Since the day the Cyprus DGS started paying to FBME Bank customers, many of the banks customers have asked the question if their offshore company that was not in good standing could qualify for DGS payment. The answer is simple and grounded by the legal consequences and operational challenges. Inactive offshore companies cannot qualify for DGS for some very logical reasons.
The deposit guarantee scheme is similar to an insurance policy. It covers damage when the insured event occurs. The activation of a depositors protection fund is triggered by bank failure. This state is announced by a competent authority. The one entitled to compensation for damage is the account holder. When the company is not in good standing anymore. This can be the result of various causes. However, when the company doesn’t exist, the funds do not automatically fall due and also cannot be transferred to the beneficiary, often a natural person.
There are severe legal consequences for having an inactive offshore company with a bank account at an (offshore) bank. First of all, KYC and AML regulations of the bank state that they always need to have up to date customer files that include the most recent passport and company documents of the account holder. Inactive offshore companies obviously cannot produce such documentation. Therefore the account should have been frozen at an earlier stage already.
Often, tax avoidence, when executed properly is legal. When the company is not in good standing anymore, there is nothing legal anymore in the tax avoidence structure. Local governments will therefore see this as tax evasion and tax fraud. Most countries in the world penalize tax evasion with imprisonment. Therefore owning an inactive offshore company with a bank account at a failed bank can have advanced personal consequences. A situation to avoid and it is recommended to restore this as quick as possible to narrow the outcome.
Also, operational challenges with an offshore company may occur. Payment from a deposit guarantee scheme can only be executed to the exact account holder of the account at the bank that fails. This means that only the company can receive payment.
Although inactive offshore companies cannot qualify for DGS payments, we are here to help. FBME Cyprus fund recovery can still work when we rules as set forth by the central bank and the European Commission. Contact us for an interview and ask for our no cure no pay service package for FBME Bank customers. We only charge our fees upon success, when your FBME account balance is in your possession again.