| Introduction - What we are going to do is describe | | | | liquidation because now the loan must be sold to |
| the legal and mechanical process relating to offshore | | | | reduce it to a net value. Generally such a loan is going |
| bank failures. We will discuss what leads up to them, | | | | to go for a deep discount at best. The liquidator may |
| what happens if they fail, and how do the depositors | | | | have to sell the banks real estate, computers, office |
| get their money back. The terms and scenarios we | | | | equipment and furniture, cars, boats, planes etc. All |
| depict are generally what happens in the world of | | | | this is time consuming and the assets should be sold |
| offshore banking. In some jurisdictions the | | | | at an auction to keep things fair avoiding accusations |
| terminology and procedures may be slightly different | | | | of selling under the market for kickbacks. There is an |
| but the general way things proceed will be in line with | | | | inherent conflict of interest in the liquidation process. |
| the scenarios depicted in this article.Offshore Banks - | | | | The bank liquidator generally gets paid handsomely. |
| A brief definition of this term is in order. These are | | | | Think perhaps $150 to $300 an hour or maybe |
| banks that are located in various countries around the | | | | $10,000 to $30,000 per month. It is in his best |
| world many being in Caribbean Island Nations. These | | | | interest to keep things going for as long as possible. |
| banks have a license that enables them to only do | | | | The lawyers the bank liquidator uses are also under |
| business with people and entities (trusts and | | | | this same conflict of interest. How honest and upright |
| corporations) that are not from that country. The | | | | these people are going to be is something for which |
| offshore jurisdiction does not trust the offshore bank | | | | there is no rule but there is generally a control |
| to accept deposits from its citizens or corporation | | | | element in the form of a creditors committee. In an |
| filed in that country. This right away should tell a | | | | honest liquidation the liquidator may elect to distribute |
| moderately astute investor that he or she is perhaps | | | | the readily available assets the offshore bank has |
| not exercising the correct amount of caution when it | | | | right away. These assets would be the actual cash |
| comes to selecting a bank and an offshore | | | | deposits. This is an encouraging sign to the creditors. |
| jurisdiction. So the first warning sign is be careful of | | | | Money would usually be held back to allow the |
| offshore banking licenses. A bank can be in an | | | | liquidation to proceed further allowing for legal |
| offshore jurisdiction and not have an offshore | | | | expenses etc. Then as real estate and other assets |
| banking license, instead be a regularly licensed bank. | | | | are sold further distributions would be made. Not all |
| Offshore bank licenses can be had in some | | | | liquidations are done so directly.The Ugly Side of |
| jurisdictions with as little as a $50,000 deposit with | | | | Offshore Bank Liquidations - Sometimes the offshore |
| the country issuing the license. Usually this amount is | | | | bank assets are deposited by the liquidator in another |
| never more than $500,000 and many countries | | | | bank. Whether or not this is in an interest bearing |
| require less. As a point of comparison a regular bank | | | | account is always a good question. If there is |
| operating in Panama is required to post $10,000,000 | | | | $12,000,000 in cash in a bank the interest at 4% a |
| cash deposit and the owners go through a rigorous | | | | year is a serious amount of money that will tempt |
| background investigation.Bank Failure - This is a term | | | | people. Legal fees can be padded and kickbacks |
| relating to the offshore bank being unable to fulfill the | | | | made to the liquidator from the law firm located on |
| demand for funds from their depositors. This can | | | | the island jurisdiction the offshore bank is in. Some of |
| occur for a number of reasons, some bad and some | | | | these islands where these offshore banks are have |
| not so bad. The offshore bank may have been found | | | | less than 100,000 people living in the country. You are |
| to be below its protective ratios and the government | | | | foreigners and don't expect such honest treatment in |
| bank auditors or financial ministry may decide to shut | | | | these tourist island jurisdictions. They may view |
| the bank down in terms of money going out for a | | | | these offshore bank liquidations as a feast for the |
| limited period of time to see if the bank can return | | | | locals courtesy of all the rich foreigners. Excessive |
| their ratios quickly to an acceptable level. In the | | | | travel can be run up by the liquidator. He can travel |
| event the ratios return to an acceptable level the | | | | abroad going first class all the way even bringing the |
| bank operation resumes normally and the depositors | | | | lawyers along, all on the clock. The liquidator can |
| may not even know anything occurred.Complaints - | | | | reach crooked settlements with people who posted |
| The way offshore bank failures generally start is with | | | | collateral for loans with the offshore bank. Depositors |
| complaints to the licensing authority of the country | | | | of the offshore bank can file lawsuits for special |
| where the bank is located stating that requests to | | | | treatment and the liquidator can settle with them in a |
| withdraw funds are not being met by the bank. To | | | | crooked manner for an illegal kickback and then they |
| document this the account holder generally retains | | | | get all their back while you only get a fraction back. |
| legal counsel in the country where the offshore bank | | | | Real estate owned by the offshore bank can be sold |
| is located and files a formal demand for the funds to | | | | under market value for a kickback to a friend or |
| bank with a very short deadline. When this demand is | | | | relative of the liquidator. Same can be done with cars, |
| not met the law firm will file a formal complaint to | | | | computers etc. The liquidator can elect to chase |
| the offshore bank licensing authority who will | | | | assets not worth chasing to continue his high paying |
| generally conduct an investigation. They may have | | | | job some years longer than it should require. |
| their own auditors or hire an independent team of | | | | Remember offshore bank liquidations do not come |
| auditors to go through the offshore bank records. | | | | along every day and the liquidator has no idea where |
| They will look to see if there are any loans on the | | | | his next job is going to come from. There is a check |
| books that do not meet the guidelines for lending | | | | and balance usually in the bank liquidation process |
| such as writing uncollateralized loans is usually | | | | which is described below.Offshore Bank Liquidation |
| considered an offense. Loans to the principals of the | | | | Creditors Committee - A creditor of the offshore |
| bank are another red flag. Real estate acquisitions like | | | | bank is generally a depositor but it could be the |
| mansions on the island where the offshore bank is | | | | electric company or the phone company. Generally, |
| located for the bank executives to live in is another | | | | the employees are considered priority creditors when |
| red flag as well. Usually without loans the bank would | | | | it comes to their wages and they get paid off first |
| not fail to meet its ratios. When these loans go bad | | | | and fast. The depositor is owed money by the |
| and there is no collateral to go after then the banks | | | | offshore bank based on their deposits, thus he or |
| get into trouble. The complaint process is possibly the | | | | she is a creditor as far as the offshore bank |
| only way the government is going to know their | | | | liquidation is concerned. An offshore bank liquidation is |
| offshore bank is in trouble and by then it may be too | | | | sort of like a bankruptcy proceeding. In an offshore |
| late, but it may not be too late. Remember we are | | | | bank liquidation a creditors committee is formed |
| talking about offshore banks here, not regularly | | | | which is something done in many bankruptcy |
| licensed regular banks which are audited and watched | | | | proceedings. The creditors committee could possibly |
| way more closely by the government and usually by | | | | have been formed before the liquidator came into |
| a different government agency than the agency | | | | office and they appoint the liquidator with or without |
| supervising offshore banks. We as a Panama Law | | | | the approval of the court, rules vary some depending |
| firm do not introduce clients to offshore banks which | | | | on the offshore jurisdiction involved. The creditors |
| should tell you something.Loss of Correspondent | | | | committee generally is voted into existence by the |
| Bank - Sometimes the offshore bank has just lost | | | | creditors, the creditors with the most dollars on |
| one or more of its correspondent banks and can not | | | | deposit having the most votes is one way to look at |
| execute wire transfers until it replaces the | | | | it. All creditors are generally not treated equal. The |
| correspondent with another correspondent bank | | | | creditors committee members are all on the same |
| which may take several weeks. When the complaints | | | | side and that side is interested in getting as much |
| hit the government they will investigate, see that the | | | | money back as they can. Decisions as to how to |
| funds are in place and allow the offshore bank a | | | | spend money chasing assets or potential assets are |
| reasonable period of time to secure another | | | | usually made by the liquidator but the creditors |
| correspondent bank, checking with them for progress | | | | committee can exert control over the liquidator even |
| reports. This is a not so bad problem that will only | | | | replacing the liquidator in extreme circumstances. |
| serve to scare and inconvenience the | | | | Some bank liquidations have taken place without |
| depositors.Offshore Bank Receivership - This is a | | | | creditor committees in place. These are generally less |
| process whereby the government agency that | | | | than above board liquidations.Creditor Claims in |
| licenses the offshore bank takes over the offshore | | | | Offshore Bank Liquidations - When the liquidator is in |
| bank to control its operation with an eye towards | | | | office the depositors are generally required to file |
| saving the bank. Sometimes they are successful and | | | | claims. The claims process involves filing identity |
| well sometimes not. Often a team of professionals | | | | documents with the liquidator and identifying your |
| from a large auditing or accounting firm are brought | | | | account and how much money was in it. Offshore |
| in. Receivership practices can frequently mean that a | | | | bank liquidations are conducted in open court and |
| percentage of your funds will be unavailable for | | | | these claims wind up as exhibits in the public domain. |
| withdrawal for sometime. This is to prevent a run on | | | | What I am saying is bank secrecy is not in place |
| the offshore bank which would for sure topple it and | | | | once the bank is in liquidation. What one can expect |
| thus cost the depositors substantial losses. You may | | | | to see is a fair number of depositors failing to file |
| be only able to take out say 25% of your funds. | | | | claims because of various reasons often relating to |
| What can often happen is the depositors lose faith | | | | bank secrecy. Of course this means a greater |
| and take as much money out as they can and avoid | | | | recovery for those who do file the claims while the |
| putting in any more money. This usually results in the | | | | other folks walk away with a total loss of their funds |
| offshore bank failing totally and being shut | | | | by choice.What to do if you are in an Offshore Bank |
| down.Suing the Offshore Bank - What often happens | | | | Liquidation - If you are already involved in a bank |
| in these offshore bank receivership scenarios is some | | | | liquidation you made a mistake and you are going to |
| depositors get scared and act jumpy and sue the | | | | get hurt. How badly hurt is the question so you |
| bank. The lawsuits generally involve having the court | | | | should be trying to mitigate your damages. If a |
| encumber or tie up an amount equal to their deposit. | | | | creditors committee is forming try to get involved |
| To accomplish this the depositors generally have to | | | | actively, even try to sit on the committee. If the |
| resort to deceit or twisting the truth minimally, to | | | | liquidator has not yet been appointed do get involved |
| make the court think they were not ordinary | | | | in that process. Try to find ways to meet other |
| depositors or the amount in question consisted of | | | | depositors. Call lawyers on the island and ask them to |
| funds to be handled in a special exceptional manner. | | | | represent a group of creditors collectively. Rest |
| The way the depositors are playing their hand is get | | | | assured other depositors will be calling lawyers on the |
| the court to hold my money before the bank goes | | | | island and the lawyer can be a contact point to form |
| down completely and then my funds get mixed in | | | | a creditors committee. The idea may not occur to a |
| with all the depositors in the fracas. If one files such | | | | lot of these lawyers so help them out a bit. If you |
| a lawsuit they are generally excluded from filing | | | | can get a creditors committee in place and have it |
| claims as regular creditors (depositors) of the bank in | | | | appoint a liquidator you will probably have a honest |
| the event of a liquidation and if they lose their lawsuit | | | | liquidation, probably. That having been said one must |
| (an expected occurrence if based on fraud or deceit) | | | | still leave room for the offshore bank itself having |
| they can lose all. Usually several depositors will file | | | | been intrinsically dishonest and the bank owners have |
| such lawsuits if there is any official action taken | | | | since ran away with the funds. When you read the |
| against the offshore bank and this could push the | | | | offshore bank liquidation horror stories you see that |
| offshore bank into greater difficulty and if there is a | | | | the money trail goes from country to country, bank |
| bank liquidation it will be a most complex one with a | | | | to bank and then it ends up with a large cash |
| lot of depositors funds eaten up in legal | | | | withdrawal which is usually the end of the trail. The |
| fees.Offshore Bank Liquidation - This is of course the | | | | offshore jurisdiction may fail to ever prosecute them |
| sword of gloom in the world of offshore banking. For | | | | or file charges which of course make one wonder |
| things to reach this level the government had to | | | | what was going on. So the key here is to get |
| have felt that the offshore bank is not salvageable. | | | | involved actively. It is real important to open |
| Generally a bunch of depositors filing lawsuits and | | | | communications with other creditors and get |
| jamming up the court system of some island | | | | organized.How to Avoid Being in Offshore Bank |
| jurisdiction is going to encourage the government | | | | Liquidations - The answer is of course simple, avoid |
| there to liquidate the offshore bank in hopes of | | | | offshore banks. Stick to banks with full banking |
| freeing up their courts. Imagine an offshore tax | | | | licenses that can conduct banking business with the |
| haven island court system. A small building with one | | | | residents of the country as well as with entities not |
| to three courtrooms and maybe three or four | | | | located in the country.Offshore Bank Alternatives - |
| judges. These courts hear divorce, child custody, | | | | The best alternative to these tax haven island |
| personal injury as in auto accidents, bankruptcy, | | | | offshore jurisdictions is Panama. Panama is a solid |
| collection cases, resident disputes with building | | | | offshore tax haven jurisdiction that does not tax |
| contractors, traffic court cases, and criminal cases. | | | | offshore derived income and has no capital gains tax |
| The court is there to enable the island jurisdiction to | | | | or tax on stock market gains. Panama has fully |
| function as an independent governing state. It is not | | | | anonymous bearer share corporations where the |
| going to jam up its courts increasing the wait times | | | | owners are not recorded in any registry or database. |
| for its citizens that are trying to deal with vital | | | | Panama has anonymous foundations which are able |
| matters like child custody where one of the parents | | | | to have generally non-freezable bank accounts. |
| is an abusive drunk hurting the children. When the | | | | Panama has no tax treaties with any country so |
| offshore bank gets put into liquidation generally the | | | | fishing expeditions are not going to happen. Panama |
| court cases can be disposed of quickly or even by | | | | has the tightest bank secrecy laws in the world and |
| summary dismissal. The government knows that the | | | | when coupled with an anonymous bearer share |
| people behind these lawsuits are trying to get more | | | | corporation it becomes the most secure and private |
| money than they would if they just waited for the | | | | structure one could have in the world today. Panama |
| liquidation to proceed and are not amused by their | | | | has 400,000 corporations registered there as well as |
| litigious behavior.The Offshore Bank Liquidation | | | | many of the merchant marine vessels and cruise |
| Process - So now the bank is in liquidation. What | | | | ships in the world. Panama has about 150 banks many |
| does this mean? Basically a liquidator will be appointed | | | | of which are large multi-billion dollar international |
| to determine what assets the bank has, liquidate | | | | conglomerates, yet the banking operation in Panama |
| what can be profitably liquidated and then see how | | | | is a separate bank corporation operating under |
| much money is left. The remaining money will be | | | | Panama bank secrecy laws. Panama has not had a |
| divided up amongst the depositors fairly depending | | | | bank failure in over five years. Panama has had only a |
| on how much they had on deposit in the offshore | | | | few bank failures in its history whereas Switzerland |
| bank. They will get a percentage of their deposit | | | | had over 15 bank failures during the years 1999 to |
| back. What would be a good return in a liquidation, | | | | 2000. Panama tightly regulates its banks. Every |
| 75%. What would be a bad return well there was a | | | | Panama Bank must submit monthly auditing reports |
| liquidation in Latvia a few years ago where the | | | | to Panama's Banking Superintendent, which is under |
| depositors got 2%. What is a typical return? There is | | | | direct supervision by the Banco Nacional de Panama |
| no number but it should be 33% to 60% unless the | | | | (BNP), the National Bank of Panama. A list of |
| bank has been really mismanaged.The Offshore Bank | | | | prominent international banks in Panama includes: |
| Liquidator - This is generally a person with an | | | | Citibank, HSBC, Dresdner Bank, Bank of Tokyo, Bank |
| accounting, legal or banking background. They can | | | | of Boston, Banco Nacional de Paris, International |
| understand the books of the offshore bank and the | | | | Commercial Bank of China, Societe Generale, Banque |
| laws pertaining to the offshore bank and the | | | | Sudameris, BBVA, Banco Uno, Banco General, |
| liquidation. If the offshore bank had secured loans | | | | PriBanco, Banco del Istmo, Global Bank, MultiCredit |
| that went bad (payments not be made according to | | | | Bank, PanaBank, ABN Amro, Banco Aliado, Banco |
| written loan documents) they will analyze the worth | | | | Continental, BancoLat, BIPAN, Lloyds TLB Bank, and |
| of going after the collateral. If there was a farm in | | | | the Bank of Nova Scotia. Many of the Panama banks |
| Argentina posted as collateral for a three million dollar | | | | own office building skyscrapers 40+ stories tall with |
| loan he may order an appraisal of the farm to see if | | | | their name on the building. These are not grocery |
| it really worth that much. If the value of the farm is | | | | store sized banks found in the island jurisdictions. The |
| more than the legal expense of securing and | | | | Panama Stock Exchange has an average trading |
| liquidating the asset the liquidator should go ahead | | | | volume of $900,000,000.Panama is free of hurricanes, |
| and liquidate it. This process may take a year or | | | | volcanoes, tornadoes, and earthquakes which is why |
| longer. If a loan was made to a trucking company in | | | | the Panama Canal was built there. Panama uses the |
| Belgium for a fleet of trucks the same liquidation | | | | US dollar as their national currency. Panama has |
| process may occur. This sort of liquidation may take | | | | modern telephones, cell phones and internet being a |
| even two or three years depending on what type of | | | | country having been built by the Americans which left |
| liquidation processes may need to be followed. The | | | | Panama in 2000. Panama has a treaty with the USA |
| borrower may file bankruptcy making the liquidation | | | | calling for the USA to protect the Panama Canal if it |
| of the secured assets difficult and time consuming in | | | | was threatened. This means the peace and security |
| some countries. The bankruptcy court might let the | | | | of the Republic of Panama is protected by the USA |
| borrower continue making payments and keep the | | | | which could have jet fighters there in minutes. |
| asset which can make for a rather problematic | | | | Panama is the new Switzerland of the world. |