Some Arvest Money Visits Tropical Isle Nightly

Arvest Bank-Rogers opened its “paper” Cayman Islands branch in 2001. But it was not until the week of March 16 that details about Arvest’s agent agreement with Canadian Imperial Bank Corp. of Toronto, which operates a physical branch at Georgetown on Grand Cayman, came to light.

That’s when Arvest Bank Group Inc.’s “limited-purpose foreign branch office” became part of its consolidation of 14 banking operations into one charter, according to recent filings with The Federal Reserve Bank of St. Louis.

Federal law prohibits banks from paying interest on commercial checking accounts within the United States. But because of tax treaties between the U.S. and nations such as Great Britain, which holds the British West Indies or Cayman Islands as a protectorate, American firms can circumvent that law by banking abroad.

The practice is common among mid-sized, regional banking operations. Large international banks such as Bank of America have physical offices in foreign countries that prevent their need for a “go between.” Regions Bank also has a Cayman agent.

For a fee, CIBC acts as Arvest’s foreign agent so that the Bentonville bank group can offer commercial depositors its Arvest Prime Sweep Account. The service links a company’s main operating account to Arvest Bank-Cayman Islands, and at the end of each banking day funds in excess of the $100,000 minimum are transferred to the sweep account. It’s a book entry only, so the money never actually leaves Arvest.

The next banking day, the prior day’s investment is automatically swept back into the company’s commercial account. Bob Kelly, president of Arvest Financial Management, said the service works similar to market funds or Treasury bills.