The “Kill Switch” On Your Bank Account

I loathe bringing up this person, but her story is a good illustration of political risk – specifically, the ability of governments to seize assets within their jurisdiction at the flip of a switch – the risk that you take by locating anything of value within any single jurisdiction, whether it’s your business, your savings, or yourself.

Last week, without warning, the IRS seized Lindsay Lohan’s bank accounts for what she owed on back taxes. It was also noted that she further aroused the suspicion of the IRS by requesting to be paid in cash for appearing at events, which is certainly not illegal (yet). It’s no secret that governments around the world hate cash, as cash transactions are harder to track and control – but that’s a story for another day. Had Lindsay Lohan placed some of her money in an offshore bank account in a jurisdiction safer than the US, it is highly unlikely that the IRS would have been able to seize it at the drop of a hat.

Also last week, the US Senate passed a bill that would seize the assets of alleged Russian “human rights violators” located within US jurisdiction. Given the US government’s long history of supporting dictators when it suited “our interests” (the Shah of Iran, Hosni Mubarak, Saddam in the 1980s, Meles Zenawi in Ethiopia, the House of Saud, the Bahraini regime, and Augusto Pinochet just to name a few), they should be in no position to judge the morality of others by literally stealing their assets within reach.

Political risk of course isn’t just confined to the US government, though, given that they control the world’s premier currency and the nearly limitless leverage that entails, I believe they are the largest source. Governments can invent excuses or exploit deliberately vague laws to the interpretation they want. It would be naïve to assume that the US government (and most others) operates under any constraints other than “what it can get away with.”

If you do anything the authorities don’t like - whether it’s speaking out against corruption, not filing your taxes correctly, having a Ron Paul bumper sticker, peacefully ingesting a non-approved substance, or just generally not being an obedient serf - you could find out the hard way that most governments are all too eager to exercise the “kill switch” that they hold over the assets within their reach. You could find your business or bank account shut down with the flip of a switch.

As a wise International Man once put it, in order to minimize your political risk and maximize your freedom, it is best to have your savings in one country, your citizenship in another, and your physical self in a third country. 

Diversifying against political risk can be achieved with internationalization, and it is a prudent step for anyone, not just Americans, to take. Please forward/share this article so that the ones you care about can have access to the information they need to take pragmatic steps to internationalize.

Sign up here to join the International Man community for free. Then check out the interesting discussions on the IM forums, so that you can stay up to date with the latest and most actionable information to become internationally diversified.

Sincerely,

 

 

 

 

Nick Giambruno

Nick Giambruno

Nick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. He is a CFA charterholder. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here.

Tags: second passport, offshore banking, irs, capital controls,