Introduction
Offshore banking activities occupy a distinctive position under the banking laws of the Union of the Comoros.
On the one hand, Comorian banking legislation expressly recognises the concept of offshore activities. Law No. 13-003/AU of 12 June 2013 relating to banking activities specifically defines, in Article 7, an "offshore transaction" as a banking or related transaction carried out outside the Union of the Comoros by a bank whose registered office is located within the Union of the Comoros.
On the other hand, the Central Bank of the Comoros has consistently stated that it has not granted any licence for the offshore conduct of banking, financial company or financial institution activities associated with any of the islands of the Union. It has further reiterated that the licensing of banks and financial institutions falls within its authority and has repeatedly warned against entities purporting to operate under licences issued by organisations presented as financial authorities of Anjouan or Mohéli.
The apparent contradiction is, however, more apparent than real.
It largely results from a failure to distinguish between two legally distinct concepts: the ability of a Comorian bank to conduct offshore transactions and the purported existence of an autonomous licensing regime allowing offshore banks to be established outside the national banking regulatory framework.
The former is expressly contemplated by law. The latter encounters significant difficulties under the institutional and regulatory architecture of the Comorian banking system.
This distinction has acquired significance well beyond the borders of the Union of the Comoros. A number of entities operating internationally represent themselves as holders of banking or financial licences issued in Anjouan or Mohéli. The legal status of such licences may therefore become material in the context of correspondent banking relationships, investment transactions, due diligence exercises, KYC or AML/CFT reviews, or any other transaction requiring the regulatory status of a counterparty to be established.
The issue is therefore not merely whether Comorian law recognises offshore banking activities. The more fundamental question is which authority has the legal power to confer banking status and under what conditions offshore activities may lawfully be conducted from the Union of the Comoros.
An examination of the applicable framework shows that, although Comorian legislation expressly recognises the possibility of offshore banking transactions (I), such recognition remains inseparable from the licensing and supervisory authority vested in the Central Bank of the Comoros (II), which necessarily raises the question of the legal effect of banking licences issued outside that framework (III).
I. Offshore banking: a concept expressly recognised under Comorian law
A. Statutory recognition of offshore transactions
Offshore banking activities cannot, in themselves, be regarded as a concept unknown to Comorian banking law.
Article 7 of Law No. 13-003/AU of 12 June 2013 is unambiguous in this respect.
It defines an offshore transaction by reference to two criteria: the location of the institution and the location of the transaction.
The institution concerned is a bank whose registered office is situated in the Union of the Comoros. The transaction itself is carried out outside the territory of the Union.
This definition already reveals the approach adopted by the legislature.
The offshore character of the activity does not arise from the existence of a separate category of credit institution. Rather, it describes the extraterritorial dimension of activities carried out by a bank established in the Comoros.
This distinction is essential.
Article 7 does not create a separate legal category of "offshore bank" distinct from banks governed by the Banking Law. It defines a category of transactions that may be carried out by a bank having its registered office in the Union of the Comoros.
The distinction is far from merely terminological.
Under the first interpretation, offshore banking would constitute an autonomous institutional regime capable of supporting its own licensing and supervisory rules.
Under the second, it constitutes only a particular mode of conducting business by an institution which must first possess the legal status of a bank.
It is the latter approach that appears to have been adopted by the Comorian legislature.
B. Recognition of offshore transactions does not establish an autonomous licensing regime
Article 7 cannot be interpreted in isolation from the remainder of the Banking Law.
The Law establishes a general framework governing access to banking activities which does not distinguish, for licensing purposes, between transactions conducted domestically and those conducted abroad.
Article 18 establishes a fundamental principle in this regard: no person may conduct the activities governed by the banking legislation or hold itself out, in particular, as a bank, banker, credit institution or financial institution without first having been duly licensed in accordance with the requirements of the Law.
An offshore transaction therefore presupposes the existence of an institution which has lawfully acquired banking status under Comorian law.
In other words, Article 7 does not constitute the legal basis for an autonomous right to conduct offshore banking activities. It merely determines the classification of transactions carried out by an institution which must already satisfy the legal requirements applicable to the conduct of banking business.
This interaction between the provisions resolves much of the apparent difficulty.
Comorian law recognises offshore banking activities, but it does not appear to recognise a parallel offshore banking system operating outside the national banking regulatory framework.
The distinction is fundamental.
It means, in particular, that the incorporation of a company whose corporate purpose includes financial activities, its registration in a local registry, or even the physical issuance of a document described as a "banking licence" does not necessarily confer upon that entity the status of a bank within the meaning of Law No. 13-003/AU.
That status must have been conferred by the authority to which the Comorian legal order entrusts licensing powers.
It is precisely at this point that the allocation of institutional authority becomes decisive.
II. Banking activities remain subject to the licensing and supervisory authority of the Central Bank
A. Banking regulation within the institutional framework of the Union
The issue of offshore banking licences cannot be understood without considering the institutional structure of the Union of the Comoros.
Comorian constitutional history has afforded substantial autonomy to the islands. Such autonomy has not, however, resulted in the disappearance of the Union's authority over matters of a sovereign or national character.
The banking sector provides a clear illustration.
Organic Law No. 05-003/AU of 1 March 2005, concerning the implementation of Article 9 of the Constitution then in force, assigned to the Union, among other matters, external financial relations as well as the regulation and supervision of credit institutions and other financial institutions.
The 2013 Banking Law subsequently organised the banking system around a national authority: the Central Bank of the Comoros.
This institutional architecture makes it difficult to reconcile the statutory framework with the existence, within a single State, of several authorities each independently empowered to confer banking status.
Such an interpretation would allow an island authority to establish institutions operating outside the national prudential supervisory mechanism, notwithstanding the fact that the Banking Law expressly organises such supervision at Union level.
The relevant question is therefore not whether the islands possess administrative powers generally.
The narrower and more significant question is whether such powers extend to conferring the regulated status of a bank.
In light of the overall structure of the Banking Law, the answer appears to be negative.
B. Prior licensing by the Central Bank as the legal basis for banking status
The role of the Central Bank is not confined to supervising institutions previously authorised by other bodies.
The Central Bank is involved from the point of entry into the banking profession.
The Banking Law assigns it a central role in the licensing process and provides for licensed institutions to be entered on the relevant registers.
Article 26 goes further by placing financial institutions under the supervision of the Central Bank and granting it regulatory, administrative and disciplinary powers.
Licensing and supervision therefore constitute two components of the same regulatory system.
An institution is not merely required to obtain an initial authorisation. Throughout the conduct of its activities, it remains subject to the supervision of the banking authority.
This framework explains the position taken for several years by the Central Bank regarding offshore banking activities.
The Central Bank states that it has granted no licence for the offshore conduct of banking, financial company or financial institution activities associated with any of the islands forming the Union of the Comoros.
It reiterated this position in a notice concerning the unlawful conduct of offshore banking activities, warning in particular against organisations purporting to issue banking licences in the name of Anjouan or Mohéli.
That administrative position is not, in itself, the legal source of the Central Bank's licensing authority.
Rather, it represents the supervisory authority's interpretation and application of the statutory framework governing the banking sector.
The legal basis must therefore be found in the legislation itself.
It is the combined effect of Articles 7, 18 and 26 that clarifies the system: a duly licensed bank may conduct offshore transactions in accordance with applicable law, but the offshore character of those transactions does not dispense the institution from first acquiring banking status in accordance with the national licensing framework.
This gives rise to a more difficult question: what legal effect should be attributed to instruments presented as banking licences where they have been issued outside that framework?
III. "Offshore banking licences" issued outside the Central Bank framework: assessing their legal effect
A. The necessary distinction between the legal existence of an entity and its regulatory status
The first difficulty arises from a frequent conflation of two legally distinct matters.
A legal entity may have been validly incorporated without necessarily possessing the regulatory authorisation required to conduct a regulated activity.
This distinction is well established in business law.
Incorporation gives the company its legal existence. A licence or regulatory approval, where required, permits it to carry on a particular regulated activity.
One cannot substitute for the other.
The distinction is particularly important in the banking sector, where licensing requirements serve objectives relating to depositor protection, financial stability, governance, solvency and the prevention of money laundering and terrorist financing.
It would therefore be legally insufficient, when assessing the status of an entity presenting itself as a Comorian offshore bank, merely to establish that it possesses a certificate of incorporation, a registration number or even a document described as a banking licence.
The analysis must extend to the legal authority of the body that issued the instrument relied upon.
A licence can produce the legal effects attributed to it only where the issuing authority itself possessed the legal power to grant it.
The status of an offshore bank purportedly established in Anjouan or Mohéli cannot therefore be determined solely by the physical production of a licence.
Its legal basis must be identified.
Which statutory provision empowered the issuing authority to license a bank?
Did that authority possess such power at the date on which the licence was issued?
Was that authority preserved following the adoption of national banking legislation?
Was the institution subsequently brought within the supervisory framework established by the Banking Law?
Is it entered on the registers maintained by the competent national authority?
These questions are legally distinct from the mere existence of the document itself.
B. From the existence of a licence to its legal effectiveness: the need for an individual assessment
It would nevertheless be excessive to infer solely from the Central Bank's current position that every issue relating to a historically issued licence can be resolved without examining its particular circumstances.
The validity of an administrative or regulatory instrument must be assessed, among other matters, by reference to the law applicable at the time it was issued, the legal authority of its issuer and the effects, if any, of subsequent changes to the legal order.
This temporal dimension may be decisive in relation to certain historical licences.
The assessment of a particular licence may therefore require reconstruction of the applicable chain of legal authority: the legislation in force at the time of issuance, the authority vested in the issuing body at that date, any transitional arrangements, subsequent constitutional or legislative changes, any withdrawal or continued effect of the instrument, and the supervisory regime actually applicable to the institution.
This approach also makes it possible to distinguish between several questions which are too often conflated.
The physical existence of a licence does not establish its legal validity.
Even if a licence was valid when issued, that does not necessarily establish that it remains in force today.
And the fact that a licence remains in force does not, by itself, determine the precise scope of activities that it authorises.
These distinctions are particularly important in international transactions.
A correspondent bank, investor, payment institution, auditor or foreign institution will generally need to determine more than whether a document was once issued.
It will need to establish whether the entity is presently and lawfully authorised to conduct the activities it claims to undertake and the supervisory framework to which it is subject.
For that reason, an assessment of an institution's regulatory status cannot reasonably be reduced to a formal documentary verification.
Where uncertainty exists, it requires a substantive legal analysis of the licence, its statutory basis and the evolution of the legal framework applicable to it.
Conclusion
Offshore banking occupies a more nuanced position under Comorian law than might initially be suggested by the apparent tension between, on the one hand, licences purporting to originate from Anjouan or Mohéli and, on the other, the repeated warnings issued by the Central Bank of the Comoros.
Comorian law does not disregard offshore banking activities. It expressly recognises them.
That recognition, however, does not appear to establish an autonomous banking regime operating outside the national licensing system.
Article 7 of the Banking Law treats offshore activity as a mode of conducting business by a bank whose registered office is situated in the Union of the Comoros. It must be read together with the provisions requiring prior authorisation to engage in banking activities and placing financial institutions under the supervision of the Central Bank.
The true dividing line is therefore not between domestic banking and offshore banking, but between activities carried out by an institution that has lawfully acquired banking status and activities conducted on the basis of an instrument issued outside the licensing system established by national banking legislation.
This conclusion does not, however, dispense with an individual assessment where a particular licence is concerned.
The date on which the licence was issued, the law then in force, the authority of its issuer, subsequent developments in the institutional framework and the possible continuation of its legal effects are all matters that may require consideration.
It is precisely at this point that the issue ceases to be the general question of whether offshore banking exists under Comorian law and becomes the considerably more complex question of the validity and legal effectiveness of a particular banking licence.
This publication provides a general analysis of the applicable legal framework and should not be regarded as a legal opinion on the validity or regulatory status of any particular licence or institution.