Guatemala Bank Accounts: The Truth

Recently we have gotten inquiries about banking in Guatemala.  We did some research to see if we felt comfortable offering this service to our clients as well.  The results were shocking!  Below is our findings both good and bad.

Guatemala Banking Risks:  This jurisdiction is so bad we feel it necessary to provide the following warnings:

• Don't be fooled by websites promoting Guatemala as a serious offshore banking jurisdiction.
  
  
• Don't be fooled because the bank being offered has billions in assets.  Our research shows that Guatemala is unstable, with unchecked violence in the streets, and bank owners disappearing with investors money!  Recently the fourth largest bank in Guatemala went bust!
  
  
• Don't be fooled by claims that Guatemala banks have a good rating from Fitch and Moody's.  Just before the 4th largest bank, Bancafe, went under it had the same good ratings.  There was no forewarning by the rating agencies.
  

7000+ customers lose $233.7 million !  

Contrary to what websites pushing Guatemala say, people did lose money, to the tune of 233 million dollars.  In fact, only onshore bank account holders (locals) were reimbursed for their losses.  Here is an excerpt from EFE news feed: 

Some 7,000 customers of the bank, however, have not been reimbursed for $233.7 million in deposits that were placed in Banco de Comercio and later transferred to an offshore bank based in Panama.

FOPA covers savings held domestically by Guatemalan banks, but it does not guarantee offshore deposits that go untaxed.

Guatemala Banking Collapse: 3 Bank Failures in the last 2 years

In the past year or so 3 banks have failed in Guatemala.  Two of the failures are covered by Reuters here, but we feel this poster on AntiPovertyCampaign.org sums it up in his real life experience nicely:

While driving to breakfast we experienced traffic slow down on Avenida de las Americas – protesters – voicing their anger at the government’s (lack of) response to the recent Banco de Comercio scandal which robbed many of their savings. The Banco de Comercio scandal involves sleazy bankers, off-shore accounts, unsuspecting customers who sign up without reading the fine print. The bank had served as a proxy, depositing customers’ money in off-shore banks instead of in the actual bank. The bank collapsed at the beginning of the year; as did its directors; as did the off-shore dough.  Its customers have no recourse. Because their deposits were technically made to go into off-shore banks (something they consented to by not reading the fine print when they opened their accounts), it made their accounts ineligible for coverage through Guatemala’s FDIC-like – an insurance which covers up to 20,000 quetzals or, approximately 2,729 dollars and 48 cents. (The current exchange rate: Q7.95 = $1.00.)

The way the government sees it, it’s the customers’ own fault. Documents, contracts, fine print – the institutionalization of trust has rendered the customers guilty. Guilty of having too much trust in, and unawareness of, the banking system. This is all making me realize that I never read the fine print for anything. I have no idea how my banks operate. They’re all credit unions – market socialism where the members are all owners – so I trust them. Is this bad? Do I trust them too much? When I make deposits, am I technically making them in off-shore banks? Would that make them ineligible for FDIC? Yikes.

This isn’t the first financial crisis Guatemala has experienced in recent months. The country’s fourth largest bank, BanCafe went under at the height of the holiday season last year.  Soon after, there was a shortage of paper money. Enough of the new bills to replace the old, worn bills hadn’t been ordered. Unless you had a credit card, you were SOL. ATM machines were inoperable. I visited here in January, arriving without any cash. I’d relied on the ATM system so often. It had never done me wrong. But this last time, I was unable to make any withdrawals. Thank goodness I had family to house me, feed me, and even spot me. (Crap, I still owe my brother 80 bucks for that bus ticket to Mexico.) It’s only months later, and now Banco de Comercio collapses.

Excerpt from AntiPovertyCampaign.org 

Guatemala Money Laundering & Drug Trafficking

If you are looking for a place to do large cash deposits into a bank then Guatemala may appear to be the place for you.  Our research revealed that Guatemala accepts large cash