KYC Compliance Strategies for Perpetual Travelers

Financial institutions have to comply with many regulatory requirements. Often they require an address verification of their customers for KYC (Know Your Customer) purposes.

The so-called "utility bill" has become a de-facto standard for address verification. A utility bill is typically a monthly invoice that shows the consumption of utility services during the preceding month.

Traditionally this relates to electricity, gas, or water. Invoices for cable TV, landline telephone service, or flat-rate internet are also generally accepted. Invoices for mobile phone contracts are usually not accepted — while flat-rate internet or cable TV have a corresponding, installed connection in at least one residence, this is not the case for mobile phone service.

Accepted Forms of Address Verification

Depending on the country of the regulator and the provider's discretion, other forms of address verification are also being accepted:

Account statements
Credit card statements
Bank reference letters
Insurance certificates
Governmental benefits

The home address must be clearly visible on the document. Digitally created documents are generally not accepted — the documents should be original and printed, even if this is unusual in many countries today.

High-Risk Countries

Certain countries are designated by regulators as high-risk countries regarding money laundering. These include some tax havens such as Panama. While accounts can generally be opened from these countries, often additional requirements are imposed — typically authenticating the applicant's passport and utility bill.

For authentication, the original document must be available. Attorneys, accountants, banks, notaries, and certain government officials are authorized to perform a simple authentication. In some cases, certification by a notary is mandatory.

The certificate must contain:

Seal or business address and contact number
Registration number / employee number (if applicable)
Name
Signature
Date of certification

Practical Strategies for Obtaining a Utility Bill

The actual purchase or rental of a house or an apartment is the best long-term strategy. But for the beginning or for low-income situations there are other methods available.

You can set up and pay for a utility bill even if you don't live in a specific location. After a little while abroad almost everybody has friends or acquaintances who can help with this matter. The perpetual traveler can simply pay someone else's internet bill, for example — the traveler gets the utility bill, and their friend gets free internet.

In many countries, transferring a utility contract is a simple process. The property owner just has to go to the notary. If the client is not present, the process can often be done via power of attorney.

Tax Identification Numbers and Tax Returns

Obtaining a utility bill without having a legal residence has been anticipated by regulators. Financial institutions are now introducing more indicators which attest to having a residence in a given country. Giving a tax number is especially popular for this.

There are two ways of getting a tax number in any given country:

Immigration or permanent residence permit — Obtaining a permanent residence doesn't always mean a tax identification number is automatically assigned. In many countries with territorial taxation, it's not easy to get a tax number if you don't operate in that country.
Triggering a limited tax obligation — This involves having some taxable activity in the country.

Country Examples

Paraguay offers the easiest pro-forma residence, but obtaining a tax identification number involves certain obstacles if you have nothing to pay tax on.

Panama assigns a tax identification number with a resident personal ID card, but you are then obligated to file a tax return if you live in Panama for at least 183 days out of the year. A permanent residence does not establish tax liability.

A tax identification number does not obligate you to file a tax return.

Increasingly, banks will demand a tax return initially and then yearly, even if you don't have to prepare one in your country of residence. For banks and countries, it's not so much about determining whether you have paid taxes, but about the income you have generated.

The Best Long-Term Solution

While a combination of permanent residence with a tax identification number and utility bill from a third party is a completely acceptable solution at present, it is not the best one long-term.

Owning foreign real estate is the best long-term solution to achieve compliance.

A property outside of your home country will generally allow a perpetual traveler to generate every required document to be fully compliant during KYC procedures. Those documents include:

Utility bills
A tax ID
Potentially a filed tax return

Owning an actual property adds no additional tax burden in most cases and provides a stable foundation for all future banking and financial relationships.

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