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Seeking Safety

January 21, 2020

Even in this digital age there remains a strong demand for highly secure physical storage. In fact, there are signs that this demand is growing. All over the globe the rich are looking to store cash, precious metals, valuables, and even cryptocurrency. 

The drivers of the demand vary. Some seek to protect themselves from a global recession. Many are concerned about natural disasters. Some are stockpiling cash in anticipation of a sharp market drop.  Others do not want to hold bank deposits “paying” negative interest rates. In fact, the storage of cash can be a cheaper alternative to negative interest rates. Storing large sums of cash is not straightforward however. The money must be transported, and detailed records must be maintained to avoid being accused of “breaking bad” when the owner tries to return the cash to the banking system. Getting a few millions of cash into a financial account is no easy matter as Walter White discovered.

The reputation and stability of Switzerland attracts many. Swiss secure vault providers report very strong demand, and even the prospect of running out of space. Just around the corner from the US Embassy in London is what appears to be an old-fashioned club in a gothic style building. The appearance is misleading. Down a flight of stairs is one of the most secure places in London. Recently opened, this steel-walled stronghold caters to those looking to protect their most prized possessions. Storage options include an apartment-size space available for about $3.2 million a year.

Some of the new high end secure storage has been developed by non-financial institutions. These organizations do not have the same level of scrutiny and regulatory oversight as traditional banks, and this has prompted questions about whether these safe havens could be used for wrongdoing such as money laundering.

The demand for high-end secure storage contrasts with the more humdrum provision of plain old safe deposit boxes in the US. The latter business is in decline no doubt partly because of the ability to store documents online. Still there are some exotic examples of the use of secure storage in the US. A private collector held the “Crown of the Andes,” made of 5.3 pounds of finely worked gold and 443 emeralds, in a Citibank box before its $2.5 million sale to the Metropolitan Museum of Art.

Of course, secure storage can turn out to be anything but. As shown in the movie “King of Thieves,” in 2015 a group of elderly gangsters drilled through the wall of an underground vault in London’s Hatton Garden diamond district and made off with $200 million of jewelry. There have been similar high-profile robberies from secure storage in several countries including Italy and the US. Ironically, well-publicized heists and scandals can boost demand for those firms claiming to offer seemingly impregnable levels of security as the wealthy hunt for even more safe places to stash their prized possessions. Even the business of providing safe deposit boxes can see a “flight to quality.”

Richard Rushton