Offshore Banks – Owning Your Own

Offshore Bank Ownership Background – Today we see many outfits offering to sell you your own bank. The idea is sure appealing. You can open up accounts for yourself under numerous corporate names, your friends can get accounts and of course you can take in new clients and make money. Wow! People will entrust me with their life savings. Sounds great, what’s wrong?

Offshore Bank Legal Considerations – After 9/11 the regulations and laws changed in international banking, they eliminated the concept of what was called a bank within a bank, instead insisting on all banks (onshore banks and offshore banks) having a brick and mortar presence. Brick and mortar is a term that means there is a physical location for the bank with offices, tellers, employees etc. This essentially eliminated the “Offshore Bank in a Box” concept. The Offshore Bank in a Box concept was based on buying a banking corporation along with an offshore banking license and operating inside of another “real” bank in the offshore jurisdiction. Essentially what one had was a website and online banking software. The Offshore Bank in a Box was essentially just another account holder at the “real” bank and used the “real” banks resources and correspondent banks. It was a nice tidy arrangement for private banking since you could open up your own accounts as privately as you wanted. Your assets were conveniently commingled amongst the banks assets. The offshore bank could write loans to you and others, hold securities in some cases and do other wonderful things that afforded one a fantastic amount of privacy and security. These banks were often for sale in a turn key fashion for $50,000, sometimes less. Then came 9/11 and in order to prevent offshore banks from flying into office buildings and the like, controls were instituted and the Offshore Bank in a Box was gone, at least for now.

Offshore Bank Non- Banks – Today we see people selling things on the internet as bank like products that are not banks. There are New Zealand financial service corporations that allegedly can operate as banks, or so you are told. Then there are the Swedish Credit Unions which are not credit unions at all. They are Swedish Financial Corporations with the words “credit union” in the name sold at greatly inflated prices. Don’t believe these claims about being able to operate like an onshore bank or even as an offshore bank. The problem is getting a correspondent bank for the entities being sold as offshore bank like products. I will explain. To be in offshore banking you need to operate in US Dollars, Euros, Swiss Francs, Pounds Sterling, Yen etc. and this requires a correspondent bank in these respective countries. No major country is going to let their correspondent bank open you up if you are not a serious brick and mortar bank. If the correspondent bank does this they would be in jeopardy of losing their banking license, fines etc. So the seller of these non-bank surrogates will frequently explain that you can operate through an offshore or onshore bank that has correspondent banks, as a regular or trust account holder of some sort. This works until the correspondent bank the bank you are using figures out what is going on and then you are gone, cut off. Now the funds are stuck in your bank, clients are screaming mad, they start making police reports, calling lawyers and you scurry around looking for a correspondent bank which you probably will not find since now you have been cut off by a bank and are being accused of bank fraud, being investigated for bank fraud etc. Save your money and avoid these offshore bank like products, they do not work in the real world.

Can You Get a Real Offshore Bank Today ? – Yes. Plan on the application process taking 6 months to 18 months, depending on the jurisdiction. Plan on having to post a cash deposit with the government of the country you are going to operate in that will be in the millions of dollars. Legal fees will be well into the hundreds of thousands. The due diligence on all the owners, directors, executives will be grueling. You will be required to have a building, offices, tellers, etc. Correspondent banks will take a few months to obtain after you become licensed. You might have to pay $200,000 a year to get a good correspondent bank (each) and you will probably want two or more. Your ongoing legal fees will be high to deal with compliance. Generally offshore jurisdictions favor granting offshore banking licenses to banks already operating in other countries. This is a real firm policy in many jurisdictions. Can you still get started sure, but consider buying an already operating institution. Remember with the compliance required today the privacy measures that were possible before 9/11 are no longer going to be possible even if you own the bank.

Can You Make Money with An Offshore Bank ? – Yes but it depends on a lot of factors. Marketing is important. Customer selection is very important in that more is not always better. Extra services is a good profit center such as credit cards, ATM cards, stock brokerage services through a stock brokerage firm, CD’s, loans, etc. A lousy offshore bank with good marketing will make more money than a great offshore bank with lousy marketing.

Offshore Banks in Panama – Panama has offshore banks (we do not open accounts for retail clients in offshore Panama Banks), and full banks. It is possible to open a Panama Bank. It is going to require millions of dollars for a cash deposit, a building, legal fees etc. A full Panama Banking License requires a $10,000,000 cash deposit to the government. A Panama Offshore Banking License requires a $3,000,000 cash deposit. Compliance is extremely tight as far as banking jurisdictions go. The regulators run a real tight ship in Panama and there are virtually no bank failures since the Americans left in 2000, except for one but the trouble began before 2000. If you have an interest in opening a Panama Bank give us a call.

Panama Savings and Loans – Panama has savings and Loans. They can not offer checking accounts but can make loans and accept deposits. They require less to open and of course offer less services. A brick and mortar presence is required. Inquire.

Panama Trust Companies – This can be a real profit center with the right marketing. The amount of capital required for deposit with the Panama government is $250,000 and then there are legal fees which will be significant. Brick and mortar is not that important but an office would be required. Inquire.