A great many publications, including international magazines, newspapers, and even in-flight airline magazines contain advertisements that read "Offshore banking licences for sale".
Whatever the jurisdiction, whoever the promoter, whatever the class or cost, you will be told how owning an offshore bank is a one-step procedure that will dramatically alter your financial life for the better: total privacy and sky-high profits within reach!
The highest priest of this thinking is one Jerome Schneider -- a guy who has made a living out of publishing racy offshore books for the uninitiated and selling bank licences to all and sundry by promising them the earth.
The reality is somewhat different. If it's too good to be true, it probably is, and you ought to think carefully before taking such a major step as purchasing a bank.
Undoubtedly, there are very real benefits arising from the ownership of an offshore bank; it can be a very powerful business vehicle. However, it is not suited for everyone as the promoters of banking licences would have you think.
Banks for $10,000?
During the 1980's and early 1990's, it was possible to purchase a banking licence in places such as Montserrat for a few thousand dollars and with little or no regulatory control. Those days are gone.
Most recently Montenegro -- formerly a part of Yugoslavia -- tried to jump on the band wagon and started offering the same laissez-faire attitude and low cost (about $10,000) banking licences. It didn't last long.
Nowadays, you have to be ready to deal with all the regulatory hurdles that have been erected in recent years to discourage the widespread ownership of so-called "shell banks". You will also be expected to capitalise your bank with at least US$ 500,000.
If you are serious about ownership of an offshore bank, you -- or your nominees -- should also be prepared to wade through some serious red tape.
Amongst others, the following is needed:
Applications are considered on an individual basis and experience in the financial industry is almost always required.
It is questionable whether or not incorporating an offshore bank as a personal asset protection vehicle is still as viable as it once was. The author of this article has come across less than five cases over the past two years where he felt such strategy was justified; it involved very substantial assets in each case, as well as very particular objectives.
As far as cutting-edge asset protection is concerned, a privately-owned insurance or reinsurance company brings many of the advantages of a shell bank, whilst being a less-regulated and less-expensive option.
On the other hand, do not be put off if you have serious intentions to run an offshore bank as a business enterprise; just remember that the formation of a bank calls for a fair degree of determination and patience on your part.
Let us leave this subject with the thought that all things are possible if you know how to approach them.
A common problem for owners of shell banks after incorporation is obtaining correspondent bank accounts, especially in US Dollars.
United States banks -- including US branches of foreign banks -- are under increasing pressure not to hold nostro accounts for smaller, privately-held offshore banks.
One of the initiatives worth noting is a February 2001 report entitled "Correspondent Banking: A Gateway for Money Laundering". The report was placed before the US Senate by Democrat Carl Levin; it argued that by providing correspondent accounts for offshore banks, US banks open the country's banking system to abuse by money launderers.
The emergence of the Euro has offered an alternative, as has the practice of private agreements between banks with existing nostro accounts providing services for shell banks.