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Opening an offshore bank account can be hell for Americans. It’s 10 times more difficult for the offshore bank trying to navigate the ever changing environment. I’ve written posts on the impact of FATCA and how the US has turned foreign bankers in to unpaid IRS agents. Here’s the rest of the story on offshore bank advertising and why opening an account is so difficult.

Not only must offshore banks report most transactions involving US persons, they’re prohibited from marketing to us gringos. You won’t see a commercial for a Panamanian bank on ESPN any time soon. Nor will brokerages in Cayman advertise in the Wall Street Journal. The US has made sure our banks aren’t forced to compete on a worldwide playing field.

Advertising by foreign banks is prohibited by the Securities Act of 1933. Regulation S specifically covers international banks, brokerages, exchanges, and securities offers. It essentially prohibits all forms of solicitation of people in the United States.

Offshore banks that offer investments must also comply with the advertising rules of Section 15 of the Exchange Act and statutes enforced by a myriad of other agencies that are beyond the scope of this article. This post is focused on banking and will barely scratch the surface of foreign securities offerings.

So, a bank in Singapore can’t advertise in the US nor cold call prospects to sell securities or banking services. If a US resident approaches the offshore bank, that’s fine. We are talking here about the bank’s ability to market to US residents.

Note that HSBC and a few others offer their offshore services to Americans online and in print. This is allowed because HSBC has a US banking license. An offshore bank is one without offices in the United States.

Because foreign banks don’t want to deal with the SEC, many have decided to avoid the issue altogether by refusing accounts to Americans. Because of Reg S and FATCA, the majority of offshore banks, along with their highest returning investment options, are closed to US citizens.

Banks that do accept Americas with our scarlet letter A are careful not to solicit our business. TV and print ads are obviously out. The internet is a more interesting medium.

The most recent guidance by the SEC on internet advertising is from 1998, 5 years before Facebook and when Compuserve and AOL were cool. These rulings are more recent than the 1933 SEC code but still way out of touch with today’s online world. See: SEC International Series Release No. 1125 (March 23, 1998).

Advertising by Offshore Banks

Here’s what offshore banks need to do to avoid the SEC’s wrath.

Offshore banks are considered to be “offering” and “selling” an offshore bank account, much like an offshore brokerage sells you an international security. To qualify under Regulation S, the offer and sale (account opening) must both occur outside of the United States.

Let’s first consider the offer. An offer is made to a person in the States when someone located in America views an advertisement or any other message from the bank meant to “condition the US market.”

On the internet, this means the bank’s website may not “push” advertisements to Americans. Pushing includes advertising in outbound email campaigns and pay-per-click where you can control the region / country where the ad is displayed. For example, Google’s PPC system allows you to determine where your advertisements will be seen. Online ads may not be displayed to anyone located in America. In my opinion, affiliate marketing also falls in to this category and is prohibited.

Push ads vary from “pull” lead generation or organic search optimization in that pull is passive content applicable to anyone anywhere. Most agree that blogs and other SEO tools for organic placement are acceptable so long as content does not directly target US investors. An American actively searching for information is seen as being different from a US person who sees and ad and is thereby motivated (coerced) to view an offer.

Active push campaigns may constitute an offer where pull posts might not… unless the website allows the customer to open an account online. In general internet terms, a “sale” occurs online wherever the server is located. It seems logical that a Belize bank could allow customers to open an account online through their server located in Belize. Not so sayeth the SEC. The ability to complete the transaction online while physically present in the US means the bank is making an offer to US persons, which is prohibited. It’s the location of the buyer and not the server that controls here.

So, how do you find the best offshore bank if they can’t push out advertisements? Some have invested in SEO and content based pull systems. Otherwise, firms like mine can qualify and introduce clients to offshore banks that accept Americans. An offshore bank will always be more comfortable with a referral than someone off the street, especially if you hold a blue passport. Also, if the referrer offers US tax compliance, all the better because the bank knows the client won’t get them in to trouble.

Regulation S for Offshore Banks

Regulation S, rules 903 and 904, and a variety of other sections govern advertising to US persons by offshore banks. Under Reg. S:

An offer or sale must be made in an offshore transaction; and
No “direct selling efforts” may be made by the issuer, a distributor, or any of their respective affiliates, or any person acting on their behalf.

An offshore transaction is one where:

No offer is made to a person in the United States; and
At the time the buy order is originated or the account opening initiated, the buyer or client is (or is reasonably believed to be by the bank) physically outside of the United States.
1. The customer is outside of the US if he is physically located out of the country. It is not sufficient for her agent to be offshore. She must be out of the country.
2. If the buyer or account holder is a corporation, then the company’s authorized representative must be out of the country. The authorized representative is the account signatory.

Offshore banks and brokerages are prohibited from advertising in publications with a “general circulation” in the United States. This applies to newspapers and magazines with circulations of more than 15,000. If less than 20% of a publication’s circulation is in the US, offshore banks may advertise but are required to include all kinds of disclaimers telling Americans to stay away. Whether these limitations will apply to online marketing is unknown.

Offshore banks are also prohibited from mailing printed marketing materials to US prospects, conducting promotional seminars in the United States, and any other activity that is meant to “condition the US market.”

Offshore Bank Marketing – Making the Sale

As a result of the above, offshore banks have limited their internet marketing efforts to pull campaigns and SEO content creation.

When it comes time to make the sale, most foreign banks require new accounts to travel to their offices to open the account. They take a copy of your passport and your entry stamp for their files to prove you were in country when the application was submitted.

There are a few notable exceptions to this travel requirement. For example, Belize and Cook Islands allow you to open an account by courier. Their forms included statements about where you were when the board meeting authorizing the account opening took place and they expect you to enter a foreign country in these pages.

Whether these forms are sufficient for the bank to “reasonably believe” you are out of the US is up for debate. They are more likely the result of a need for these smaller jurisdictions to offer an easier path to account opening for competitive reasons rather than a solid legal solution to a complex problem. Hopefully the fact that they are “off the radar” of US regulators will cover for their willingness to take a risk in exchange for a competitive advantage.

Other form based workarounds include banks that require new accounts to sign a statement that they didn’t view the bank’s website before opening an account. Many offshore banks refuse to respond to email inquires from US persons.

Finally, some offshore banks and brokerages that refuse accounts to US individuals will accept offshore corporations held by Americans. The thought here is that the corporation is the client and not the individual. Of course, such banks will report transactions by the beneficial owner to the IRS under FATCA. The corporation might work for the SEC but does not affect tax reporting requirements to the IRS.

Offshore corporations provide excellent privacy and protection. They can manage either investments or active businesses efficiently offshore. My only word of caution is to avoid structures with nominee directors where you are required to give up control of the assets. Even when nominees are used, you must be the only signor on the offshore account.

I hope you’ve found this post on the trials and tribulations of offshore bank advertising interesting. Offshore banks must overcome a number of hurdles to continue offering services to Americans. This explains why they charge higher fees than their US counterparts who don’t need to follow any of these rules. Their operating and compliance costs per account are significant.

If you have any comments or questions on offshore banking, please send them to christian@premieroffshore.com.

Offshore Bank Internet Marketing Best Practices

Here are my suggestions to anyone responsible for advertising an offshore bank. It’s intended as a guide for bankers who already have a handle on Reg. S, FATCA, et al.

Host your website outside of the United States. All of the bank’s emails, data, and website content must be hosted outside of the United States. This should be obvious for security reasons and don’t let the less expensive and faster US based services convince you otherwise. While a US website does not constitute a US presence for tax or licensing purposes, it is one of the factors the SEC might use against you in a Reg S or marketing case.

Only advertise on websites hosted outside of the US. Potential advertising partners should have no US presence, office or mailing address, and a significant portion of their traffic should be from international readers. A good example of such a site is www.lowtax.net

No PPC targeted to the United States. If you push advertisements on the internet, you must avoid US users. Any type of PPC campaign targeting the US is sure to make you a target.

Be smart with your SEO posts. Don’t affirmatively target US persons. Write about internet banking, offshore privacy, and related matters without discussing US centric issues. When writing on FATCA, do so from the bank’s perspective (compliance) and not from the client’s point of view.

All SEO and internet work should be done outside of the United States. The last thing you need is your US SEO team to be subpoenaed and telling a court they were instructed to target US customers.

Outbound email ads are only recommended for to lists with 20% or fewer US names. A US name is a person living or present in the US. Most Americans abroad, except for active military, are fair game.

I don’t believe the maximum list size of 15,000 subscribers for print mediums will hold up in email campaigns. Any email campaign where you don’t know the demographics of the list is high risk.

Place any offerings of securities behind a password protected page accessible only after the user agrees they are not US person or that they are an accredited investor. How to confirm identity and accredited status are complex matters for internet marketers and beyond the scope of this post.

Your client should be out of the US when they sign and submit the account opening request. Forms may be submitted in person or by courier. If by courier, the city of origination on the waybill should be outside of the United States and you must put this form in the client’s file.

Here are a few options to regarding the requirement the contract be entered into abroad:

Maybe you use a form like Belize and hope for the best.
Maybe you require the customer to travel to your bank. Certain countries, such as Panama, have laws requiring an in-person visit.
Maybe you set up an unlicenced office in a city Americans can access easily.
- For east coast clients, Nassau, Bahamas offers the most direct flights from the US in the Caribbean.
- For west coast clients, it appears Los Cabos, Mexico is the most efficient option with non-stop flights from 40 US cities. Mexico City has the most flights, but that’s a much longer journey and a tough place to navigate.
- Of course, you will be prohibited from marketing to persons in the country where you have this unlicensed office.
- It doesn’t matter where the clients complete the paperwork so long as they are outside of the United States. A single office in a centrally located city could service multiple foreign banks.

The bank may only present at or sponsor conferences held outside of the US. Any display of your logo at a US event may be considered conditioning the US market. No form of advertising, including investment tombstones, are permitted in the United States.

You might work with unrelated websites to post positive articles about your offshore bank but avoid traceable affiliate programs. You may not own or control the website posting articles about your bank.

First, I’ve been writing about offshore banking for over a decade. My most recent (2015) articles on the topic are:

If you have questions on forming an offshore bank, please send them to christian@premieroffshore.com.