As Swiss Banks Close Their Doors, Look to Uruguay

By Bob Bauman JD, Offshore and Asset Protection Editor

The “Switzerland of Latin America” – that’s the phrase I used six months ago when I wrote to you from Punta del Este, Uruguay. I was referring to the delightful South American country I was visiting for the first time.

But that catchy phrase was not mine: 61 years ago, in the shattered wake of World War II, Uruguay was described as the "Switzerland of the Americas" in a 1951 New York Times article.

Uruguay earned that unusual name because of its popularity as a safe haven for capital and precious metals fleeing Europe at the time, and for its adoption of careful, Swiss-inspired banking laws and customs.

When I wrote about Uruguay back in March, I got some serious grief from good friends in Switzerland, claiming I had abandoned their country, which I had always called the world’s leading offshore financial center. Well, my friends, I still say that … but Switzerland and the Swiss have got some major problems of their own making – and anyone planning personal financial activities has to keep them in mind.

Money Taking Flight

In the three years since the tawdry UBS-American tax evasion scandal was exposed, Swiss government politicians have tried to shield UBS and other threatened Swiss banks by capitulating to U.S. IRS pressures, too often at the expense of American clients. Thousands of U.S. names have been turned over to the IRS.

In effect, this has all but repealed the 1934 Bank Secrecy Law, ironically even as Swiss courts have upheld that law. As a self-serving byproduct of this, thousands of innocent Americans with Swiss bank accounts suddenly found themselves dumped in a wave of unjustified financial ethnic cleansing by nervous Swiss banks.

The truth is, there are still very solid Swiss banks that do welcome American clients. We know who they are, and we can arrange accounts with very little trouble for our Sovereign Society members.

But Swiss banking experts themselves openly now say that Swiss banks must lure affluent clients from emerging markets or face a slow death as the pursuit of tax dodgers by the U.S. IRS and European tax-collection hounds results in more fleeing assets.

Western Europeans may pull as much as US$139 billion, or 15% of their holdings, from Swiss banks, claims Herbert Hensle of Cap Gemini SA. Bank Sarasin & Cie AG reported last week that private clients withdrew US$308 billion from Swiss locations in the 12 months leading up to June 2012.

Switzerland built the world’s biggest offshore wealth center during an era of “black money” that ended when the U.S. sued UBS three years ago. Many of the highest fee-generating European and U.S. customers are withdrawing funds as the hunt for tax evaders widens.

As many as 100 Swiss banks will vanish, according to Vontobel Chief Executive Officer Zeno Staub. (Vontobel is one of the cooperative Swiss banks with which we work).
Solid and Confidential

By comparison, Uruguay’s banking system is solid, appealing to investors and depositors from around the world who seek a safe haven that also offers tax advantages. Since January 1, 2008, almost 400 banks have failed in the United States … meanwhile, Uruguay’s banks have operated without problems. While the U.S. GDP has shrunk, Uruguay’s continues to grow.

Unlike too many other offshore banks around the world, banks in Uruguay welcome American clients. Most banks offer e-banking, but a personal visit is required to open an account.

Uruguay’s financial reputation has made it an important regional financial center for all Latin America. There are 11 private banks, plus the government central bank, Banco de la República (BROU), that strictly supervises all banks in the country.

The private banks are totally or partially owned by leading American or European financial institutions. Banco Itaú and Lloyds TSB in Montevideo usually accept non-resident American clients in their retail banking branches. In addition, attesting to its regional banking role, there are over 30 representative offices of foreign banks.
Financial Privacy Guaranteed By Law

Unlike the United States, where the PATRIOT Act has destroyed financial privacy, Uruguay’s protection is based on a bank secrecy statute (Law #15,322, 1982) that forbids banks to share information with anyone – including the government of Uruguay and foreign governments.

The only exceptions allowed are in cases involving issues of alimony, child support, or alleged crimes such as foreign tax evasion and fraud. Even then, information can be shared only after obtaining a local court order.

The country does not automatically exchange tax or bank account information with the U.S., Canada or any other government. Uruguay does comply with Article 26 of the Organization for Economic and Community Development’s (OECD) model standards for tax information exchange requests. That is, banks may exchange information upon proof of foreign tax evasion or tax fraud.

In keeping with current international “political correctness,” Uruguay’s government does not want the country labeled as a “tax haven.” Nevertheless, Uruguay is, in fact, an offshore tax haven that imposes very few taxes on foreign residents living here.

Last February, The Sovereign Society held its first "Uruguay Investment Tour" to give people a chance to experience everything this beautiful country has to offer. Our guests had an incredible time learning about unique investment opportunities, as well as about what life is like in Uruguay. The trip was so successful, by popular demand we are taking another 50 guests back in November!

I invite you to join me, Erika Nolan and Jeff Odyke, along with leading Uruguayan experts who will meet with you and explain banking, residence, citizenship, real estate, farm investments, tax-free zones, wines and expat living.

Our second Uruguay Investment Tour is scheduled from Friday, November 9, 2012 through Thursday, November 15. That's springtime in the Southern Hemisphere, and this may be just the escape you will need after the U.S. elections, regardless of who wins.

Until next time,


Bob Bauman