By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
A number of financial advisors who are concerned about the coming financial crises in America have recommended transferring some assets beyond the borders of the United States. For prudent wealth management, it is an option worth consideration.
Unfortunately, there is bad news for Americans who want to transfer funds and investments outside the US. Foreign banks and brokerage firms don’t want custody or management of assets owned by anyone who is either a US citizen or resident! Huge numbers of Americans with existing foreign accounts have already had them summarily closed.
In times past, a number of Americans established overseas accounts in Switzerland and other nations. If the total value exceeded the Internal Revenue Service (IRS) reporting threshold, information about these accounts and assets were supposed to be reported by the taxpayers to the IRS on their personal tax returns.
As you might suspect, some of these foreign assets involved attempts to hide them from the US government, family members, or business associates. In many instances, taxpayers chose not to disclose the existence of such accounts, report the income on such assets, and pay the related income taxes.
The Department of Justice and Internal Revenue Service have long been aware that this occurs. More than 60 years ago the IRS began pressing for so-called “voluntary disclosure” programs where, if banks and brokerages would turn over information about accounts held by Americans, the US government would not make life difficult for the foreign entity. The first two such programs had limited lifespans. Still, they generated 33,000 disclosures and $4.4 billion of tax collections by mid-2012.
The Foreign Account Tax Compliance Act of 2010 (FATCA) has created additional obstacles for Americans seeking to establish bank and brokerage accounts outside of the country. Now, any non-US asset manager or financial institution with accounts held by Americans must register with the US Securities and Exchange Commission (SEC) as an investment advisor, under terms of the US Investment Advisors Act of 1940. Before this legislation, almost no foreign banks or brokerages registered with the SEC.
Registration with the SEC and compliance with SEC regulations is a greater burden than foreign banks or brokerages want to bear. As a result, even long-time, law-abiding Americans have seen their foreign accounts closed. Americans now seeking to set up overseas accounts with foreign-based institutions are almost always turned away.
I’m not sure of the degree to which Americans who want to establish accounts solely to store physical precious metals are affected by the current restrictions. Many large foreign banks have significant US operations and are already registered with the SEC and other US regulatory agencies. Also, several storage facilities in Switzerland and elsewhere are owned wholly or partly by US-based banks and brokerages which already comply with SEC regulations. Americans seeking to use such institutions should realize that such foreign accounts don’t really have any privacy from the US government. The bad news is that these are just about the only “foreign” banks and brokerages that would be willing to open and hold accounts for Americans.
It has been a standard development throughout history that any country’s government that made it difficult for its citizens to move assets beyond the borders of the nation descended into totalitarianism. If it didn’t eventually allow free capital flows, then that government ultimately failed. Just because the nation may be the United States of America does not mean it is exempt from this historical pattern.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster ( under “News & Articles) and at CoinInfo. His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com. He is also the financier and executive producer of the forthcoming movie “Alongside Night” (trailer posted at http://www.youtube.com/watch?v=sTZ8vn45Cds).