a tag agent added to the printing ink. This sneaky development could lead to chemical “sniffing” to detect the tag agent and ignore other false factors.
A new style of underwear with money pouches has been dubbed “Kangaroos”. These patented briefs by Portuguese inventor and underwear-designer Carlos Vieira have a pouch in front for storing money, credit cards and other valuables. They are somewhat hard to find but easy to have made yourself.
Other ways to thwart pickpockets and muggers: keep your bankroll in your toiletries. A Californian company makes a line of more than 150 camouflage safes. These are cans and bottles that look like deodorants. But in reality, they are fake. The bottoms screw open to reveal hollow insides, perfect for storing money, jewellery and other important items. Designs include fake hairspray, fake soft drinks, fake jars of peanut butter, etc. Don’t use them for smuggling as customs officers recognize them at a glance.
For keeping a few thousand dollars in your garage or in the boot of your car, there is even a fake tire inflater. The camouflage “safes” are between US $15 and $25 in most large department stores. Thieves in the USA are slowly catching on to them. But in the rest of the world, they are mainly unknown. The Corner Spy Shop, 56A Queensway (corner of Inverness Place), London W2 3RY, UK has a small selection at £25 sterling per container. They also sell UV-ink, voice changers and other fun stuff, but at heavily inflated prices. Mail order buyers look to the US for better selection and more realistic pricetags.
The other thing you have to watch out for is currency controls. Some countries, such as Switzerland and the UK, have no currency import or export controls whatsoever for residents and nonresidents alike. Other countries have strict controls for residents but not for non¬residents – with the possible, added twist that non-residents may be obliged to declare the import of cash exceeding a certain amount in order to be allowed to re-export it on departure. Due to international concern about terrorists it is a lot easier to fall foul of these regulations when travelling by air, where you stand a high chance of getting frisked or even strip-searched (Pakistan is notorious for harassing departing travellers, residents and non-residents alike, to ensure that money, gold or diamonds are not smuggled out).
Even if there are no controls or regulations regarding the importing or exporting of cash in the country you are visiting, you will be sure to raise some eyebrows if the authorities discover a million dollars in cash in your carry-on luggage or in a suitcase in the trunk of your car. Warning: Many airports now require departing passengers to show that portable computers, cameras or hi-fis in carry-on luggage work – the legacy of the Lockerbie bombing. Do not rip out the intestines of your computer and replace them with cash if you travel by air! At best, it may lead to nosey questions and waste of time – at worst, it may lead to you being detained until you can produce documentation that you came by the cash in a legal manner and are not
a professional money launderer. Also remember that big stacks of money in a suitcase do show up on the sensitive X-ray machines now in use.

RATES OF EXCHANGE

MORE MILEAGE ON THE MARK
If you find yourself in a foreign country, you normally get the best rate of exchange in banks. Sometimes, however, post offices give you better value for your money if they are prepared to change foreign currency (France, for instance). Black markets can be even more profitable, but a wise PT is careful not to get cheated, nor to run foul of the law. Apply common sense and prudence. In Hungary or South America, you’ll always get a fast shuffle from street money changers.


Large international hotels generally offer the worst rate of exchange. But they are open 24 hours a day and very seldom charge any commission. For a quick cash infusion in the middle of the night, they are better than the street people who whisper “change money”.
Where to change money? As a rule of thumb, change your cash in the country where the currency you are carrying is stronger, worth more, higher esteemed and more stable than the currency you want. Gunter is travelling to Istanbul from his home in Frankfurt. The German mark is a strong currency. The Turkish lira is not. Gunter gets more mileage on his mark if he waits until he is in Turkey before exchanging it. The same is true between Switzerland and Italy. You get two per cent more changing Swiss francs in Italian banks. Normally, banks located in airports operate the same rates of exchange as those downtown. However, in some countries (Portugal, Morocco, etc) their charges and commissions tend to be much higher.

CASH IS KING, LONG LIVE THE KING

In terms of privacy, cash is unrivalled – to a point. It is highly portable. It is accepted worldwide for just about any purchase (provided you have the correct local currency). And, best of all, it does not in itself leave behind a trace of you. Once issued, there are no records of transfers and it is defined as being a “bearer” instrument. This simply means whoever holds cash is presumed to be the rightful owner of it. In most countries, this has led to a special “cash rule” law being passed which asserts that stolen cash tracked down should not be returned to its rightful owner after it has been spent. A merchant who, in good faith, accepts stolen cash for his goods or services from a bank robber does not risk being asked to return it.
The distinction is a crucial one. Let us say, for instance, that someone breaks into the Louvre Museum in Paris and steals the Mona Lisa. This, obviously, does not mean that the painting is now his – just as a bank robber does not automatically gain legal ownership of the loot the second he rushes out of the bank. If the art thief then sells the painting it does not follow that the buyer gains legal ownership of it – after all, it is still stolen property. No matter how many times a piece of stolen property is bought and resold, it legally remains the property of the owner from whom it was stolen. This means that if the property is ever recovered it will be returned to whence it was stolen although certain countries, including Italy, make an exception to this rule if a buyer of stolen property acted ‘in good faith’. This leads to some highly amusing international court battles where authorities in one country implore their colleagues in another to force the “good faith” – buyer of a stolen object to return it.
If you take 1000 dollars, pounds or francs from your bank account and go spend it on something, there is no paper trail of what you did with it – only the fact that you signed a receipt for it and went away. You should, however, note that keeping purchase receipts for something you buy with cash is potentially culpable. A few years ago, the singer-come-actress Barbara Streisand returned to the United States from a holiday in Japan. On examining her luggage (yes, celebrities are also harassed) two items of interest were found by the customs officials – a pair of fancy boots and a US $700 dollar cash receipt for said boots. As this exceeded the amount of foreign-purchased goods she could legally bring into the US without declaring it, good old Babs had to pay the duty and a fine. Needless to say, authorities issued a public statement informing the world press of their catch of a “celebrity-smuggler”, presumably to inhibit others from perpetrating the same crime.
Still, the fact remains that only cash may be handed over in exchange for goods or service without leaving anyone except the seller in a position to make a permanent record of it – and, again, watch out for what you do with any “cash receipt” given you. As a rule of thumb you may safely discard such receipts when the seller has delivered his end of the bargain unless you envisage later finding yourself in a position to prove that you are the rightful owner of whatever you bought. If you hold an absolutely top secret meeting with someone you are not supposed to be seeing in a restaurant, for instance, someone finding the receipt may investigate by turning up at the restaurant and get you identified by showing pictures of you or your contact to the maitre d\ This may be highly damaging if, for instance, you are under a court order not to meet nor speak to a witness in a civil or criminal case. Golden Cash Rule number one: unless it is highly possible that you will be required to present them at a later date, discard immediately and safely (by burning, flushing out in the toilet or similar) any cash receipts that you get. What should Barbara have done? Worn the boots and mailed that receipt to herself before leaving Japan, of course. Or paid the seven per cent duty!

Bankers and bank staff.

Bankers and bank staff, like all people with mouths, are generally indiscreet. All but a very few countries are generally invasive of privacy rather than protective of it. Most governments (translate politicians) are ready, willing and able to confiscate your assets without giving it a second thought. So what does one do? The solution is to bank “offshore“, in a country where your banker doesn’t know anyone you know, and, as mentioned before, to bank under an alternate name. A small island or country like Switzerland or Luxembourg whose economy depends upon keeping it attractive as an offshore banking center is less likely to confiscate your money. Likewise, a few countries have a long tradition as banking centers.

CAN YOU SUPPLY A LIST OF GOOD, RELIABLE, SAFE BANKS WHO KNOW HOW TO KEEP A SECRET? CAN YOU EXPLAIN HOW TO IDENTIFY GOOD BANKS?
We could use the “woman” example and say that banks are like women. We recognize too thai our female readers could say the same thing about men! Ail men, women and banks have certain desirable characteristics and many have fatal flaws. Your favorite is not necessarily my favorite. But given what I have said up until now, and realizing that our readers want specific recommendations, here come a few.

HOW DO YOU GET AROUND THE PROBLEM OF PROVIDING A “BANK REFERENCE” PARTICULARLY IF YOU ARE OPENING A FIRST ACCOUNT ABROAD IN A NEW BANKING PASSPORT IDENTITY?

Most bankers want a reference on you mainly “for the record”. The world is full of swindlers and con men who pretend to be someone else in order to divert (ie steal) funds that don’t belong to them. Bankers do not need the aggravation of being involved with customers who immerse them in litigation or unfavorable publicity. If you come in with a simple story, explaining why you want a secret account and if you plan no fancy and illegal financial shenanigans, most banks in offshore banking centers will accept your account upon a mere showing of a passport. Most individuals with tax or domestic problems do not want any foreign banks contacting any professionals or bankers in their home country. If you mention the common problems of possible divorce and the avoidance of confiscatory taxation, most “offshore” bankers will give you an understanding ear. None will ever want to be helpful to common criminals, terrorists, drug dealers etc. If they are hard-nosed or don’t like your looks or smell, they may insist upon some sort of letter of introduction or reference.

For a reference letter that will be acceptable everywhere, it is often possible to look up the name of an accountant or lawyer in the country of your banking passport, and to obtain a letter addressed ‘To whom it may concern”. This letter says merely that “Mr Curt Customer has been a valued client for X years and is highly recommended\ If you mention to your new banker that you wish to keep your new account a secret from everyone in your home country, the banker – if he has any sense of ethics, will never check your reference. You can point-blank ask him if he intends to call your reference giver, and if he says “yes”, then say, you’ll have to take your business elsewhere as you regard this as a serious breach of your confidentiality. Normally, your new banker has his document “for the file”, and that is enough for him.
If your new potential banker does not like your looks, your attitude, or the idea that you are showing off by bringing in large sums of cash, he may reject your business. Thus it is best to make an appointment well in advance, come in to merely discuss the possibility of opening a substantial account. Then shut up and let the banker sell you! Perhaps you make the first deposit with a small amount of cash, say US $25,000 to $50,000. If you need to deposit more, use checks you have purchased for cash or travellers checks acquired at another bank in the same town, made payable to your new name or (once your account has been accepted) to the order of your new bank.
After an account is opened, it is easier to feed it with cash (even in a country where cash deposits are monitored or restricted) by making a large number of smaller cash deposits in other branches of the same bank and also by depositing checks you have purchased for cash. Or you can make several cash deposits to new accounts at other banks and then consolidate by making bank transfers from other banks in the same town. You can simply ask at a branch if there are any restrictions or reporting requirements in that particular country in connection with cash deposits. We suggest you might have favorable answers in Andorra, Belgium, Luxembourg, Gibraltar, Germany, and Austria – to name a few names, but be careful in any EU country which since July 1992 has to report any amount over 15,000 ECUs (£10,000 or US $15,000) paid in or out in cash.

WITHOUT KNOWING THE LOCATION OR BALANCE IN THE ACCOUNT DURING MY LIFETIME?

HOW WILL MY HEIRS OR THE PERSONS I WANT TO INHERIT THE FUNDS BE ABLE TO GET MY MONEY

There are many possibilities. First, instructions about the existence and testamentary disposition of the account after your death can be given in a sealed envelope to a trusted third party. This person should probably live outside the jurisdiction of your home country. You can tell your kid or wife that she should see this person for a sealed envelope in the event of your death. The trusted third party should have some incentive to see that your heirs get the envelope – like being told that US $2000 will be delivered to him by the heir upon your death if he delivers. The envelope can contain a list of your assets, a will (properly witnessed) an assignment or death instructions. Banks in many countries accept death instructions, powers of attorney or assignment orders upon them signed before the death of the owner and do not require probates.
This is true in Switzerland or Liechtenstein for instance – not however in most British Colonies or ex-colonies, where Common Law is in effect.


There you need a will, probate and all that expensive bother. The Common Law idea is that it is too easy to forge the signature of a dead person and there should be a great deal of formality required to pass assets upon death. But as these “Estate” court proceedings have turned into a way to give lawyers, administrators, executors and appraisers and a grand assortment of politically appointed parasites a big chunk of your estate, people now go to great lengths to avoid probate. For advice on this subject there is a very good paperback book called (US and UK versions) How to Avoid Probate by Norbert Dacey. But getting back to offshore banks, your bank will also be glad to have one of their own legal staff go over with you the various options you may have available to you with the costs, advantages, and disadvantages. One of my favorites is to simply have my heir sign all the papers to give him a joint account or signing power during my lifetime as well as after my death, but not to reveal the location of the account, except in the sealed letter to be opened upon my death. It is important to remember that some arrangements have to be made because if you do nothing, the fine print in your account opening papers usually provides that after some long period of inactivity in your account (like 20 years) the account becomes the sole property of the bank. Obviously, with this incentive, the bank is going to make absolutely no effort to find your heirs! In some countries, after periods of inactivity the state takes the money and the account earns no further interest for the holder, who must usually pay a 50 per cent fee to “heir-tracers” to get his own money back. In most of the states of the US this period is only five to seven years! Moral? Make arrangements before you die unless you want the enemy to get your money.