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How California Foreclosures Are a Good Investment and Where to Find Them

California is a great place to live as it has it all: a vibrant economy, lots of employment opportunities, recreational facilities and a varied climate that suits different people. If you are on the lookout for buying a home to live in or investing in real estate to resell and make profit, investing in California foreclosures is a good idea.

There are several benefits of investing in California. It is the most populous state in America and third largest in terms of land area. The Central valley is one of the most agriculturally productive regions of the world. California is also one of the most geographically diverse regions of the US with the highest and lowest points (Mount Whitney and Death Valley). Key developments include the emergence of the entertainment industry of Hollywood in Los Angeles area. Other contributions to the prosperous economy include aerospace, petroleum and information technology. With its GDP, California would rank as the 10th biggest country in the world equivalent to Italy.

California has a diverse geography as well as climate. As counted in 2008, it has the highest percentage of minority communities accounting for 57% of the population. It is a true melting pot of cultures having one of the most linguistically diverse areas of the world. It is perceived as the Golden state-an ideal holiday destination, dry and sunny all the year round and with easy connection to the mountains and the beaches. It is also the perfectly Blue State-tolerant of alternative lifestyles, not completely religious and concerned with environmental issues.

So where to find California Foreclosures? It is easy finding California Foreclosures simply because there are so many of them.

If you want to search for California foreclosures, you may find listings of Bank Or Real Estate Owned properties. Simply do a Google search on the Net and visit the sites which advertise REO properties. You will be able to see photos of foreclosed homes, descriptions and also the asking price by the banks. It will also give the address of the realtor in charge, also called as REO specialists, for dealing with the foreclosed property as under California law banks cannot sell property directly.

Another way to access California Foreclosures is to contact a real estate agent. He will have detailed information on foreclosed properties. The agent may be working for several banks, so he will have knowledge about other foreclosed properties than the ones you have spotted on the website.

Next is to find a California foreclosures auction site and get ready to participate in foreclosure auctions. Having an agent working for you will put you in a competitive advantage over other buyers and bidders. Thus if you proceed in the right direction, capturing California foreclosures will be a rewarding experience.

Fixing the Banks – A New Approach to National Banking Regulation

A strong economy needs a strong financial services sector. A strong financial services sector needs strong, viable, and competitive banks. Today’s American banking sector is in near collapse. The federal government has practically nationalized the big banks. The FDIC is nearly bankrupt. According to the FDIC’s Failed Bank List, the FDIC has closed 112 banks in the past year. From 2000 through September 2008, they closed 40 banks.

The banks have destroyed the housing sector. After Fannie Mae and Freddie Mac inspired loose lending, neighborhoods and cities across the country are being destroyed by foreclosures and banking processes that are driving down housing values even more. Sudden caps on equity lines, refusing short sale offers, then foreclosing, not maintaining foreclosed properties, and not paying assessments are destroying home values and killing the consumer economy.

At the same time, $700 billion of taxpayer money and debt obligation went to the financial sector through TARP to fund and save the very people who continue to keep the downward pressure on. The people were told the TARP bailouts would save the economy and keep credit available. Credit is certainly not flowing to businesses and good credit risks. Credit card rates are rising to the 30% range for even the best risks and payment histories. The housing sector is sinking horribly; the only saving grace is the $8000 credit for first-time buyers and that is set to expire soon.

The system needs fixing and traditional regulation is not the answer. Our proposed solution is based on the following fundamental beliefs:

No bank should ever be too big to fail; Some banks must fail in order to keep the others in line and aware of the downside to poor performance.
Banking has lost touch with local markets and customers.
Competition results in better banking services and products at the lowest price to the consumer.
More banks are better than fewer banks for the economy, for industry, for consumers, and for any geographic area.
Consumer, mortgage, and business banking should be separate from investment banking.
The government should never own equity in or control management of any bank.
The government cannot regulate the risk out of the system, without destroying the economy; nor should it attempt to do so.
The government cannot regulate good decision-making into any industry; it can only set guidelines and reduce the risk impact.
Our Proposal

The nation’s big banks are very big-too big for the government to bail out and too big for the economy to suffer the effects of banking failure. For sure, multiple big banks failing nearly simultaneously is the recipe for economic meltdown, as we have learned. No bank should be too big to fail. The government has to get out of the role of last line of defense. The incentive to take banking risks and claiming upside benefits while leaving taxpayers to clean up banking failures has to end, now.

So, we propose breaking up every large bank into smaller regional banks, 1980’s ATT-style. No federally-regulated bank should be allowed to do business in more than five US contiguous states. This will ensure:

Strong regional banking services with regional flavor and local headquarters.
Enough diversification to eliminate geographic and industry risk in business.
A broad base of regional banks with products and services geared to regional needs.
Interlocking state networks of banks will promote a variety of competition and quality services nationally.
No banking failure can have a national impact.
For the purposes of the regulation, Hawaii will be deemed to be contiguous to Alaska, California, and Oregon. Alaska will be deemed to be contiguous to Hawaii, Washington, and Idaho. Maine can be deemed to be contiguous to Vermont and Massachusetts in addition to New Hampshire. Finally, Washington, DC will be considered a part of Maryland.

The proposal does not allow banks to cherry pick five states across the nation, for example New York, California, Florida, Texas, and Illinois. Instead a bank starting in California could compete in California, Arizona, New Mexico, Texas, and Louisiana. Or, the could compete in California, Hawaii, Oregon, Washington, and Alaska. A Florida bank could go as far west as Texas or as far north as Maryland or Illinois. But, in all cases, a bank is limited to five contiguous states.

A federally-regulated bank does not have to compete in five states; they can do business in one, two, three, or four states-as long as the states are contiguous.

Skipping states is not allowed. A bank doing business in Florida and South Carolina must also be active in Georgia (or around Georgia via Tennessee and Alabama).

Breaking up the big banks should not be too difficult. Banks should be split ATT-style via stock spin offs. None of the new “baby” banks shall have interlocking boards or shared directors. The new banks must be independent entities. They must have their own management teams and headquarters.

Central service organizations like information technology should be spun off into independent service companies. They can have 5-year contracts to service the family of former banking company owners. After that, they should compete in the marketplace to service banks or be acquired to be an in-house IT organization.

The new “baby” banks will be permitted to acquire and merge with other banks. However, they are limited to doing business within their five contiguous states. Market operations in other states must be sold or spun off prior to closing on a merger or acquisition.

The result of our proposal will be a stronger group of regional banks. These banks will be more in touch with regional needs and industries. Decision making will be more decentralized and more accountable.

Yet, each bank will be large enough to diversify geographic risk. No bank will be unwillingly tied to a single metropolitan area, housing market, or client industry. Banks will be large enough to specialize and to serve the needs of their consumer and corporate customers.

The geographic footprints of various banks should not match up exactly. Each state should have a unique and dynamic marketplace of competitors. For example, Maryland could have competition from banks based in New York, Florida, and Illinois.

Best of all, no bank will be too big to fail. No bank failure will have national implications.

If, in the future, the system is working well or there is the need to promote additional competition in selected “under served” states, Congress could increase the contiguous state limit to six or seven states. Or, they could deem “under served” states as one state for regulatory purposes (for example, North and South Dakota might count as a single state to encourage more local competition) at the request of the state legislatures.

Myths and Facts About Buying a Foreclosure in California

In the current real estate market, many buyers are interested in foreclosures, and with good reason. In my market area (greater Sacramento, California), foreclosures are often discounted by an average of about 20% from other homes. So it’s no wonder that some 60% of all residential sales in recent months have been properties that the bank has foreclosed on.

Many buyers have heard different things about foreclosures, some that are true, some that are true in other states besides California, and some that are just plain wrong. Let’s take a look at some of the common myths and facts about foreclosures so that we can better understand what we’re dealing with.

Myth: Foreclosure Buying Is for Serious Investors Only Actually this is partly true. If you’re talking about buying a foreclosure at a trustee’s sale, when the foreclosure process is “finished” and the bank is sold at a public auction, yes, this is true. California law allows the trustee to require any bidder to provide cash or cash equivalent at a trustee sale, and there is no inspection period. If you’re going to be buying “on the courthouse steps”, you’d better know what you’re doing. What this myth doesn’t tell you is that many foreclosed homes are never sold at the trustee sale, so they’re “bought back” by the bank. These homes make up the bulk of the foreclosures that Realtors┬« sell, and are called REOs (“Real Estate Owned”, i.e., by the bank), foreclosures, or sometimes “bank repos”. These homes can be financed. The big differences in buying these homes and in any other kind of sale are 1) The bank will generally not fix items found during the inspection period (with certain exceptions) and 2) the requirements for owner disclosure are also relaxed somewhat, since the law assumes the bank won’t know about the property first hand. You still have an inspection period, however, so you can find out what you’re getting and cancel the transaction if anything serious comes up.
Myth: After you Buy a Foreclosure, the Foreclosed Former Owner Can Cure the Debt and Get The House Back This is true to some extent in some states outside of California, where most homes are sold using a mortgage and foreclosed using a judicial foreclosure. Such foreclosures are often subject to the buyer’s “right of redemption”, a one year period in which the buyer can get the house back. In California, the vast majority of homes are sold using a deed of trust, so there is no right of redemption after the trustee’s sale.
Myth: Banks are Desperate to Unload Foreclosures, and Will Accept Almost Any Offer What we’ve found in our area is that it’s not so much the case that banks will accept any offer, as that they will discount the property 20% and more up front. In other words, usually most of the discount on a foreclosure is built into the list price already. Because they often represent very good bargains, we found when we ran statistics that the average ratio of what buyers pay to what the home listed for is actually higher in the case of foreclosures than in the case of non-foreclosed homes. This is not because the banks weren’t willing to give a bargain, but because they listed the home as a bargain.
Myth: When You Buy A Foreclosure You Pay the Amount Owed on the Loan Generally this is false. When you buy a foreclosure you pay an amount agreed to by you and the bank that owns it.
Fact: Foreclosures are Sold As Is This is true. As a rule the bank will not make repairs on a foreclosure. However, there are some exceptions to this rule. If you present a strong offer, the bank will sometimes pay for repairs that may be required. Lender required repairs are often common on when homes are financed using FHA, for example. Generally, you still have inspection period on an as is sale. You still have the right to do your inspections, and we strongly recommend you do. What “as is” means is that once you’ve done your inspections, you’ll decide whether to move forward or cancel, and the seller generally won’t do repairs.
Fact: Foreclosures Are Great Buys As we mentioned above, often foreclosures are listed at 20% (or more) of the list price of a comparable non-foreclosed home. Multiply that 20% by $300,000, for example, and we’re talking about a savings of $60,000! For being willing to accept a home that may have minor repairs and some cosmetic fixing needed, that’s not a bad way to go! No wonder 60% of the homes selling in our area are foreclosures!
Note: The information in this article is provided for informational purposes only, and should not be relied on exclusively to make a buying decision. Discounts quoted herein are averages, and all information here should be discussed with a competent real estate professional who is familiar with your area. Buyer should satisfy themselves as to any information about the condition of their home and obtain competent advice and inspections as needed.

Eastern European Banking Model

A traditional banking model in a CEEC (Central and Eastern European Country) consisted of a central bank and several purpose banks, one dealing with individuals’ savings and other banking needs, and another focusing on foreign financial activities, etc. The central bank provided most of the commercial banking needs of enterprises in addition to other functions. During the late 1980s, the CEECs modified this earlier structure by taking all the commercial banking activities of the central bank and transferring them to new commercial banks. In most countries the new banks were set up along industry lines, although in Poland a regional approach has been adopted.

On the whole, these new stale-owned commercial banks controlled the bulk of financial transactions, although a few ‘de novo banks’ were allowed in Hungary and Poland. Simply transferring existing loans from the central bank to the new state-owned commercial banks had its problems, since it involved transferring both ‘good’ and ‘bad’ assets. Moreover, each bank’s portfolio was restricted to the enterprise and industry assigned to them and they were not allowed to deal with other enterprises outside their remit.

As the central banks would always ‘bale out’ troubled state enterprises, these commercial banks cannot play the same role as commercial banks in the West. CEEC commercial banks cannot foreclose on a debt. If a firm did not wish to pay, the state-owned enterprise would, historically, receive further finance to cover its difficulties, it was a very rare occurrence for a bank to bring about the bankruptcy of a firm. In other words, state-owned enterprises were not allowed to go bankrupt, primarily because it would have affected the commercial banks, balance sheets, but more importantly, the rise in unemployment that would follow might have had high political costs.

What was needed was for commercial banks to have their balance sheets ‘cleaned up’, perhaps by the government purchasing their bad loans with long-term bonds. Adopting Western accounting procedures might also benefit the new commercial banks.

This picture of state-controlled commercial banks has begun to change during the mid to late 1990s as the CEECs began to appreciate that the move towards market-based economies required a vibrant commercial banking sector. There are still a number of issues lo be addressed in this sector, however. For example, in the Czech Republic the government has promised to privatize the banking sector beginning in 1998. Currently the banking sector suffers from a number of weaknesses. A number of the smaller hanks appear to be facing difficulties as money market competition picks up, highlighting their tinder-capitalization and the greater amount of higher-risk business in which they are involved. There have also been issues concerning banking sector regulation and the control mechanisms that are available. This has resulted in the government’s proposal for an independent securities commission to regulate capital markets.

The privatization package for the Czech Republic’s four largest banks, which currently control about 60 percent of the sector’s assets, will also allow foreign banks into a highly developed market where their influence has been marginal until now. It is anticipated that each of the four banks will be sold to a single bidder in an attempt to create a regional hub of a foreign bank’s network. One problem with all four banks is that inspection of their balance sheets may throw up problems which could reduce the size of any bid. All four banks have at least 20 percent of their loans as classified, where no interest has been paid for 30 days or more. Banks could make provisions to reduce these loans by collateral held against them, but in some cases the loans exceed the collateral. Moreover, getting an accurate picture of the value of the collateral is difficult since bankruptcy legislation is ineffective. The ability to write off these bad debts was not permitted until 1996, but even if this route is taken then this will eat into the banks’ assets, leaving them very close to the lower limit of 8 percent capital adequacy ratio. In addition, the ‘commercial’ banks have been influenced by the action of the national bank, which in early 1997 caused bond prices to fall, leading to a fall in the commercial banks’ bond portfolios. Thus the banking sector in the Czech Republic still has a long way to go.

In Hungary the privatization of the banking sector is almost complete. However, a state rescue package had to be agreed at the beginning of 1997 for the second-largest state bank, Postabank, owned indirectly by the main social security bodies and the post office, and this indicates the fragility of this sector. Outside of the difficulties experienced with Postabank, the Hungarian banking system has been transformed. The rapid move towards privatization resulted from the problems experienced by the state-owned banks, which the government bad to bail out, costing it around 7 percent of GDP. At that stage it was possible that the banking system could collapse and government funding, although saving the banks, did not solve the problems of corporate governance or moral hazard. Thus the privatization process was started in earnest. Magyar Kulkereskedelmi Bank (MKB) was sold to Bayerische Landesbank and the EBDR in 1994, Budapest Bank was bought by GE Capital and Magyar Hitel Bank was bought by ABN-AMRO. In November 1997 the state completed the last stage of the sale of the state savings bank (OTP), Hungary’s largest bank. The state, which dominated the banking system three years ago, now only retains a majority stake in two specialist banks, the Hungarian Development Bank and Eximbank.

The move towards, and success of privatization can be seen in the balance sheets of the banks, which showed an increase in post-tax profits of 45 percent in 1996. These banks are also seeing higher savings and deposits and a strong rise in demand for corporate and retail lending. In addition, the growth in competition in the banking sector has led to a narrowing of the spreads between lending and deposit rates, and the further knock-on effect of mergers and small-hank closures. Over 50 percent of Hungarian bank assets are controlled by foreign-owned banks, and this has led to Hungarian banks offering services similar to those expected in many Western European countries. Most of the foreign-owned but mainly Hungarian-managed banks were recapitalized after their acquisition and they have spent heavily on staff training and new information technology systems. From 1998, foreign banks will be free to open branches in Hungary, thus opening up the domestic banking market to full competition.

Internet Banking: Relevance in a Changing World

Surprising, but true – Internet-based activity is not the preserve of the young “digital native” generation alone. A 2008 survey says that Generation X (those born between 1965 and 1976) uses Internet banking significantly more than any other demographic segment, with two thirds of Internet users in this age group banking online.

Gen X users have also professed their preference for applications such as Facebook, to share, connect and be part of a larger community.

This is some irony in this, since online banking, as we know it today, offers minimal interactivity. Unlike in a branch, where the comfort of two way interaction facilitates the consummation of a variety of transactions, the one way street of e-banking has only managed to enable the more routine tasks, such as balance enquiry or funds transfer.

It’s not hard to put two and two together. A clear opportunity exists for banks that can transform today’s passive Internet banking offering into one that provides a more widespread and interactive customer experience.

It is therefore imperative that banks transform their online offering, such that it matches the new expectations of customers. Moreover, Internet banking must journey to popular online customer hangouts, rather than wait for customers to come to it.

There are clear indications that the shift towards a “next generation” online banking environment has already been set in motion. It is only a matter of time before these trends become the norm.

Leveraging of Social Networks

Forward thinking banks are leveraging existing social networks on external sites to increase their visibility among interested groups. They are also deploying social software technology on their own sites to engage the same communities in two way discussions. Thus, their Internet banking has assumed a more pervasive persona – customers are engaging with the bank, along with its products and services even when they’re not actually transacting online.

Heightened visibility apart, banks can gain tremendous customer insight from such unstructured, informal interactions. For example, a discussion on the uncertain financial future among a group of 18 to 25 year olds could be a signal to banks to offer long term investment products to a segment that was previously not considered a target. Going one step further, a positive buzz around a newly launched service can create valuable word-of-mouth advertising for the business.

Collaborating through Web 2.0

The collaborative aspect of Web 2.0 applications has enabled banks to draw customers inside their fold more than ever before. Traditional methods such as focus group discussions or market research suffer from the disadvantages of high cost, limited scope and potential to introduce bias. Feedback forms merely serve as a post-mortem. In contrast, Web 2.0 has the ability to carry a vast audience along right from the start, and continue to do so perpetually. Thus, an interested community of prospects and customers participate in co-creating products and services which can fulfil their expectations.

The pervasiveness of Web 2.0 enables delivery of e-banking across multiple online locations and web-based gadgets such as Yahoo!Widgets, Windows Live or the iPhone. This means next generation online banking customers will enjoy heightened access and convenience

A New York based firm of analysts found that 15% of the 70 banks tracked by them had adopted Web 2.0, a number of them having done so within the last 12 months.

Standard Chartered Bank employees connect with their colleagues through Facebook and use the platform to share knowledge, clarify questions and participate in discussions on ongoing company activities.

Bank of America, Wachovia Bank and Commonwealth Credit Union have built a presence within interactive media to create awareness and keep up a dialogue with interested communities. They have employed a variety of methods, ranging from creating YouTube communities to launching campaigns on Current TV, a channel in which viewers determine content.

Personalisation of Online Banking

Vanilla e-banking divides customers into very large, heterogeneous groups – typically, corporate, retail or SME, with one type of Internet banking page for each. That’s in sharp contradiction to how banking organisations would like to view their clientele. Banks are moving towards customer-specificity, almost viewing each client as a “segment of one”, across other channels, and online banking is set to follow suit. For instance, a specific home page for home loan customers and another for private banking clients could well be a possibility in future.

Interestingly, National Bank of Kuwait had the foresight to do this several years ago – they enabled customers to determine which products they would view and access, and were rewarded with a dramatic increase in online transactions.

Money Monitor from Yes Bank allows customers to choose their landing page – for example, they can set “all transactions”, “net worth” or “portfolio” as their default view. Other features include the ability to categorise transactions as per customers’ convenience and the printing of custom reports.

Empowerment Online

Beyond doubt, Internet banking has created a more informed, empowered class of customers. This is set to climb to the next level once customers are allowed to proactively participate in many more transaction-related processes. The Internet has already made it possible for customers to compare product loan offerings, simulate financial scenarios and design custom retirement portfolios. Going forward, they would be able to consummate related transactions – which means, after comparing interest rates, they could originate a loan online, and once secured, they can begin to repay it online as well.

Portalisation

The emergence of Web 2.0 technology coupled with banks’ desire to personalise their e-banking to the highest degree is likely to result in “portalisation” of Internet banking. The idea of banking customers being able to create their own spaces online, filled with all that is relevant to them, is not that far-fetched. Customers can personalise their Internet banking page to reflect the positions of multiple accounts across different banks; they could include their credit card information, subscribe to their favourite financial news, consolidate their physical assets position, share their experiences with a group and do more – all from one “place”.

Money Monitor enables customers to add multiple “accounts” (from a choice of 9,000) to their page. Accounts could be savings or loan accounts with major Indian banks, or those with utilities providers, credit card companies, brokerage firms and even frequent flyer programs. Users can customise their pages as described earlier.

As banks seek to develop their Internet banking vision for the future, in parallel, they will also need to address the key issues of security and “due defence”. While it is every marketer’s dream to have customers work as ambassadors, adequate precaution must be taken to prevent the proliferation of malicious or spurious publicity. Therefore, before an individual is allowed to participate in a networking forum, he or she must have built up a favorable track record with the bank. The individual must be a recognized customer of the bank, having used a minimum number of products over a reasonable length of time. Qualitative information about the person’s interaction with the bank’s support staff (for example frequency and type of calls made to their call centre, outcome of such interaction and so on) may be invaluable in profiling the “right” type of customer who can be recruited as a possible advocate.

Collaborative Web 2.0 applications may necessitate opening up banks’ websites to outside technology and information exchange with third party sites, raising the spectre of data and infrastructure security. A robust mechanism of checks and balances must be built to ensure that the third party sites are secure, appropriately certified and pose no threat to the home banks’ sites. Likewise, before a third party widget is allowed to be brought on to a site, it must have passed through stringent security control.

Due diligence must be exercised before permitting users to place a link to another site to guard against the possibility of inadvertent download of malicious software, which could, in the worst case, even result in phishing originating from the banks’ sites.

It is equally important for a bank to guard its customers against invasion of privacy, data theft or misuse. The concept of portalisation envisages deploying technology to bring information from other banks’ or financial service providers’ websites into the home bank’s site. The home bank must ensure that its customers’ personal or transaction related information, which may be shared with the other providers, is not susceptible to leakage or outright misuse.

Offshore Internet Banking Advantages and Disadvantages

The topic of offshore internet banking is a hot one and one that is increasingly growing in popularity not only within the consumer banking community, but also the business or corporate banking sector.

The beauty of offshore online banking is that in addition to enabling you to conduct banking activities allowed by traditional and local brick and mortar businesses, it allows you more variety and flexibility in terms of your banking needs. For example, if you travel often, offshore online banking gives you the flexibility to conduct business on to go from anywhere, while ensuring that you have access to the type of currency if you need at a time you need it.

Having said that, not all banks offer online or internet banking services as this service costs the banks a significant amount of money. Programming sophisticated and secure systems require the effort of several full time computer engineers, full security and compliance departments, as well as heavy overhead to support the service on an ongoing basis.

Because there are so many variables involved in offering this service, offshore internet banking services vary from one financial institution to another. Some have better systems while others have work to do. A lot of this is predicated on the resources the bank has dedicated to this initiative, both in terms of quantity and quality.

Opening an Offshore Bank Account

Before diving further into this topic, I want to clarify that engaging in offshore internet banking is not about evading taxes. It is about mitigating risk of capital loss due to no fault of your own. So when considering a foreign jurisdiction in which to establish an offshore bank account, consider one that is politically stable and financially strong. In addition, it helps to select a jurisdiction that pays an attractive interest rate and has low to no income tax. Some of the most preferred jurisdictions over the years have been Switzerland, Cayman Islands, Singapore, Hong Kong and the United Arab Emirates (UAE).

Opening a personal bank account is usually a very personal activity. With offshore internet banking however, there are ways you can get started remotely without having to show up to the bank’s local office, saving a ton of time, money and mainly frustration.

One such way is by visiting a local bank’s branch in your domicile state, or home country. Many big banks that offer internet banking have a multi-national presence. Chances are good that your selected bank has a local branch near where you live, despite being headquartered in another offshore jurisdiction.

In other cases, there are international banks that may not have local branches near where you live, but are willing and able to establish an offshore bank account for you through email, snail mail, fax and telephone. There are usually a set of documents required by banks in order to execute this process. Therefore you can still open a foreign bank account with an offshore bank without having to leave your country, but it may come with a little more effort, and sometimes the struggle involved in communicating with someone overseas.

The Advantages of Offshore Internet Banking

Here are some advantages of offshore internet banking that you should know about.

Protection from sovereign risk – as mention already above, parking funds in foreign bank accounts mitigates the risk of loss of capital resulting from freeze or confiscation of funds by Governments without any fault of your own. This risk is less of a concern in a developed economy with a solid banking infrastructure such as the United States, but it is nonetheless an inherent risk that exists.

Tax benefits – many offshore jurisdictions have low to no income tax implications on interest income, or income from business activities.

Higher Interest Rates – because many offshore banks operate with low costs, they can afford to offer higher interest rates compared to larger multi-national names. In fact, in developed economies like in Europe and North America, regulatory compliance requirements is seen by many as form of taxation on banks, thereby increasing overhead costs and lowering interest rates.

On Demand Access to Statements – offshore internet banking gives you instant access to your statements where you can view your activities on a real time basis. This includes past and pending deposits and withdrawals. You can therefore access your account balance at anytime.

Money Management – with offshore internet banking you can transfer funds between accounts across the globe instantly. Offshore banks have inventories of various currencies and can help you fulfill banking transactions in multiple countries. You can schedule automatic payments to vendors to release automatically.

There are several other advantages to offshore internet banking. You can open offshore trading accounts and establish offshore brokerage accounts to conduct trading and investment activity (there can be tax advantages to this). Conducting transactions online is not only mostly free, but also very efficient. Transaction time online is simply much less. You can also have streams of income potentially directly deposited straight into your offshore online bank account.

From a personal finance perspective, downloading banking activity from your offshore online bank account is easy and can be done instantly. Most online banking platforms are designed to feed information into financial or personal accounting software or to spreadsheets like Excel. Individuals can save a significant amount on accountant fees just by utilizing this feature. Not to mention more intimate knowledge and management of their own finances.

For those looking for anonymity, offshore online bank accounts also allow you to conduct banking anonymously as per bank secrecy guidelines.

The Disadvantages of Offshore Internet Banking

Merely establishing an offshore bank account can be a reason for the Government to put more focus on your activities. After all, many use offshore internet banking as a mechanism to conduct illegal activity and evade taxes. Some specific disadvantages of offshore internet banking as a result of conducting business through foreign bank accounts are the following:

Knowledge of Internet – There is a certain level of internet savvy required to be able to navigate your way through offshore internet banking platforms to ensure you are getting exactly what you want. This is a big reason why some elderly shy away from conducting banking online.

Deposit Timeline – Because many banks do not have the technology to be able to collect deposits remotely, you may have difficulty depositing all your proceeds. While many banks have developed electronic scanning technology, others have yet to catch up. There is no consistency to say the least.

Security / Fraud Implications – because banking is conducted online, offshore internet banking exposes you to the risk of network intrusion or breach. Because information is transferred electronically and stored in various databases, breaches can cause private and sensitive information to leak out into the wrong hands. But then again, this is no different than losing your check book if compared to traditional brick and mortar banking.

Spam Mail – offshore online banking also means that you will receive emails from the foreign bank you have your offshore bank accounts with. Internet predators recognize this as an opportunity for phishing, or fish for private and sensitive information. Many times you may see an email in your inbox from what seems like your foreign banking institution. However it is not. These are phishing emails hoping for you to login and enter your personal information such as login and password.

TIPS: Here are a few tips to avoid falling for phishing scams. First, when you receive an email from your bank, call them to verify that they sent the email. Second, instead of opening the email they sent you, visit the bank’s website directly and see if you can conduct what’s asked of you on their site by you logging in directly rather than clicking a login link in an email message.

Third, if you were to open the email and click on any link in it for whatever reason, once the link takes you to a website where you are required to enter personal information, look for security symbols such as an https URL address or a padlock on the lower right hand side corner of the web browser. There are other security measures as well that can be visible spotted. Read online for more on this topic.

Financial Security – some offshore bank locations are not very financially secure or stable. For example, during the global economic crisis of 2008, many savers lost money parked in offshore bank accounts in some destinations such as Iceland. I don’t mean to scare you by any means as this situation is rare, and in most cases those who suffer losses are compensated in some way over time. However, know that this inherent risk exists. Always look for deposit insurance. The bigger the allowance the better.

Credibility by Association – as I’ve already mentioned, offshore internet banking has negative connotations attached to it, often associated with money laundering, use of illegal monies, untaxed monies and support of illegal causes. Offshore bank accounts at times are tied to crime rings and terrorists. What does this mean for you? Although you may engage in offshore banking legally and legitimately, understand that there will be closer scrutiny over you by the Governments.

Access Restrictions – offshore banks are in destinations far away from you, therefore more difficult and expensive to access. In many countries, communication in person is preferred to communicating over phone, email and snail mail, therefore internet banking can get a bit difficult and frustrating. I see this trend slowly changing with banks understanding the need to communicate at all levels and mediums to satisfy a global audience.

Expensive – offshore internet banking is usually more expensive to set up and administer and thus more accessible and feasible for those more affluent or high income earners. It’s not so much that it is expensive to open a foreign bank account. It is not. However, many times you will need to go through a firm that specializes in helping expatriates establish and manage foreign bank accounts. All these activities cost money.

Internet banking today is very convenient and is accessible to almost everyone. For the average individual it can be a great offshore tax planning tool to add to the mix. For those that travel, foreign internet banking can provide all sorts of convenience, allowing one to transact anywhere and with anyone. So if you liked what you read about offshore online banking, I highly recommend you look into it further to see how it can help you meet your objectives.

Impact Of China Pakistan Economic Corridor (CPEC) On The Banking Industry Of Pakistan

A Karachi-based banker receives the latest update on stocks from his counterpart in Hong Kong in a blink of an eye. That information is then relayed to a customer in Doha who then orders electronics made in Chengdu transported across the proposed CPEC route and then by sea on a bulker ship to its final destination. The breakneck pace and the astonishing volumes at which goods, information, and money move from one part of the world to another is conquering inhospitable terrains, exploring new sea lanes, defying traditional methods of communication, taking the world online, and exploiting untapped energies. Global interconnectedness through trade has always and is constantly determining, redesigning, and reshaping human life at a scale never imagined before. London shoppers buy garments made in Pakistan. Chinese watch American TV seasons. Arabs use software developed in Silicon Valley to instigate an earth shattering revolution. The overbearing influence of international trade on human lives is remarkable in the truest sense of the word. Both literally and otherwise, international trade is having a great impact on the way humans conducted life and business.

But the idea of global interconnectedness is not new, in fact, it can be traced back to the time of Han Dynasty in 221 BCE when all of China came under one supreme rule. About the same time, the conquests of Alexander established a veritable contact between the Western and Eastern societies widening existing road networks and creating new trade routes. Over the course of next several centuries, a gigantic web of trade networks emerged which spanned continents drawing from China silk, tea, porcelain, and jade while gold and glass wares travelled from Rome, the western terminus of the famous Silk Road. Along the way, many items were picked up from many regions and local kingdoms of Middle East and India which eventually benefited the local populations also. The trade links formed along the breadth and width of the 5000 miles long Silk Road were commercial, cultural, technological, but also financial in nature. The goods, technologies, and even diseases of all kinds were exchanged; such was the power of international trade. Back then, the roads were long, treacherous, and unpredictable. And crossing the inhospitable terrains was incredibly dangerous but the huge demand for goods led to the creation of a complex web of trade networks which were duly supported by local financial moneylenders and money-exchangers backed by local governments and fiefdoms.

The long-awaited revival of the old Silk Road (as enshrined in the One Belt, One Road Project of China) has the potential to genuinely alter the world economics like never before in history. This largest ever financial undertaking since the Marshall Plan by USA for Europe post World War II will include over 60 countries and most likely to generate $ 2.5 trillion dollars in trade, if the regional plan works according to the design. This regional pact promises to economically benefit the countries included in it by linking them to global trade networks. Imagine a good chunk of that trade passing through Pakistan and affecting the life and finances of ordinary Pakistanis. This life altering, game-changing, golden goose transformed into a trade route is called China Pakistan Economic Corridor.

The $ 46 billion dollar China Pakistan Economic Corridor (CPEC) is an important part of this OBOR project which connects the Western parts of China and Central Asian Republics to the Gawadar port in the Arabian Sea. The deep sea port of Gawadar is strategically located just outside the Strait of Hormuz and near the main shipping route of global oil trade and it is the closest trade route to the landlocked Central Asian Countries which have enormous natural resources and untapped market potential. And Pakistan stands to benefit from all that because this CPEC is not just a trade route but a complete project for life which includes energy projects, railroads, 25 industrial zones, and cross border fiber optics which will connect Pakistan with the world both on technological and trade fronts.

Developing countries struggle in the wake of hindered access to markets, lack of finance, and limited infrastructure at home to support economic activities. In that context, the CPEC promises to take Pakistan straight into the international foray where big players play.

But here is the kicker: when the global trade fever kicks in through the CPEC, then Pakistan must be ready to welcome it.

The ability to meet the challenges of international trade head-on and that too with great success will largely depend on Pakistan’s banking & financial sector’s readiness in adjusting to the new trade environment.

The influence and impact of local and domestic players and a whole host of homebred economic forces may ratchet down with the increased international trade moving feverishly back and forth and back again across the CPEC routes. Pakistan’s banks will have to calibrate their strategic position in order to be able to take advantage of the money movements resulting from increased trade passing through the country.

Increased integration through increased trade and more of international trade passing through the proposed CPEC routes will create a new set of challenges, opportunities, and risks for the Pakistani banking and financial sector offering financial services to local businesses and their foreign affiliates, to the government and investors at home and abroad.

If history offers any guidance, then it is a known fact that Pakistan’s economy never really depended on huge trade volumes (with the current trade volume hovering at about $ 80 billion) as so much as it will do in near future. For once, the central bank of Pakistan (State Bank of Pakistan) in particular will have to use interest rate swings to keep inflation in check, and others banks may have to make considerable adjustments in their positions by administering some radical and some not so radical but smart changes and tweaks here and there in their financial offerings to meet the changing dynamics of the new trade environment in Pakistan. The economic shocks resulting from the new trade environment can be both positive and negative depending on how they are confronted. Therefore, adjustments have to be made accordingly which could result in a great earning opportunity for many.

The contrasting snapshot of Pakistan’s current trade environment juxtaposed with the picture of trade likely to emerge in near future offers a great insight into what the local businesses and financial & banking sector might have to deal with when billions of dollars of trade starts to pass through Pakistan. It is important to understand this because the CPEC is going to touch Pakistan on many levels. Pakistan’s current business environment is characterized by a massive shortfall of electricity which can reach as much as 5 million kilowatts in the summers. This electricity shortage acts as a bottleneck in the process of industrialization of underdeveloped economies which means that production lines and factories come to a grinding halt due to lack of energy. Many companies, banks, private businesses, government offices, and even the shopkeepers & students especially only those who have the means are forced to use private generators when the light goes out. But all that is about to change: the Neelum-Jehlum Hydropower plant which is the largest ever overseas power plant undertaking by any Chinese firm will alleviate 15% of electricity shortage. It will generate 45 billion Rupees or $ 400 million in revenues. It is just one of the 22 projects which are included in the CPEC. Thus, the CPEC is truly a game changer as it possesses the ability to get the infrastructure ready for integrating Pakistan with the international trade regimes.

The improvement in the macro environment is evidently in the pipeline with substantial investments taking place in the infrastructural development which if supported by the banking sector and small improvements in the basic micro infrastructure stands to give huge advantage to Pakistan on the back of three major global trends promising to alter fortunes of Pakistan for the better now and forever which include investments from China coming in, the return of Iran into the international economy, and the low oil prices.

Therefore, the new trade environment of Pakistan will be made up of the results of the CPEC which will offer greater, seamless, and hassle-free access to Central Asia Countries where the potential for business, banking, and trade is immense and the markets there virtually untapped, untouched, and not fully exploited or explored. This means that the trade volumes are going to skyrocket, or break the ceiling, or simply exceed expectations as new markets are explored and regional economies get ready for more consumption. Thus, the prospect of making some serious moolahs on the back of the CPEC is too alluring to ignore for both businesses and banks.

Where there is increased trade, there is a trail of money to be found, and there must be a bank nearby. And all trades since the ancient times required a most secure method for all kinds of financial transactions. And that is where banks jump right into the foray big time. Even in the old days when trade was happening through the Silk Road, local money lenders and money exchangers acting as small bankers were offering some kind of safety and security to the financial transactions taking place along the route. The safety and security of financial transactions is as important as giving a real boost to international trade.

There are two important things: first and foremost, no country can ever grow quickly and persistently over a long period of time by staying disconnected from the international trade. And second of all, no country can become a thriving economy on the back of trade without the active backing of an equally robust and thriving banking sector facilitating that trade.

In any trade environment, the most important thing for an exporter is to get paid and for an importer to get his goods. If the exporter is not getting paid, then he is sending gifts. The banks can facilitate the trade by offering guarantees and other financial services to both exporters and importers in Pakistan. The payment methods if made secure and mediated by banks can help both the trade and bank. The international trade has many payment methods which include Cash-in-Advance, Letters of Credit, Bills of Exchange or Documentary Collections, and Open Account etc. Cash in advance method is best for exporters and riskier for importers. However, LCs or letters of credit is considered to be the most reliable and secure method available to international traders which is basically a guarantee given by a bank on behalf of the importer that if the terms of the LC are met by the exporter, the exporter will get his agreed payment. Billions of dollars of trade in USA is made secure by LCs offered by their banking sector. Documentary Collections or Bills of Exchange is another product which banks offer and is available to international traders. In this method of payment, a bank is nominated which receives the shipping documents from the exporter and once the importer comes in with the money, the goods can be claimed and picked up by the importer. Even in the open account payment method, banks are used as intermediaries between international traders.

Therefore, the biggest question that confronts Pakistani banking sector is this: are they ready for what is about to hit them? Because there could be 1001 ways to make real wampum once the CPEC gets underway. Sooner rather than later, Pakistan’s trade environment will be truly global. The banks will have to offer new financial services or old financial offerings into a newly designed package but at an unprecedented scale and magnitude. The bank will to adjust to new trade environment taking shape in the country because it is no secret that international trade slows down if the financial banks are unable to offer secure payment methods.

According to the estimates of World Trade Organization, around 80 percent of world trade is backed up by financial offerings and credit guarantees offered by the banks. The reason is fairly simple: everyone wants to be on the safer and beneficial side when the trade happens. The exporter wants to receive payment as soon as the goods are delivered and the importer wants to keep his money with him until he has received the goods because there is an element of risk involved in international trade. Thus, the role played by banks in facilitating global trade is huge. For the developing countries, this role played by banks assumes greater significance because the growth of developing countries greatly depends upon trade volumes which are likely to stay strong and persistent if the banking sector is able to meet the demand for LCs, payment guarantees, and other insured financial services and help keep the wheels of trade moving along smoothly and surely. That is how the banking sector stands to benefit from the shifting trends in the trade environment of Pakistan which will be soon connected with the economies of the world that matter.

Pakistani banks will be able to explore new ways for making more revenues for themselves and for traders by forging new and unbreakable alliances with the corporate world, make cross border financial agreements, taking their services worldwide, and facilitating the trade so that the trade could move seamlessly across the borders.

Pakistani banks will have to find ways to offer cost effective solutions to international traders. The banks must offer these services in an efficient manner on an absolutely new scale and manage its own operations in a way that the banks can stay competitive and truly global over the coming decades. Their offerings of LCs and Bills of Exchange must be more efficient, robust, and really good if not better than those offered by international bankers. Pakistani banks can automate their financial services in the wake of the new trade environment.

The banks in Pakistan can make use of the latest technology which helps in automatically classifying LCs as they are generated in the form of invoices, purchase orders, agreements, and other certificates facilitating cross border trade. This wholehearted adoption of technology is going to put Pakistani banks on par with the rest of the banks in the world but will also prove to be less cumbersome, cost effective, and time saving. This in turn will help boost the trade big time. Pakistani banks will also have to ensure accuracy of their data in order to ensure compliance regulations. This can be done by the use of intelligent technology which helps in ensuring timely extraction, validation, and screening of the data and documents submitted with the banks. These are some of the things that banks in Pakistan must possess if they wish to improve their financial services for the facilitation of trade and also position themselves to better manage the trade happening and passing through the country. The adoption of the right kind of technology, better positioning of trade financial services, and making right adjustments to the scale and magnitude of the expected trade will definitely put Pakistani banks on the world map that helped the country become more competitive both globally and regionally.

The new Silk Road is estimated to generate $ 2.5 trillion in trade over the next ten years and some of that trade will pass through the proposed CPEC routes. China imports 60% of its oil from the Gulf and 48% of China’s oil is transported via tanker ships which have to travel 16,000 kilometers for up to three months through the Malaka Straits and through the South China Sea which is fast becoming a contested region marked by competing claims to the sea lanes. That makes the trade through that route somewhat unsafe, uncertain, and ridden with untoward risks. And due to this ensuing uncertainty Gawadar Port offers a much less expensive alternative route which offers savings worth billions of dollars. Just in terms of numbers, CPEC once fully underway will add two percentage points to the GDP growth of Pakistan which will effectively take the GDP beyond 6% growth rate annually. That figure in itself speaks volumes about the sheer money potential of this proposed project. It has the potential to bring in huge influxes of money which would definitely force the banking industry to grow.

In the wake of CPEC, a great number of opportunities are coming to Pakistan. The need for strategic management, strategic budgeting, forecasting, planning, overall project accounting, investment banking, new and improved financial services are going to surge. The sectors of shipping, storing, transportation, and finance are going to jack up with huge financial appetite requiring more innovative and improved fast-paced financial and banking services on a larger than life scale. The need for taxation and streamlining of the taxation regime post CPEC will be undeniably great.

Anti-money laundering specialists, branch managers, financial analysts, CFOs, financial consultants, tax managers, financial management, banking consultants, investment bankers, trade marketers, and trade accountants will be in great demand over the next decade. Financial services and financial and banking sector will be in full swing once the trade through CPEC begins to flourish.

Increasing trade is the key to alleviating abject poverty, boosting economic activities and achieving shared prosperity. Evidence shows that countries open to trade and with better access to markets and better financial support infrastructure and regime for businesses and trade are able to provide more opportunities to their people to become successful businessmen, bankers, traders, and entrepreneurs. With enhanced participation in world economy, Pakistan stands a chance to become a major world economy.

Pakistani banks can learn a lesson or two from the banks of China and India. 3 out of top ten banks in the world are Chinese. They got to the place where they are today by actively supporting the international trade and offering products that helped in transforming local traders into world beaters.This happened because in order to ensure double digit economic growth, Chinese banks stepped up their game and grew exponentially in order to provide funds and credit for China’s rapid economic development. Banks in India are reaching out to the remotest areas through a wide network of branch banking.

Risky investments are likely to go up as soon as the trade along the CPEC jumps into proper action. In a short span of time, economic wheels will start to roll with increased trade gyrations. With the increased privatization and undiscovered investment opportunities emerging in the economy, Pakistani banks could very well be looking at a rosy fiscal picture. Even an ordinary fruit exporter could be looking the way of the investment bankers to suggest ways for more financing opportunities for improving trade with the CARs.

In the wake of what is about to happen, Pakistani banking industry can do a few things to meet the ensuing challenges of CPEC: mobilizing savings through a wide network of branch banking; transforming savings into capital formation which could become the basis for more economic prosperity and development; finance the industrial sector and boost the capital markets; promote entrepreneurship by underwriting shares of new or existing companies; and help people acquire new skill sets in order to be able to better cope with the impending changes and major alterations expected to be caused by the new trade environment in Pakistan.

When an Offshore Bank Fails

Introduction – What we are going to do is describe the legal and mechanical process relating to offshore bank failures. We will discuss what leads up to them, what happens if they fail, and how do the depositors get their money back. The terms and scenarios we depict are generally what happens in the world of offshore banking. In some jurisdictions the terminology and procedures may be slightly different but the general way things proceed will be in line with the scenarios depicted in this article.

Offshore Banks – A brief definition of this term is in order. These are banks that are located in various countries around the world many being in Caribbean Island Nations. These banks have a license that enables them to only do business with people and entities (trusts and corporations) that are not from that country. The offshore jurisdiction does not trust the offshore bank to accept deposits from its citizens or corporation filed in that country. This right away should tell a moderately astute investor that he or she is perhaps not exercising the correct amount of caution when it comes to selecting a bank and an offshore jurisdiction. So the first warning sign is be careful of offshore banking licenses. A bank can be in an offshore jurisdiction and not have an offshore banking license, instead be a regularly licensed bank. Offshore bank licenses can be had in some jurisdictions with as little as a $50,000 deposit with the country issuing the license. Usually this amount is never more than $500,000 and many countries require less. As a point of comparison a regular bank operating in Panama is required to post $10,000,000 cash deposit and the owners go through a rigorous background investigation.

Bank Failure – This is a term relating to the offshore bank being unable to fulfill the demand for funds from their depositors. This can occur for a number of reasons, some bad and some not so bad. The offshore bank may have been found to be below its protective ratios and the government bank auditors or financial ministry may decide to shut the bank down in terms of money going out for a limited period of time to see if the bank can return their ratios quickly to an acceptable level. In the event the ratios return to an acceptable level the bank operation resumes normally and the depositors may not even know anything occurred.

Complaints – The way offshore bank failures generally start is with complaints to the licensing authority of the country where the bank is located stating that requests to withdraw funds are not being met by the bank. To document this the account holder generally retains legal counsel in the country where the offshore bank is located and files a formal demand for the funds to bank with a very short deadline. When this demand is not met the law firm will file a formal complaint to the offshore bank licensing authority who will generally conduct an investigation. They may have their own auditors or hire an independent team of auditors to go through the offshore bank records. They will look to see if there are any loans on the books that do not meet the guidelines for lending such as writing uncollateralized loans is usually considered an offense. Loans to the principals of the bank are another red flag. Real estate acquisitions like mansions on the island where the offshore bank is located for the bank executives to live in is another red flag as well. Usually without loans the bank would not fail to meet its ratios. When these loans go bad and there is no collateral to go after then the banks get into trouble. The complaint process is possibly the only way the government is going to know their offshore bank is in trouble and by then it may be too late, but it may not be too late. Remember we are talking about offshore banks here, not regularly licensed regular banks which are audited and watched way more closely by the government and usually by a different government agency than the agency supervising offshore banks. We as a Panama Law firm do not introduce clients to offshore banks which should tell you something.

Loss of Correspondent Bank – Sometimes the offshore bank has just lost one or more of its correspondent banks and can not execute wire transfers until it replaces the correspondent with another correspondent bank which may take several weeks. When the complaints hit the government they will investigate, see that the funds are in place and allow the offshore bank a reasonable period of time to secure another correspondent bank, checking with them for progress reports. This is a not so bad problem that will only serve to scare and inconvenience the depositors.

Offshore Bank Receivership – This is a process whereby the government agency that licenses the offshore bank takes over the offshore bank to control its operation with an eye towards saving the bank. Sometimes they are successful and well sometimes not. Often a team of professionals from a large auditing or accounting firm are brought in. Receivership practices can frequently mean that a percentage of your funds will be unavailable for withdrawal for sometime. This is to prevent a run on the offshore bank which would for sure topple it and thus cost the depositors substantial losses. You may be only able to take out say 25% of your funds. What can often happen is the depositors lose faith and take as much money out as they can and avoid putting in any more money. This usually results in the offshore bank failing totally and being shut down.

Suing the Offshore Bank – What often happens in these offshore bank receivership scenarios is some depositors get scared and act jumpy and sue the bank. The lawsuits generally involve having the court encumber or tie up an amount equal to their deposit. To accomplish this the depositors generally have to resort to deceit or twisting the truth minimally, to make the court think they were not ordinary depositors or the amount in question consisted of funds to be handled in a special exceptional manner. The way the depositors are playing their hand is get the court to hold my money before the bank goes down completely and then my funds get mixed in with all the depositors in the fracas. If one files such a lawsuit they are generally excluded from filing claims as regular creditors (depositors) of the bank in the event of a liquidation and if they lose their lawsuit (an expected occurrence if based on fraud or deceit) they can lose all. Usually several depositors will file such lawsuits if there is any official action taken against the offshore bank and this could push the offshore bank into greater difficulty and if there is a bank liquidation it will be a most complex one with a lot of depositors funds eaten up in legal fees.

Offshore Bank Liquidation – This is of course the sword of gloom in the world of offshore banking. For things to reach this level the government had to have felt that the offshore bank is not salvageable. Generally a bunch of depositors filing lawsuits and jamming up the court system of some island jurisdiction is going to encourage the government there to liquidate the offshore bank in hopes of freeing up their courts. Imagine an offshore tax haven island court system. A small building with one to three courtrooms and maybe three or four judges. These courts hear divorce, child custody, personal injury as in auto accidents, bankruptcy, collection cases, resident disputes with building contractors, traffic court cases, and criminal cases. The court is there to enable the island jurisdiction to function as an independent governing state. It is not going to jam up its courts increasing the wait times for its citizens that are trying to deal with vital matters like child custody where one of the parents is an abusive drunk hurting the children. When the offshore bank gets put into liquidation generally the court cases can be disposed of quickly or even by summary dismissal. The government knows that the people behind these lawsuits are trying to get more money than they would if they just waited for the liquidation to proceed and are not amused by their litigious behavior.

The Offshore Bank Liquidation Process – So now the bank is in liquidation. What does this mean? Basically a liquidator will be appointed to determine what assets the bank has, liquidate what can be profitably liquidated and then see how much money is left. The remaining money will be divided up amongst the depositors fairly depending on how much they had on deposit in the offshore bank. They will get a percentage of their deposit back. What would be a good return in a liquidation, 75%. What would be a bad return well there was a liquidation in Latvia a few years ago where the depositors got 2%. What is a typical return? There is no number but it should be 33% to 60% unless the bank has been really mismanaged.

The Offshore Bank Liquidator – This is generally a person with an accounting, legal or banking background. They can understand the books of the offshore bank and the laws pertaining to the offshore bank and the liquidation. If the offshore bank had secured loans that went bad (payments not be made according to written loan documents) they will analyze the worth of going after the collateral. If there was a farm in Argentina posted as collateral for a three million dollar loan he may order an appraisal of the farm to see if it really worth that much. If the value of the farm is more than the legal expense of securing and liquidating the asset the liquidator should go ahead and liquidate it. This process may take a year or longer. If a loan was made to a trucking company in Belgium for a fleet of trucks the same liquidation process may occur. This sort of liquidation may take even two or three years depending on what type of liquidation processes may need to be followed. The borrower may file bankruptcy making the liquidation of the secured assets difficult and time consuming in some countries. The bankruptcy court might let the borrower continue making payments and keep the asset which can make for a rather problematic liquidation because now the loan must be sold to reduce it to a net value. Generally such a loan is going to go for a deep discount at best. The liquidator may have to sell the banks real estate, computers, office equipment and furniture, cars, boats, planes etc. All this is time consuming and the assets should be sold at an auction to keep things fair avoiding accusations of selling under the market for kickbacks. There is an inherent conflict of interest in the liquidation process. The bank liquidator generally gets paid handsomely. Think perhaps $150 to $300 an hour or maybe $10,000 to $30,000 per month. It is in his best interest to keep things going for as long as possible. The lawyers the bank liquidator uses are also under this same conflict of interest. How honest and upright these people are going to be is something for which there is no rule but there is generally a control element in the form of a creditors committee. In an honest liquidation the liquidator may elect to distribute the readily available assets the offshore bank has right away. These assets would be the actual cash deposits. This is an encouraging sign to the creditors. Money would usually be held back to allow the liquidation to proceed further allowing for legal expenses etc. Then as real estate and other assets are sold further distributions would be made. Not all liquidations are done so directly.

The Ugly Side of Offshore Bank Liquidations – Sometimes the offshore bank assets are deposited by the liquidator in another bank. Whether or not this is in an interest bearing account is always a good question. If there is $12,000,000 in cash in a bank the interest at 4% a year is a serious amount of money that will tempt people. Legal fees can be padded and kickbacks made to the liquidator from the law firm located on the island jurisdiction the offshore bank is in. Some of these islands where these offshore banks are have less than 100,000 people living in the country. You are foreigners and don’t expect such honest treatment in these tourist island jurisdictions. They may view these offshore bank liquidations as a feast for the locals courtesy of all the rich foreigners. Excessive travel can be run up by the liquidator. He can travel abroad going first class all the way even bringing the lawyers along, all on the clock. The liquidator can reach crooked settlements with people who posted collateral for loans with the offshore bank. Depositors of the offshore bank can file lawsuits for special treatment and the liquidator can settle with them in a crooked manner for an illegal kickback and then they get all their back while you only get a fraction back. Real estate owned by the offshore bank can be sold under market value for a kickback to a friend or relative of the liquidator. Same can be done with cars, computers etc. The liquidator can elect to chase assets not worth chasing to continue his high paying job some years longer than it should require. Remember offshore bank liquidations do not come along every day and the liquidator has no idea where his next job is going to come from. There is a check and balance usually in the bank liquidation process which is described below.

Offshore Bank Liquidation Creditors Committee – A creditor of the offshore bank is generally a depositor but it could be the electric company or the phone company. Generally, the employees are considered priority creditors when it comes to their wages and they get paid off first and fast. The depositor is owed money by the offshore bank based on their deposits, thus he or she is a creditor as far as the offshore bank liquidation is concerned. An offshore bank liquidation is sort of like a bankruptcy proceeding. In an offshore bank liquidation a creditors committee is formed which is something done in many bankruptcy proceedings. The creditors committee could possibly have been formed before the liquidator came into office and they appoint the liquidator with or without the approval of the court, rules vary some depending on the offshore jurisdiction involved. The creditors committee generally is voted into existence by the creditors, the creditors with the most dollars on deposit having the most votes is one way to look at it. All creditors are generally not treated equal. The creditors committee members are all on the same side and that side is interested in getting as much money back as they can. Decisions as to how to spend money chasing assets or potential assets are usually made by the liquidator but the creditors committee can exert control over the liquidator even replacing the liquidator in extreme circumstances. Some bank liquidations have taken place without creditor committees in place. These are generally less than above board liquidations.

Creditor Claims in Offshore Bank Liquidations – When the liquidator is in office the depositors are generally required to file claims. The claims process involves filing identity documents with the liquidator and identifying your account and how much money was in it. Offshore bank liquidations are conducted in open court and these claims wind up as exhibits in the public domain. What I am saying is bank secrecy is not in place once the bank is in liquidation. What one can expect to see is a fair number of depositors failing to file claims because of various reasons often relating to bank secrecy. Of course this means a greater recovery for those who do file the claims while the other folks walk away with a total loss of their funds by choice.

What to do if you are in an Offshore Bank Liquidation – If you are already involved in a bank liquidation you made a mistake and you are going to get hurt. How badly hurt is the question so you should be trying to mitigate your damages. If a creditors committee is forming try to get involved actively, even try to sit on the committee. If the liquidator has not yet been appointed do get involved in that process. Try to find ways to meet other depositors. Call lawyers on the island and ask them to represent a group of creditors collectively. Rest assured other depositors will be calling lawyers on the island and the lawyer can be a contact point to form a creditors committee. The idea may not occur to a lot of these lawyers so help them out a bit. If you can get a creditors committee in place and have it appoint a liquidator you will probably have a honest liquidation, probably. That having been said one must still leave room for the offshore bank itself having been intrinsically dishonest and the bank owners have since ran away with the funds. When you read the offshore bank liquidation horror stories you see that the money trail goes from country to country, bank to bank and then it ends up with a large cash withdrawal which is usually the end of the trail. The offshore jurisdiction may fail to ever prosecute them or file charges which of course make one wonder what was going on. So the key here is to get involved actively. It is real important to open communications with other creditors and get organized.

How to Avoid Being in Offshore Bank Liquidations – The answer is of course simple, avoid offshore banks. Stick to banks with full banking licenses that can conduct banking business with the residents of the country as well as with entities not located in the country.

Offshore Bank Alternatives – The best alternative to these tax haven island offshore jurisdictions is Panama. Panama is a solid offshore tax haven jurisdiction that does not tax offshore derived income and has no capital gains tax or tax on stock market gains. Panama has fully anonymous bearer share corporations where the owners are not recorded in any registry or database. Panama has anonymous foundations which are able to have generally non-freezable bank accounts. Panama has no tax treaties with any country so fishing expeditions are not going to happen. Panama has the tightest bank secrecy laws in the world and when coupled with an anonymous bearer share corporation it becomes the most secure and private structure one could have in the world today. Panama has 400,000 corporations registered there as well as many of the merchant marine vessels and cruise ships in the world. Panama has about 150 banks many of which are large multi-billion dollar international conglomerates, yet the banking operation in Panama is a separate bank corporation operating under Panama bank secrecy laws. Panama has not had a bank failure in over five years. Panama has had only a few bank failures in its history whereas Switzerland had over 15 bank failures during the years 1999 to 2000. Panama tightly regulates its banks. Every Panama Bank must submit monthly auditing reports to Panama’s Banking Superintendent, which is under direct supervision by the Banco Nacional de Panama (BNP), the National Bank of Panama. A list of prominent international banks in Panama includes: Citibank, HSBC, Dresdner Bank, Bank of Tokyo, Bank of Boston, Banco Nacional de Paris, International Commercial Bank of China, Societe Generale, Banque Sudameris, BBVA, Banco Uno, Banco General, PriBanco, Banco del Istmo, Global Bank, MultiCredit Bank, PanaBank, ABN Amro, Banco Aliado, Banco Continental, BancoLat, BIPAN, Lloyds TLB Bank, and the Bank of Nova Scotia. Many of the Panama banks own office building skyscrapers 40+ stories tall with their name on the building. These are not grocery store sized banks found in the island jurisdictions. The Panama Stock Exchange has an average trading volume of $900,000,000.