> If you have eight figure net worth or access to same from external sources it's not particularly difficult to start your own offshore bank.
An eight figure net worth is not even close when it comes to considering starting an own bank.
Furthermore, offshore today means just one thing: "red flag". Because of AML rules, the list of Non-Cooperative Countries or Territories [1], and FATCA/CRS reporting, the only people still going through the hassle of using offshore to hide something are people who really want to hide something -- hence the red flag.
Finally, banks don't exist by themselves. They need other banks to partner and transaction with. For example: say you are a bank in the British Virgin Islands. Now try to buy stock on the NYSE. For that, you need a bank with access, and no bank with access would partner with some shady outfit.
> And if you've been following the history of Wirecard
Wirecard is a scandal beyond comparison. It is unfathomable to me how this could have gone on so long.
To contrast that, working for a bank myself, I was involved in numerous audits by financial regulators, and you wouldn't believe the level of detail they went into. Any flaw or inconsistency -- no matter how trivial, at what org level, or even across levels or topics -- was brought up.
But perhaps that was just coincidence, and we had the luck of being audited by most the diligent of auditors.
> And even if you go with a traditional bank, KYC is mostly box ticking.
Absolutely not true, at least not with the banks I'm familiar with (and our peer group services mainly high-net-worth clients).
Every single client can be subject of an AML audit. Any irregularity in a record will be construed as an overall failure of AML policies in the institution. You don't just "tick the boxes" with high-risk clients. Background checks happen. Plausibility checks happen.
> And some of the biggest banks have been directly implicated in money laundering, AML laws and all.
Laws cannot prevent crime, they can only deter crime. Yes, big banks are occasionally still involved in money laundering, but compare this to 20 years ago. The incentives are diminishing.
> Because of AML rules, the list of Non-Cooperative Countries or Territories [1], and FATCA/CRS reporting
Swiss, Czech bearer instrument companies were a thing pretty recently. Cypriot trusts were a thing just a few years ago (maybe still are?). Or do you define offshore as only those weird and incomprehensible third world countries half a world away? I'm pretty sure people thought the lists were meaningful in 2013, too, and yet they have grown since then -- and the structures used to get around them have changed as well.
The whole subthread is somewhat meaningless in the context of the article, though, because it would be ridiculous to expect Lebanon to have the same level of insight into company ownership as say, Austria, Germany, or the US.
> the only people still going through the hassle of using offshore to hide something are people who really want to hide something -- hence the red flag.
Offshore means tax optimization, and anonymous companies may be nothing more than an attempt at keeping competition from guessing your game plan. E.g. real estate investors. I suppose those might be red flags in countries with funny ideas about taxation (the US, parts of Europe).
> Wirecard is a scandal beyond comparison. It is unfathomable to me how this could have gone on so long.
I take it you haven't heard about the HSBC's drug cartel money laundering? From the perspective of a small business, stuff like that makes KYC/AML look like unneeded and annoying security theatre.
(All of the below assumes that a bank is involved, as banks are the subjects of the relevant regulations. If a bank isn't involved -- which is rarely the case -- anything goes.)
> Swiss, Czech bearer instrument companies were a thing pretty recently. Cypriot trusts were a thing just a few years ago (maybe still are?).
Not sure about the bearer instrument part (especially with the Czech Republic being subject to EU rules), but I'm quite familiar with the Cypriot trusts, and (1) banks must know their Beneficial Owners and (2) those BOs do get reported to their home countries with FATCA resp. CRS reporting.
And of course, you're right -- there are still ways to get around them. But those ways have become increasingly difficult, to the point where many banks simply don't bother with that business segment anymore because the headaches outweigh the potential profits. Getting past a red flag, while operating legally is not impossible, but why bother.
> The whole subthread is somewhat meaningless in the context of the article, though, because it would be ridiculous to expect Lebanon to have the same level of insight into company ownership as say, Austria, Germany, or the US.
That's a fair argument. I have to admit that I interpreted the question more in the sense that someone (not necessarily Lebanon) should have this information.
> Offshore means tax optimization, and anonymous companies may be nothing more than an attempt at keeping competition from guessing your game plan. E.g. real estate investors. I suppose those might be red flags in countries with funny ideas about taxation (the US, parts of Europe).
Hiding something from the competition, or other nosy parties, is my best guess as well. There are legitimate ways of optimizing taxes, but it's become increasingly difficult to hide assets from your home government. (The running joke is that the United States is the last tax haven, as it's the only country not to share information with other countries.)
> I take it you haven't heard about the HSBC's drug cartel money laundering? From the perspective of a small business, stuff like that makes KYC/AML look like unneeded and annoying security theatre.
I'm familiar with that one, and many others. Wirecard in my opinion still stands by far because there were credible reports of malfeasance going back years, and BaFin went after the reporters instead.
As I said earlier, these laws can't prevent crime, they can only deter it. You're still going to have bad actors, at many possible levels (even at the C-level, as we saw with Wirecard).
It's just become increasingly difficult, with diminishing payoffs. Coming back to the original statement I was challenging: doing shady stuff post-9/11 was far more difficult than pre-9/11, and it's become even more difficult since (although admittedly, the recent development is motivated by taxation).
If you mean purchasing a bank for such a sum: indeed, the price can be cheap.
But then you own a bank, and have to be in full regulatory compliance, which today is an immense burden. You need an officer for this, a responsible person for that, you need risk management, accounting, etc.
My argument is that nobody with 8 figures net worth would put up with that hassle just to hide an investment (because you can do that with comparatively less hassle by other means), but if someone is willing to actually operate that bank, why not.
An eight figure net worth is not even close when it comes to considering starting an own bank.
Furthermore, offshore today means just one thing: "red flag". Because of AML rules, the list of Non-Cooperative Countries or Territories [1], and FATCA/CRS reporting, the only people still going through the hassle of using offshore to hide something are people who really want to hide something -- hence the red flag.
Finally, banks don't exist by themselves. They need other banks to partner and transaction with. For example: say you are a bank in the British Virgin Islands. Now try to buy stock on the NYSE. For that, you need a bank with access, and no bank with access would partner with some shady outfit.
> And if you've been following the history of Wirecard
Wirecard is a scandal beyond comparison. It is unfathomable to me how this could have gone on so long.
To contrast that, working for a bank myself, I was involved in numerous audits by financial regulators, and you wouldn't believe the level of detail they went into. Any flaw or inconsistency -- no matter how trivial, at what org level, or even across levels or topics -- was brought up.
But perhaps that was just coincidence, and we had the luck of being audited by most the diligent of auditors.
> And even if you go with a traditional bank, KYC is mostly box ticking.
Absolutely not true, at least not with the banks I'm familiar with (and our peer group services mainly high-net-worth clients).
Every single client can be subject of an AML audit. Any irregularity in a record will be construed as an overall failure of AML policies in the institution. You don't just "tick the boxes" with high-risk clients. Background checks happen. Plausibility checks happen.
> And some of the biggest banks have been directly implicated in money laundering, AML laws and all.
Laws cannot prevent crime, they can only deter crime. Yes, big banks are occasionally still involved in money laundering, but compare this to 20 years ago. The incentives are diminishing.
[1] https://en.wikipedia.org/wiki/FATF_blacklist