What is a Pirate Bank
A pirate bank is a type of offshore savings account used by wealthy individuals 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. Pirate banks are one method individuals and entities use offshore financial accounts to establish legal, but ethically questionable tax havens.
BREAKING DOWN Pirate Bank
Pirate banks and 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.
While avoiding taxes is a significant rationale for pirate banks and secretive accounts, it's not the only reason. Simply sheltering assets from oversight and reporting is another. For many investors, it makes perfect sense, even if unethical, to keep the spotlight off of their financial dealings. For instance, imagine the bad PR for a member of Congress who publicly lobbied for gun-control but regularly enjoyed profits from investments in gun manufacturers. In this instance, an offshore investment account would be an effective way to keep opponents and critics from discovering this member's double-talk.
Several recent high profile scandals have exposed the many ways the global elite have been dodging oversight with a rogue offshore financial system. The biggest, with effects still unfolding, was the 2015 Panama Papers episode. The Panama Papers include 11.5 million leaked documents, detailing financial and attorney-client information on more than 214,488 offshore entities. The Panama Papers investigation into the offshore secrets of the rich and famous would go on to win the prestigious Pulitzer Prize. The prize was awarded to the Washington-based International Consortium of Investigative Journalists (ICIJ), together with two U.S. titles, McClatchy and the Miami Herald.