Anyone familiar with the "Shell Bank Loophole"?

[Nigital Domad]

Good day, Comrades! I came across this article, and wondered if anyone has experience creating their own FFI (not for any illicit purpose, mind you), if this loophole has been closed yet, etc?

https://www.pwc.lu/en/newsletter/2022/loophole-preventing-the-fatca.html

 

[Sols]

Since financial institutions like banks themselves are excluded from FATCA reporting (on their own assets), you can hide your assets by declaring that your company is a foreign financial institution. Some do this falsely, knowing that little to no due diligence is/was being done. Others obtain some sort of bank/FI license to make it technically truthful.

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This is the probably the answer to your question.

 

[koohl]

Sols said:
you can hide your assets by declaring that your company is a foreign financial institution.
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This is completely new information for me! Thank you so much for bringing up this topic here.

How does one go about this in practice? I mean, can you just set up a company, for example, in New Mexico or Wyoming and then ask your agent to register it as a 'foreign financial institution'? And how do you obtain a legitimate license to do so?

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My Journey to successful card processing for Replica, IPTV, Adult and Gaming business.
I keep my journey in the closed forums in Mentor Group for less saturating methods.
Please understand that I don't sell any services or do consultancy, you don't need to contact me about that!

 

[Primat2024]

Do you know anyone that can help with the setup of a company for financial services to hide assets?

 

[EliasIT]

I imagine that you can't just use some of the well-established corporate service providers for such a setup. They would probably be very expensive and likely overcomplicate the process, making it impossible for an average person with a decent amount of wealth to get it established.

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My personal favorite thread posted in the Mentor Group. Group of investment companies to avoid licensing.

 

[Sols]

This is a bad idea.

It's not entirely clear what a financial institution is and what isn't in the FATCA definition. But if we take reasonable presumptions, you're looking at a type of licensed activity that has capital requirements in the hundreds of thousands on top of all the costs associated with setting up and maintaining it. The type of licenses that probably qualify are bank licenses and non-bank deposit taking licenses like EU/EEA EMI or PI, Singapore MPI/SPI, and so on.

Many licenses you might think of aren't actually financial institutions, such as most crypto "licenses". They are just registrations. Securities dealers, money services/brokers, and wealth management companies may not necessarily be financial institutions.

Now, let's say you get a bank license in Dominica or Vanuatu. Congratulations. Now it's time to actually make it functional. Time to open correspondent accounts, and... Oh, what's that? JPMorgan, Deutsche Bank, DBS, HSBC, SC, BNY, and Raiffeisen want nothing to do with your bank that was set up with just one customer in mind, has no track record, no business plan, sketchy staff, and no real presence in Dominica? Exactly the kind of stuff FATF-GAFI warns other banks to not onboard.

So research your (probably illegal) FATCA evasion carefully. And go to a tailor if you haven't been recently. You'll want an orange jumpsuit that actually looks good on you. Going to prison for money laundering, tax evasion, and wire fraud is no excuse for dressing poorly.

koohl said:
How does one go about this in practice? I mean, can you just set up a company, for example, in New Mexico or Wyoming and then ask your agent to register it as a 'foreign financial institution'? And how do you obtain a legitimate license to do so?
Click to expand...

New Mexico and Wyoming are US territories and cannot be considered foreign financial institutions in this context. It has to be a non-US financial institution. A New Mexico LLC is a foreign entity in Texas as they're different states. But on a federal level, they are not foreign.

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This is the probably the answer to your question.

 

[Silverlake]

koohl said:
This is completely new information for me! Thank you so much for bringing up this topic here.

How does one go about this in practice? I mean, can you just set up a company, for example, in New Mexico or Wyoming and then ask your agent to register it as a 'foreign financial institution'? And how do you obtain a legitimate license to do so?
Click to expand...

Your agent wouldn't declare it, it's something you would do when you fill out a W-8BEN-E.

The cleanest way to do it would be to apply for some sort of license and depending on the license you will also have operational costs and have to upfront a decent amount for regulatory capital requirements. If you really want to go down this route you should look at setting up a broker in some African country (Excluding Comoros). You need a jurisdiction which is reputable, recognised and respected (Hence my exclusion of Comoros).

 

[koohl]

Silverlake said:
The cleanest way to do it would be to apply for some sort of license and depending on the license you will also have operational costs and have to upfront a decent amount for regulatory capital requirements.
Click to expand...

Do you have any idea about what the total costs would be? just an estimate and who could assist ?

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My Journey to successful card processing for Replica, IPTV, Adult and Gaming business.
I keep my journey in the closed forums in Mentor Group for less saturating methods.
Please understand that I don't sell any services or do consultancy, you don't need to contact me about that!

 

[Silverlake]

koohl said:
Do you have any idea about what the total costs would be? just an estimate and who could assist ?
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Depends, if you buy one that's already ready - South Africa goes for around $120K - $150K. Mauritius is cheaper but banking options aren't as good as South Africa since it's G20. You would also need a Director, KI and Compliance Office as personnel. Operational costs can vary, in my experience, running a broker with minimal requirements will cost you around $30K (Staff + Software).

Send me a DM. I can introduce you to someone who setup a few licenses for me, but only if you're really serious about this.

 

[bountymounty]

Why you suggest south africa when we talk USA ?

 

[Silverlake]

bountymounty said:
Why you suggest south africa when we talk USA ?
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Because a USA FI with US UBOs would have regulatory requirements to report for FATCA and therefore, defeat the whole purpose of what the article is trying to suggest in the first place.

Basically, the whole point here is to setup a foreign FI (Outside USA) and open an account with this entity. This basically means it won't be reported when the banks produce their XML schema on 31 Dec. However, I have to agree with @Sols, this is a terrible idea and your just playing the old cat and mouse game but if you really want to engage, this is the cleanest way to do it.

Last edited: Nov 21, 2024

 

[brianK]

I wonder if you are aware of that it is only for U.S. persons?

Loophole preventing the FATCA reporting of a U.S. person​

Click to expand...

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