'Foreign capital depository' gets first applicant
HELENA - Efforts to bring Swiss-style banking to Montana may be starting to pay off.
The state has received its first application to open a "foreign capital depository" in Montana, and officials said Wednesday they expect two more applicants by next week.
The proposals bring with them the potential for billions of dollars in deposits by foreigners that would, in turn, generate millions of dollars for the state through a fee assessed on the assets.
Gov. Marc Racicot said he will ask next month's special legislative session to cut in half that tax as a move to help Montana become a major player in the international banking market.
"We feel it's a very positive step forward," he said. "Over the long run, we've got to be competitive if we want to capture a share of the market as quickly as we can … before this becomes a national phenomenon."
News of the renewed interest in Montana's foreign depository program came Wednesday from Globalink, the company hired by the state to help market Montana as a haven for some of the estimated $27 trillion in international banking circles.
Spokesmen for the Portland, Ore.-based company, who met with Racicot in an unannounced meeting Tuesday, said Montana is an attractive alternative to Switzerland and offshore banks as a place for the super-rich to stash their money.
"It's very viable," said Doug Hamilton of Whitefish, president of Globalink. "The initial reaction that we've gotten from the international community was quite positive. They like the safety of having assets in the United States.
"People feel very comfortable with the financial, economic and political conditions in the U.S.," he said.
Bruce Caputo, an attorney for the company, said the strong protection for individual privacy provided by the Montana Constitution is another enticement for people who crave confidentiality about their finances.
He said those applying to open depositories in Montana would not be doing so unless they have substantial commitments from customers wanting to put their money here.
"Having a Swisslike program somewhere in the U.S. could generate several billion dollars in deposits over the next 24 months," Caputo said.
He estimated that an initial depository in Montana could attract $1 billion to $2 billion by the middle of next year. That would mean about $15 million to $30 million a year for the state under current law that imposes a 1.5 percent annual fee on such deposits.
But that rate is higher than the tax imposed by foreign banks with which Montana would be competing and has discouraged interest in the state, Caputo said.
The rate must be halved if the state wants its 3-year-old program to work, he said.
That would mean a $7.5 million to $15 million benefit to the state under Caputo's first-year scenario.
The notion of having Montana compete with banking in Switzerland and the Cayman Islands arose in the early 1990s and was dismissed as a pipe dream by many lawmakers. They passed the law allowing depositories for foreign residents in 1997, with little real hope the move would bear fruit.
Friday's application by First Depository of Montana Inc. was the first serious overture. Michael Potter, a San Diego attorney and specialist in international banking law, paid the $25,000 nonrefundable application fee.
He could not be reached for comment Wednesday.
Racicot said Potter's application and the two anticipated next week are based on the expectation that lawmakers will cut the fee during the coming session, which convenes May 8.
"It's a good-faith demonstration by those in the private market," he said.
Hamilton said the potential is enormous. Only a third of the money in international banks is owned by U.S. citizens, so the remaining $18 trillion is the large pie from which Montana hopes to carve a small piece, he said.
In addition to helping market the program, Hamilton's company will investigate the backgrounds of those applying to open depositories in Montana and monitor their operations to ensure they comply with laws intended to prevent money laundering by criminals.