The Basis Of Banking: KYC, Location, and Purpose For A Smooth Experience

Having structures abroad, like companies or bank accounts, can significantly boost your projects, bringing you wealth, returns, safety, and stability. Yet they can as easily bring you the opposite: complications, over taxation, increased liability, or the complete loss of your funds.

It's time to understand that banking and financial services are not to be taken lightly. This is why we introduce the basis of banking, a guide that might be helpful when drafting your plan to obtain greater benefits. 

Basis Of Banking: KYC, AML, FATCA, And Other Components 

Opening a bank account abroad or establishing a company can be a lifesaver by boosting your business, your company, or your investment projects. Moreover, the right bank account can protect your money for several years by giving you interest. 

The same applies to real estate: Entering the right deal in the right country can make a difference, adding value to your portfolio and returns in the long term.

But things can go really badly, too. You may put a fair amount of your savings into a savings account, then the bank can go bankrupt and leave you with nothing. 

Banking and Real Estate Examples 

Taking the example to the real estate sector, one can invest in a land with full potential only to realize that in 10 years the neighborhood is ruined. Suddenly, you are left with a distressed asset. It’s not only that you won't get capital gains: you are lucky if you ever get to sell it.

In general, it’s better to choose locations that have already proven their worth. Entry prices may be higher, but the future is less uncertain. In Bocas del Toro, for instance, Panama’s tourist magnet, there's a private island for sale with full ownership.

The same goes for banking. This is why we have created this basis-of-banking guide. We can't say that following this guide will save you from problems, loss, or other risks, but it can help you organize your ideas and make the best out of your banking activities.

We stress the fact that this guide isn't infallible; it's just our opinion on what helps in the early stages of the process. 

The Basis Of Banking Through Three Principles

1-Choose the right jurisdiction and Currency

When we think about banking, KYC quickly comes to mind along with many other concerns, like jurisdiction. 

Currency: future account holders should not only look at AML and KYC procedures but also at currency. You want a currency with a strong history, like the US dollar or the euro, which are not prone to sudden changes or abrupt falls.

Important note about currency: this shouldn't discourage the investor from diversification. If history has taught us something is that all great empires have fallen, so it doesn't hurt to allocate certain funds into emerging currencies, especially those that are doing well.

Political history: nobody likes sudden sways when it comes to politics, and certainly not the investors. Countries with a turbulent political history are not good places to allocate your assets.

2-KYC: Meaning In Banking 

It's important to understand what is FATCA, AML and KYC. These initiatives are the basis of banking because they confirm the account holder's identity. They are intended to discourage fraud, shady businesses, or illegal activities. 

AML and KYC are short for “anti-money laundering” and “know your customer”. This says it all, showing how these principles can help make the banking sector a safer place for everyone.

When we delve into what is FATCA, we find a different explanation. Short for Foreign Account Tax Compliance Act, it applies only to American citizens who open accounts in foreign countries.

Its main objective is to motivate, quite strongly we may say, US citizens to disclose their foreign assets. 

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KYC Meaning In Banking And How It Can Affect Me

The good thing about banking KYC is that it is the bank's business. Clients' obligations finish when they turn in their documents and forms as requested, obviously, doing it earnestly and with full disclosure. 

The challenge arises when trying to open accounts in exclusive banks that demand more documents and stricter conditions that sometimes are hard to meet unless your last name is Rothschild.

What is FATCA, AML and KYC

Thus, Know Your Customer is focused on proving the person's identity without a doubt, and anti-money laundering forms are meant to detect any suspicious activity that might harm the bank's reputation. When it comes to FATCA, it concerns only American citizens, and it usually doesn't take more than filling out a few forms. 

3-The Purpose Of The Account

A third stage becomes vital in the basis of banking: this is the purpose. As we recently discussed in our article, the decision will be greatly influenced by the expected use of the funds.

For protection, banks in Switzerland and Liechtenstein have always been at the forefront, especially if you need storage for valuables, gold, or precious metals. 

Those who are in the e-commerce field will probably need an account that can be linked to virtual wallets like Stripe or PayPal, and in US dollars if the business is international. In this case, the United States, Puerto Rico, or Panama are excellent choices. 

Many people open bank accounts abroad for specific reasons, for example, if they intend to buy property or open a business. For them, high interest rates are unimportant as they plan to move the funds quickly, while for savers, high yields are all that matter. 

Disclaimer: this article doesn't constitute banking or financial advice. Before opening a bank account in any jurisdiction, make sure to consult with certified specialists. 

Understanding Banking: KYC And Other Secrets Revealed To Make The Best Decision

These parameters may come in handy when deciding where to open a bank account. The field is ample, and the possibilities are increasing now that new players are offering competitive options. 

At Mundo, we have experts in banking, corporate, real estate, and economic migration, and can help you implement the right tools for your strategy. When it comes to banking in particular, we can assist you in opening accounts in Panama, Puerto Rico, the US, Serbia, and Singapore. If you don’t find your preferred country on this list, contact us and ask about it. 

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