Confiscation of Assets
Democracies have legalised the potential confiscation of private assets
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In our modern world, most prudent investors understand bank security, identity checks and similar measures are there to safeguard everyone’s interests. So naturally, that would surely imply asset protection is simply the other side of the same coin? But recent financial world developments, often introduced as a response to global crises, suggest the realities of private wealth protection are rather more complex.
In addition, the long-term security of your valuables and investment assets actually depends to a large extent on where they are stored. Bank deposits, for instance, are much safer in some countries than in others – with Switzerland and Liechtenstein consistently topping the list of safe havens for financial assets.
So what are the risks? What constitutes a modern safe haven? And what strategies are open to investors?
Seizure of institutional assets
Investors should be reassured that financial institutions generally do their utmost to protect their customers’ assets and manage them to secure optimal benefits. After all, it is hardly in their own commercial interests to do otherwise. However, they are also obliged to adhere to the laws governing their jurisdiction, and this particular obligation has sometimes proved costly for their customers.
In 2008, around the time of the global economic downturn, Argentina nationalized its private pension funds, with critics accusing the government of confiscating these private assets to repay the country’s public debt. Such sequestration of private funds is by no means limited to Latin America alone. Early in 2009, Ireland used its national pension fund assets to help pay for an EU/IMF bailout. Elsewhere, the governments of France, Hungary and Bulgaria all raided pension funds between 2010 and 2011 as a means of relieving debt pressures on the public purse.
More recent developments suggest that more and more governments are granting themselves fiscal powers to seize legitimate private assets. Spain, for example, imposed a tax of 0.03% on all bank account deposits (2014), while Greece gave its tax officials the power to open certain bank safe deposit boxes, in order to confiscate quantities of cash and valuables from some Greek owners (2015).
Significant moves have also taken place at international level: At a meeting in November, 2014, the G20 Nations endorsed a plan to ‘promptly recapitalize’ the deposits of banks deemed ‘too big to fail’ by using their ‘unsecured debt.’ Commenting on this landmark proposal, offshore experts The Nestmann Group said at the time this development “profoundly changes the rules for banking globally, and not in a good way.” According to Nestmann, with the primary source of unsecured debt being customer deposits, insolvent banks will thus be free to recapitalize by converting not just deposit and current accounts, but also CDs and money market accounts, into stock.
The EU’s own proposals for failing banks, the Bank Resolution and Recovery Directive (BRRD), became law in 2016, and a year earlier in Germany. According to the European Council, these measures will facilitate “a systematic recourse to the bail-in of shareholders and creditors”. Experts believe the slightly ambiguous reference to bank “creditors” can be taken to mean any future EU bank bail-in will likely also involve the assets of bank depositors.
What is a safe-haven jurisdiction?
Given the far-reaching power of BRRD-style proposals, an independent sovereign state with no external affiliations should now become the top priority for investors seeking offshore asset protection. In addition, any optimal location should be able to offer an enduring tradition of democratic government, together with a stable economy underpinned by a trusted currency. The prospects of any preferred location would be further enhanced by qualities such as: solid, defendable borders; good transport links; a financial centre of global repute; as well as a national character which values discretion and vigorously defends individual property rights.
All these attributes, and many more, accurately describe the primary features of Switzerland and the Principality of Liechtenstein. Furthermore, it is perhaps revealing to note that no confiscations of assets have ever taken place in these two independent countries close to the heart of Europe. And neither has there been any attempt to adopt external legislation to allow this, nor any local campaigns to set up such measures within these jurisdictions.
A sound offshore strategy
The existence of BRRD shows that even stable European democracies have legislated to pave the way for emergency seizure of private assets. So investors too need to adjust their own offshore wealth protection strategies without delay to minimise the potential risk. However, it would not be particularly wise to decide to make a transfer of assets to a new location as a solution for one particular threat alone.
The reason why asset storage locations such as Switzerland and Liechtenstein are particularly favoured options is that they offer optimal locations from multiple perspectives. Taking Switzerland as an example, Swiss storage providers such as Swiss Gold Safe offer premium facilities for the safekeeping of cash, precious metals, artworks and similar categories of valuables. Swiss Gold Safe benefits for private clients and institutions include:
To summarize the main points of this article:
To find out more about Swiss Gold Safe services and rental of offshore safe deposit boxes, please visit: https://offshoresafedepositboxes.com/switzerland/.