Pass Through Accounts

PanamaLegal · #1 08-15-2008, 04:05 PM

Our law firm gets contacted by people daily asking about a pass through account. What is meant is they wish to wire money into an account generally in Panama (we also do banking in Guatemala and Ecuador) and then wire the money to another bank account the same or next day to a bank in another country using a different corporate name. This is exactly how to have your bank account closed. Imagine here you are a foreigner, opening a new bank account, you do not physically live in the jurisdiction the bank is in, your business is not in the country you are banking in, you start receiving funds from other countries and then immediately wiring them to a third country. Now imagine you sit on the anti-money laundering committee of the bank, what are you going to think? Is it possible you might think the account holder is trying to stay one step ahead of interpol? Would you consider closing the account and returning the wire, or putting a hold on the funds and asking for source of funds documentation like contracts that are signed, notarized, have lawyers letterhead and stamps, or even making a suspicious transaction report to the governmental authorities which can cause more major issues requiring a lawyer and full documentation to get the funds released and then what if you cannot provide documentation? Now some say it's ok to use a bank in a real backward third world jurisdiction as a pass through. This is simply throwing kerosene on the fire.

We could go deeper and talk about correspondent banks and the person not taking care to make sure different correspondent banks are used each time the funds are moved just to watch that end, but I never see them talk about that which is another reason to doubt the expertise of those touting pass through accounts.

What generally works is if one leaves 30% of the funds in the account for 90 days. The other 70% should not be moved immediately. It should be moved in pieces, say three pieces a week or two apart. This should keep the bank calm.

No sane bank is going to allow pass through funds for a foreigner with a new account. if they did every password phisher would be using them to quickly get the money out of the victims account and move it around through several countries in a matter of days. If you run a lot of reasonable activity through the bank account for a year of so and then occasional have a need for a fast pass through and explain things to the bank contact first all should be well.

Another important point is banks make no money on pass through accounts. Wire fees are not enough to keep a banks doors open. They need and want deposits which pass through practices do not provide. So at the very least the bank sees risk of problems from the authorities, their banking commissioner, mumbling or worse from the correspondent bank and they close your account.

If you pick your bank and jurisdiction carefully along with your structure you should be protected from civil issues. Use lawyers for the attorney client privilege. Avoid countries with tax information exchange agreements. Even if your country is not in any such agreement with the country the bank is in another country may be in such a treaty. It is a simple matter for them to ask the other country to request your information stating this name came up in an investigation or something like that and then they have the records. Once they have the records they can wind up in the public domain especially if there is a court case and they are filed in the courts which is public record. Once they are in the public domain any country or person can lawfully use them even if they were gotten illegally at the base level and then problems can mount. The safest way is to keep yourself off the bank records. Banks have to turn records over by statue or according to the terms of their license if their government asks for them. If all that comes up it is the law firm name as the signatory and beneficiary owner that gets turned over then the request yielded nothing. If they go after the law firm for the records the law firm can start a fight in court and if they do not have hard evidence they should not get the money or your name. Now this is assuming the jurisdiction is correct and the structure is correct. So a pass through is for someone not really understanding the way things can be done and they are trying to jack rabbit away from the system. Bad idea.

When you see people talking about pass through accounts remember this post before you buy into their pitch.

I just got upset about people leading others down this path that is really just a minefield. Please excuse the long post.