For those who are not aware, Andorra is a small tax haven principality located in the Pyrenees mountains between France and Spain. Since Andorra has no income or corporation taxes, it has developed something of a financial services business going back about half a century. The private banking divisions of Andorran banks tend to work very much along the lines of Swiss, Austrian and Liechtenstein banks.

Because Andorran banks offered similar advantages to these countries but Andorra was less known (and therefore less subject to pressure) Andorran banks have flourished. It's important to note that foreign banks have traditionally been strongly discouraged from opening in Andorra by the Andorran government. Andorran banks have only local capital, have very strong balance sheets, and are very conservative. They are not exposed to risky business practices.

In particular, Andorra was little known in the USA, and had few American clients, so long after Switzerland and Austria started refusing business from US citizens, Andorran banks were happy to deal with Americans, tending instead to reject the business of French and Spanish citizens.

Andorra is still an excellent place for private banking. For a small country, you would be surprised at the level of expertise available. We have worked with several Andorran banks over the years and have been impressed with all of them.

As of 2009, however, the scurrilous attack on tax havens led by Obama, Gordon Brown and French President Nicolas Sarkozy have had something of a negative effect on Andorra. Sarkozy, a shameless publicity seeker, has been particularly vocal in his criticism of Andorra, probably because of his political connections there – in his role as President of the French Republic, he also happens to be co-prince of Andorra.

As of the time of writing, Sarkozy has started an internal furor between political parties in Andorra, some of whom are more in favour of capitulating to OECD demands, whereas others are fiercely independent and protective of Andorra's tax-free status. On this, the jury is still out and we will have to see what happens. Those with established non-resident accounts in Andorra have not been affected and probably won't be – but it pays to be alert.

In the interests of diversification, Andorran banks are however expanding and diversifying in the direction of the Americas. Between them they have opened subsidiaries and offices in Uruguay, Panama and the Bahamas. The main aim of these offices is to enter the Latin American market, considering that Andorra is predominantly Spanish speaking and the cultural similarities make this the most attractive market. Also not forgetting that doing business in Latin America remains relatively problem-free for banks, while seeking clients in the European Union or USA could expose banks to a lot more regulatory hassles and demands for information etc.

The advantage for clients is that this network of European and American offices are available to assist in account opening for European and American account holders.

All Andorran banks have a policy of requiring personal meetings prior to opening accounts. These meetings may take place either in Andorra or in the remote offices, no matter where you wish to open the account. This means for example that you can visit Andorra to open an account in Uruguay, or vice versa.

The option of visiting Andorra is of course convenient for Europeans – they can open an account far away from the European Union, without having to travel all the way to Uruguay. Likewise, the option of visiting for example Panama is convenient for North Americans, even though they might finally decide to open an account based at the head office in Andorra.

A third option is to arrange for the meeting to be held elsewhere, with a bank officer or representative. These people travel frequently and may be able to visit a city near you. Our local “Mr Fixer” who handles Andorran banks can advise and co-ordinate this.

The personal meeting requirement may appear at first glance to be an inconvenience, but is actually useful in getting a feel for the bank's services. “You don't know until you go.”

Beyond that, account opening is quite straightforward. At the meeting you should present your passport, a bank reference, and documents proving the source of funds.

Of course, in the case of corporate accounts you also need to show the company documents. At any rate, you should inquire about exactly what is required before the meeting, so you can be well prepared.

The only other important thing to note is that these are private banks and their main business is investment. Andorran banks do not want business of the the active type, with lots of wires or cheques in and out. If you are looking for this kind of account, our second option (see below) is a better alternative.

All Andorran banks automatically work on a multi-currency account system, so you can keep various currencies within the same account. As this is a full service private banking relationship, you can also negotiate other services like secured loans – for example you can borrow against your portfolio to make other investments, thereby increasing gearing. They will also issue guarantees to foreign banks for the purposes of real estate loans. All banking services are possible and you will be dealing direct with intelligent, qualified bankers who speak lots of languages including English, Spanish, German, Dutch, Scandinavian languages, Russian etc.

What is the next step? If you wish to open an account in an Andorran bank, it's almost essential to be introduced by somebody who is already known to the bank. This policy not only gives the banks a much higher level of comfort, but it works – this is the precise reason why you haven't heard about Andorran banks being involved in scandals like ponzi schemes etc. Real traditional private banking, of this type, is all about relationships.

Introducers cannot risk their reputations with banks by sending the 'wrong' kind of business, whether it be criminals with dirty money or simply people who will waste the bank's time by asking lots of questions then never moving forward. These banks are in the business of looking after money for wealthy people. They don't want to hear from people who are waiting to be paid out a huge amount from some dodgy ponzi scheme or a non-existent Nigerian oil executive who contacted them out of the blue by e-mail. The first step in advance of anything else is to demonstrate that you are serious about doing clean, confidential business.

If you follow this procedure strictly, you will find you end up with a very private account in a first class Western European bank. If you don't, you won't!

Once you have sent this requested information you will hear back usually within a day or two. If your account is pre-approved you can expect a telephone call from a banker and a meeting will be set up.

If opening an Andorran Bank Account is of interest to you, you might also be interested in Setting up a Panama E Commerce Business.