Nomad Capitalist Chapter 8: Offshore Banking - In Other Words, Just Being Smart

Henderson walks into a Romanian bank. He has his passport. That is it. Twenty-five minutes later he has a fully functional bank account. The banker, Teodora, looks at him like he is crazy when he acts surprised. “Why would it not be easy?” she asks.

That one line sums up the entire chapter. Why do we assume banking should be hard? Why do we treat opening a bank account in another country like it is some kind of criminal activity? Because that is what movies and politicians told us. And most of us never questioned it.

Your Bank Is Probably Not That Great

Here is the thing Henderson keeps coming back to. US banks ranked only 40th safest in the world in one study. The UK was 44th. Since 2000, over 550 banks have failed in the United States alone. Meanwhile, Singapore has three banks. None of them have ever failed. Not one.

So why do people keep all their money in American or British banks? Habit. Comfort. And the belief that “our country” must be the best at everything.

I grew up in an ex-USSR country. We learned very early that trusting one government with everything is a bad idea. My parents did not need a book to tell them that diversification across borders makes sense. They lived through a system collapse. When your savings can evaporate overnight because of decisions made by people you never voted for, you start thinking differently about where you keep your money.

Henderson makes the same point but from an American perspective. He tells a story about trying to send a wire transfer to himself while in Romania using his Chase account. Chase blocked his online access. Their solution? Come to a US branch with your debit card. He was in Europe. They could not understand why someone would be on the other side of the world and still want to use their own money.

That is not a bank working for you. That is a bank working against you.

What Offshore Banking Actually Is

Let us clear something up. “Offshore banking” just means having a bank account in another country. That is it. If you live in America and open an account in Canada, that is offshore banking. If a Singaporean opens an account in Singapore, that is just a bank account. It is the same bank. You are just using it as a foreigner.

Henderson makes a joke about this. It is like someone telling you to try Chinese food when you visit China. In China, they just call it food.

The word “offshore” carries so much baggage. People imagine suitcases of cash, Swiss numbered accounts, James Bond villains. Henderson says numbered bank accounts do not even exist anymore. They died after 9/11 and after the US government went after Swiss banks. The whole spy movie image of offshore banking is decades out of date.

Modern offshore banking is boring. You wire money in. You get an ATM card. You use online banking. It works the same as your bank at home, except often better. Singapore banks let you hold 12 to 15 currencies in one account. You can switch between dollars, euros, and pounds with a click. Try doing that with Bank of America.

Six Myths Henderson Destroys

This chapter spends a lot of time busting myths. Let me go through them quickly because I think this is the most useful part.

Myth 1: Offshore banking is what you see in movies

Nobody is carrying suitcases of cash to Caribbean islands. Well, almost nobody. One offshore banker told Henderson about a single bank somewhere in the Caribbean that still accepted cash deposits for a 16% fee. His comment: “They might as well put up a sign that says we launder money.” Real offshore banking is wire transfers, debit cards, and online dashboards. Just like at home.

Myth 2: It is for hiding money

No. You must report foreign bank accounts to your government. In the US, the FBAR form is due every June 15. The penalty for hiding money offshore? Up to half your balance. Half. Whether you have ten thousand or ten million. Why would you risk that when you can do everything legally and still get the benefits?

Henderson had his own money confiscated once. California took money from his account for a tax fee that had already been ruled unconstitutional by California courts. The banks did not fight it. They just let the government take it. An offshore account adds a layer of distance between you and that kind of overreach. Not secrecy. Distance.

Myth 3: It is for avoiding taxes

Opening a bank account in Panama does not magically make your taxes disappear. If you live in the US, you pay US taxes. If you live in Canada, you pay Canadian taxes. A foreign bank account changes none of that. People have gone to jail believing otherwise. Henderson is very clear: do not listen to anyone who tells you a foreign bank account alone will save you from taxes.

Myth 4: You will get audited

Henderson says he has been in this industry for years and does not know a single person who was audited specifically because of an offshore bank account. The IRS guy at his desk is not sitting there plotting to get you. File your taxes cleanly, report your accounts, and you are fine. Anyone can get audited randomly, offshore accounts or not.

Myth 5: Foreign banks will collapse

This one makes me laugh. People worry about a bank in Singapore failing while ignoring that their local bank keeps two cents per dollar on hand. Some offshore banks keep 20 to 30 cents per dollar. The FDIC in the US has well under one percent of deposits in reserves. If every bank failed at once, you would get about one dollar for every three hundred you deposited.

Henderson mentions the Cyprus bank crisis. Yes, it happened. But everyone saw it coming. It was the hot money capital for Russians. The lesson is not “do not bank offshore.” The lesson is “do not make stupid decisions.”

Myth 6: I do not need a foreign bank

If you plan to live your entire life in one country and never invest internationally, maybe you do not. But if you want flexibility, if you want to buy property abroad, if you want to send money internationally without your bank freezing your account, then you probably do.

The Benefits That Actually Matter

Henderson lists several real advantages. Higher interest rates. Some foreign banks pay five to ten times what American banks offer. New Zealand, Cambodia, Georgia, Armenia. In some emerging markets, you can earn double-digit returns just from bank interest.

Currency diversification. If all your money is in one currency and that currency loses value, you lose value. Ask people in Zimbabwe or Argentina how that worked out.

Business functionality. Foreign banks understand international business. They do not panic when you send money to Mexico, Australia, and Georgia in the same week. Your US bank might freeze your account for that.

And here is an interesting one. Some countries will give you a residence permit just for depositing money in their bank. Armenia offers residency for a $20,000 investment in securities. Turkey offered citizenship for $500,000 in a bank deposit. You can get a bank account, earn interest, and get a residence permit or passport all from one action.

Build Your Tunnels Now

Henderson uses this concept of “tunnels” that I find very practical. The idea is simple. Banks that accept foreigners today might not accept them tomorrow. If you open an account now, even with a small deposit, you are usually grandfathered in when rules tighten.

He gives the example of Chinese banks. Around 2016, you could open an account with as little as $1,000. Those banks stopped accepting foreign accounts later. But people who already had accounts kept them. They built their tunnel before the door closed.

This is happening everywhere. Hong Kong banks are getting pickier. Singapore might follow. FATCA regulations make US citizens especially problematic for foreign banks. The window is narrowing. Henderson says act now, even if it is just a small account. The options available today might not exist tomorrow.

The people who will be hurt the most? Small depositors. As compliance costs rise, banks want bigger accounts. The person with $5,000 will have fewer and fewer choices as time goes on.

Where to Actually Bank

Henderson has strong opinions here. Avoid the Caribbean islands. They have been harassed by Western governments to the point where banking there is not worth the trouble. Avoid old-school offshore destinations like Switzerland and Liechtenstein unless you have massive deposits. And definitely avoid HSBC. Henderson says they are the worst offshore bank despite marketing themselves as the international solution.

His number one recommendation? Georgia. You can open a bank account with as little as $7. The process takes about ten minutes. Online banking is simple. Interest rates on US dollar deposits can reach 5%. Exchange rate spreads are tiny. The only catch is you need to fly there in person.

For people who do not want to travel, Henderson warns against remote account opening. Those Caribbean banks that will open an account without meeting you are the ones causing problems. If you want a quality account, show up in person. A $500 flight is cheaper than the $100 wire transfer fees and monthly maintenance charges you will pay at a sketchy offshore bank.

Henderson also likes Montenegro, Romania, and Serbia for banking in the Balkans. Singapore remains excellent for larger depositors. Cambodia offered 11% on US dollars at one point. Every situation is different, and the best bank depends on your citizenship, how much money you have, and whether you are willing to travel.

Key Takeaway

Offshore banking is not shady. It is not illegal. It is not only for rich people. It is just banking in another country. The word “offshore” does all the heavy lifting in making it sound scary.

The real question is not “should I bank offshore?” It is “why would I keep all my money in one country, in one currency, in one bank that ranked 40th in the world for safety?”

Henderson keeps repeating his core phrase. Go where you are treated best. If your bank cannot handle international wire transfers, if they freeze your account when you travel, if they keep two cents per dollar of your deposits on hand, then you are not being treated best. You are just being treated.

Start small. Open one account somewhere. Put a little money in it. Report it properly. And stop watching spy movies for financial advice.

Book: Nomad Capitalist by Andrew Henderson | ISBN: 9798461831486

Previous: Chapter 7 - Nomad Healthcare Next: Chapter 9 - Offshore Companies and Tax Savings

Part of the Nomad Capitalist series