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Is Offshore Banking In Belize Still A Safe Strategy?

21 Jan
Offshore Banking In Belize

Belize Under The Gun

Kathleen and I flew from Panama to Belize City Tuesday morning for this week’s Live and Invest in Belize Conference. Passing through the airport, we picked up a copy of the local paper. Big topic in the press and on everybody’s mind in this country is banking. Belize is being beaten up and knocked around by the global banking powers that be (that is, the United States), as the United States carries on ever-more-aggressively with its anti-money-laundering crusade.

Belize isn’t the only country whose banks have come under attack as a result of the United States’ current de-risking agenda. Belize has been targeted hard, though. This is a small country with a small and delicate economy. The fallout from the campaign being waged against it has been big.

When U.S. correspondent banks de-risked their banking profiles by cutting off services to Belize banks, the trickle-down effects were quick and far-reaching. U.S. correspondent banks telling Belize banks they would no longer accept their business caused immediate problems not only for anyone with an account at one of Belize’s international banks (who could no longer send or receive money to or from his account), it also created problems for Belize citizens, residents, and business owners with accounts at local banks. Those local banks lost their ability to send or receive money from outside the country.

In effect, the entire Belize banking industry was cut off.

There are five international banks operating in Belize. All of these, as well as the Central Bank of Belize, lost their correspondent banks. Think of that. The country’s central bank lost its correspondent bank.

As of this writing, all five international banks as well as the Central Bank of Belize have put new correspondent relationships in place, meaning they’re back in business. However, the pressure of de-risking remains a big threat to the Belize economy. The current worry is that U.S. banks will shut off merchant account processing in this country. If that were to happen, it would mean that no one in Belize would be able to accept or process payment by credit card.

That sounds ridiculous, right? Yes… but, unfortunately, it’s also an actual possibility. This happened in St. Kitts last year. Businesses were stuck. They couldn’t process credit cards for many weeks before new merchant processing paths were put in place. If you wanted to stay at a hotel, for example, you had to be prepared to pay your bill in cash… in advance, at check-in. If you wanted to stay in a high-end hotel for, say, a week, that meant handing over a few thousand dollars in cash.

And you had to bring that cash with you. The ATM system is tied into the merchant account processing system. Merchant account processing being shut down means not only no credit card processing but also no ATM transactions.

You could carry cash with you for your vacation, but you have to report carrying cash of US$10,000 or more across an international border. And if you take large amounts of cash out of your account in the United States, you’ll likely be tagged by the NSA or Homeland Security, if not immediately picked up for questioning.

When Is Too Much Control Too Much?

The United States has put the entire global banking world under its thumb. You can’t operate within it unless they allow you to operate. The U.S. government either doesn’t see or doesn’t care about the enormous damage that this is causing to small countries like St. Kitts and Belize. Closing these little countries out of the U.S. correspondent banking network and shutting down their merchant processing abilities is an Armageddon-level attack on their economies. It’s unconscionable… and it should be criminal.

While the international banks in Belize have found new correspondent banks, they continue to look for additional options. However, one local bank, the Belize affiliate of First Caribbean Bank, has decided to leave the market completely.

What does all of this mean for you? Should you avoid Belize banks at this point?

Some are suggesting that anyone who has an account in an international bank in Belize should close it as soon as possible and run for the hills.

My position (having lived through several banking crises in several different countries, with one still pending final resolution) is: Why would you jump ship once the ship has been righted?

You could move your money out of your Belize bank, but where would you put it instead? Panama? Some Panama banks have already gone through the loss and replacement of their correspondent banks but not all. You could be moving from a bank that has managed to come out the other side of this mess to a bank that has yet to live through it… meaning you’d have to live through it again.

Unfortunately, there is no reason to believe the United States government is going to slow its efforts to control the global financial system in the name of clamping down on money laundering. This means it is only going to be more difficult, looking ahead, for individuals and banks around the world to transact business.

The best strategy for an individual in the face of this reality is to have more than one offshore bank account in more than one jurisdiction. Don’t have all your eggs in one basket (jurisdiction). As Belize banks begin to emerge from the struggles of the past several months, I’d continue to include Belize on the list of places to consider doing that.

Lief Simon

Mailbag

“Lief, I have a question to do with the teak residency option in Panama. If one wanted to use a 401k or IRA to make such a purchase would one have to separate out the residency cost from the investment? I was thinking about self-directed IRAs that have that clause against self-dealing… for example, one can’t purchase a house if you live in it?”

A.K.

Most experts agree that what you’re describing wouldn’t be possible. That is, you can’t use your IRA funds to buy property or an investment and then use that investment to obtain residency. Further, in most cases, the investment has to be titled in your own name to qualify you for residency… again meaning you wouldn’t be able to use IRA funds.