ABC banks, offshore banks and shell banks…

09 Dec

offshore banks and shell banksIn the world of international finance you will hear a number of confusing terms to describe various kinds of banks. These include A banks, B banks, C Banks, offshore banks and shell banks.

A shell bank is one which has no substantial presence, staff, or independent existence. These banks are often nothing more than a banking license lodged at an attorney’s office with the nameplate on the door from which they have also come to be called, brass plate banks. Under the Patriot Act, these banks are de facto presumed to be criminal operations. The most famous purveyor of these banks was Jerome Schneider, who has since been convicted of various felonies.

The major difference between an offshore bank on one hand, and an A, B, or C bank is that the former is generally regulated by a government finance Ministry, and as such is not a real bank, nor directly tied into the worldwide banking system; while the latter are real banks with various kinds of licenses.

An A bank is a standard commercial bank, the kind with which you probably deal in your hometown. In some countries this is called a universal bank, because it’s banking license allows it to do almost everything.

A B bank is very similar to an offshore bank in that both are restricted from dealing with the residents of the country in which they are chartered. However, a B bank is a real bank, regulated by the central bank, and as such part of the worldwide banking system.

A C bank is even more restricted by its charter so that it can only do business with those persons or entities named within the charter. As such, it is the banking equivalent of a captive insurance company. In some places there are offshore banks that operate under similar restrictions and they are usually known as restricted offshore banks.

As previously noted, the Patriot Act places a huge onus on shell banks–this was extended by Attorney General John Ashcroft to include offshore banks generally. Because of this, the utility of offshore banks has decreased considerably.

The real Golden Fleece for offshore business is a domestic commercial or A bank, which is friendly to nonresident accounts.

–The Navigator

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