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