Interest in investments among Russians and residents of CIS countries continues to grow, and more and more people are considering opening foreign accounts. This choice is conditioned by a wider range of assets on foreign stock markets and better protection of assets on such accounts compared to Russian or CIS accounts.
Bank account for investments
Private banking service provides an opportunity to open a foreign account with a minimum deposit amount from 500 thousand US dollars. However, such accounts are usually subject to high service fees and the strategy for placing funds in them is focused on the medium term. This option is suitable for those who wish to keep their money abroad and have significant funds.
Foreign brokerage accounts are suitable for active investors with a good understanding of foreign markets and assets. However, you should take into account the peculiarities of taxation in your country and abroad, as the investor will have to deal with this issue independently. In addition, it is necessary to constantly monitor market fluctuations and rebalance the account in time to minimize risks and preserve profits.
Unit-linked (ULIP / PPLI) счет
Unit-linked programs are an ideal trading platform for long-term investors with access to global financial instruments. The distinguishing characteristics of this type of investment win out over others:
- Low entry threshold, typically starting at $75,000 (in the case of one-time contribution programs).
- Ability to purchase a variety of financial assets such as stocks, bonds and cash, and hold funds in three major currencies (US dollar, pound sterling, euro) in separate accounts.
- 100% level of confidentiality and capital protection, as account data is securely encrypted and protected from access by third parties.
- Convenient formula for purchasing funds with a lower entry threshold than buying direct.
- Tax optimization, as the brokerage account is protected by a life insurance policy, which allows you to defer income taxes.
- Ability to create a trust for maximum protection and privacy of savings.
- Use when buying real estate abroad, as the owner can pledge his unit-linked account to a foreign bank to obtain funds for the purchase of real estate or to simplify the procedure for obtaining a mortgage loan.
- The possibility of opening a unit-linked savings program to meet various target goals, such as a child’s study abroad, building capital for retirement or major purchases in the future.
All these factors make unit-linked accounts an attractive investment tool with a high level of efficiency and ease of use.
It is possible to open an insurance investment account through various international insurance companies. Today some of these companies are International Assurance Limited, Hansard, Custodian Life, Investors Trust and others. Below we provide a brief overview of the terms and conditions of some of them.
International Assurance Limited RCC (IAL) is an international insurance company incorporated in Mauritius, known as a friendly jurisdiction. It has been in operation since 2009 and has an insurance license, which can be found on The Financial Services Commission website. IAL uses GenRe to reinsure policies. IAL offers the opportunity to open a direct account with the popular American broker Interactive Brokers. It also provides access to an international Mastercard that can be linked to the policy. For the Russian market IAL opens programs for capital from $100,000 or equivalent in currencies USD, EUR, GBP, JPY, AUD.
Investors Trust is an international insurance company established in the Cayman Islands in 2002, with the registration of the holding company’s parent company in the United States of America. It specializes in unit-linked and index-linked products (major indices S&P500 and MSCI EAFE). It is the only insurance company offering a choice of three jurisdictions for opening an account for investors: Puerto Rico (USA), Cayman Islands (not available for Russia and CIS) and Labuan (Malaysia). The jurisdiction of Labuan (Malaysia) is currently available.
Hansard is another insurance company that specializes in the English method of investing and provides access to programs for Russians and residents of CIS countries. The company has been operating in the insurance services market since 1987, which testifies to its reliability and quality customer service. Hansard’s shares have been listed on the London Stock Exchange since 2006 and the company publishes its results and performance to the market, which provides a check on the financial stability and performance of the group.
Custodian Life is an insurance company incorporated in 1981 in Bermuda and regulated there. It is the first insurance company in Bermuda, established in 1947. Custodian Life provides flexible methods of investing capital with growth opportunities over the medium to long term. The company’s products are designed to meet the client’s main objectives, such as capital formation and ensuring financial stability in the future.
How to open and fund an overseas account To open an overseas investment account, the following steps must be followed:
- Choose a financial partner.
- Prepare the necessary documents.
- Send a request for approval to the selected company.
- Receive confirmation of the request to open an account.
- Sign a contract for services.
- Transfer the money to the specified details in accordance with the terms and conditions agreed between the parties.
Bank transfers are usually used to fund accounts, the details of which are provided upon approval of the account opening application. You can transfer money on your own through your personal online account or contact your bank branch for assistance. Unit-linked savings programs are topped up with a regular bank card without commission.
Nuances of an account abroad for citizens of the Russian Federation
When opening an account abroad, it is necessary to take into account the nuances associated with financial monitoring by the Central Bank and tax inspection, and modern geopolitics.
Financial monitoring when transferring money abroad is compulsory and is carried out by Rosfinmonitoring for each transaction exceeding the threshold of 600,000 roubles. Even smaller amounts may fall under the attention of the anti-money laundering department if they appear suspicious.
Control by the tax authorities is aimed at monitoring transactions that may be suspicious from the point of view of non-payment of taxes. When opening a bank or brokerage account abroad, it is obligatory to notify the tax inspectorate and pay income taxes. In the case of a unit-linked insurance account, no tax notification is required because the deferred taxation rule applies and taxes are only paid when the account is partially withdrawn or completely closed.
It is also important to consider hereditary planning. Many investors don’t pay attention to this, but no one is immune to the unexpected. In the case of bank and brokerage accounts, many owners do not leave wills naming direct heirs for such cases. In a unit-linked insurance policy, there is an option to specify one or more direct heirs to the account who will have access to the funds as soon as possible (within 1 month).
Each of the three accounts discussed has different benefits depending on the investor’s goals, but the unit-linked insurance account is the most beneficial for long-term investors. With enhanced capital protection and access to global assets, such an account allows for prudent overseas deployment and numerous benefits, including tax deferred and inheritance planning.