DEFINITION of 'Pirate Bank'

A type of offshore savings account used by a wealthy individual to hide assets, typically to evade taxes and/or commit illegal acts such as money laundering. A pirate bank is different from a traditional offshore account in that it uses advanced technology to make it more difficult to track down the account. The account may also be unnumbered and have a chain of ownership that is difficult to trace.

BREAKING DOWN 'Pirate Bank'

Offshore accounts are commonly located in Switzerland, the Cayman Islands and the Channel Islands and funded electronically via wire transfer. Offshore accounts are associated with greater confidentiality and security, and these characteristics appeal to law-abiding citizens as well as less scrupulous ones. Not all offshore accounts are associated with illegal activity, however, and some banks require applicants to provide extensive documentation to prove their legitimacy before they can obtain an account. Offshore accounts can also legally be used to shield corporations from the higher tax burdens in their home countries.

RELATED TERMS
  1. Offshore Mutual Fund

    A mutual fund that is based in an offshore jurisdiction, which ...
  2. Linked Savings Account

    Any type of bank savings account that is linked by account number ...
  3. No Shoring

    No shoring refers to situations where companies bring business ...
  4. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
  5. Savings Account

    A deposit account held at a bank or other financial institution ...
  6. Joint Account

    A bank or brokerage account that is shared between two or more ...
Related Articles
  1. Investing

    Pros And Cons Of Offshore Investing

    Tax loopholes are shrinking, but there are still plenty of viable prospects. Get the big picture.
  2. Managing Wealth

    Offshore Banking Isn’t Illegal. Hiding It Is.

    If you want to put your money into an offshore account, go ahead. But be aware that it won’t be exempt from taxes.
  3. Small Business

    Why Do Companies Go Offshore?

    The term offshore simply means to be located or based outside of a nation’s boundaries.
  4. Managing Wealth

    When Offshore Banking Makes Sense for U.S. Expats

    For U.S. expats who have trouble opening bank accounts overseas, offshore banking can be a solution.
  5. Taxes

    How New Offshore Bank Rules Will Affect Americans

    FATCA is being implemented in 2013. Here is how it will affect the personal banking and taxes of Americans who hold offshore bank accounts.
  6. Trading

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  7. Trading

    Steps To Open An Offshore Forex Account

    Offshore forex accounts offer favorable tax treatment and less restrictive regulations. Here’s how a U.S.-based investor can open one.
  8. Insights

    Panama Papers: What Advisors Need to Know

    Here is how clients may be impacted by some of the issues brought to light by the Panama Papers.
  9. Taxes

    All You Need to Know About Tax Havens

    These tax-free zones might sound appealing, but the consequences often aren't.
  10. Insights

    Tax Implications of Opening a Foreign Bank Account

    Learn about the tax implications of opening a foreign bank account, including accounts that generate earned or unearned income from overseas activity.
RELATED FAQS
  1. Why is the Cayman Islands considered a tax haven?

    Find out why the Cayman Islands is considered a tax haven and why this location is so popular among those looking to reduce ... Read Answer >>
Hot Definitions
  1. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  2. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  5. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  6. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
Trading Center