We represent the last bastion of truth and if we have to lie to keep it that way, damn well we'll do it. - Asst Prosecutor, The Practice
When notorious bank robber Willie Sutton was asked why he robbed banks, he reportedly replied, "Because that's where the money is." International investors have discovered for themselves that owning a bank can be even more lucrative than a career in bank robbery. Because running one's own bank dramatically demonstrates the benefits of offshore financial operations, it's a good case study of what can be accomplished once the investor breaks free of domestic confines.
Banking is not as exotic as it might seem at first glance. A bank is merely a company organised much like other companies. It is built upon trust and it flourishes, as all companies do, by keeping promises. The following material is of equal importance to the user as well as the organiser of any international business organisation.
Although it is difficult to start a bank in most of the large bureaucratic countries, there are many nations whose laws are not as strict. In fact, there are jurisdictions where people have been able to start banks just by incorporating a company with the word bank in its name. This has allowed a number of "questionable" figures and operations to damage the reputation of other banks. When this happens, the local government often restricts the issuance of new licenses and tries to clear the deadwood out from among the old licensed firms. Other jurisdictions, such as the Cayman Islands, have had reasonable bank regulations for some time and so have prospered as financial centres.
When just starting out in banking at a low level of capitalisation, the best strategy is to incorporate the bank in as good a banking environment as one can afford, then to build up enough of a reputation for keeping commitments to start doing business in a better location. Most of today's large banks started with one person or a small group of people who offered nothing but their promises and reputations.
Bank formation is a very political activity everywhere, so it's impossible to know what jurisdiction will be best by the time this introduction is printed. Once a site is selected, a local professional will help obtain the bank license. The local assistance of a registered agent will be needed, in any case, and a well - known local professional can open many doors during the organisation process. A travelling to selected locale to find one. The formation process itself can teach a great deal about how things are accomplished in the chosen haven and in the offshore world in general.
A short aside about preparation is in order here. It is important to learn as much as possible about investing before moving into the international investment community. Someone uncomfortable doing business with his local bank or broker will not enjoy overseas dealings. It is essential to put in the preparation time required by complex ventures, otherwise one may be better off accepting the services of an established international organisation.
One shortcut is to buy a bank that is already in existence. This saves a good deal of time and should end up costing about the same as doing it from scratch. There are companies that make their living by establishing banks and then selling them to interested buyers. These companies range from clean to shady and the normal rules apply about knowing what one is buying before paying. It's a good idea to contact the regulatory authorities in the country where the bank is located to check on the company's reputation. In addition, contact an independent local professional in the area to get an opinion on the legitimacy of the proposed sale.
This document was excerpted, modified & otherwise prepared by the 'Lectric Law Library ('LLL) from materials supplied by Baltic Banking Group - www.BalticBankingGroup.com Copyright 1998 - 2002 'LLL & BBG, all rights reserved.