The Web page of Freedom Star National Bank in Phoenix promises 18% certificates of deposit and confidentiality from the prying eyes of the Internal Revenue Service.

"We are a mail-order bank that pays the highest interest rates in the nation," its Internet site boasts.

But according to the Office of the Comptroller of the Currency, the public should beware: Freedom Star doesn't have a national bank charter or federal deposit insurance.

Freedom Star is just one of several banking services being delivered in cyberspace that are prompting regulators to raise red flags.

"They are essentially unregulated," said Daniel P. Stipano, director of the OCC's enforcement and compliance division. "There are certainly a lot of Web sites of interest to us that we are reviewing."

In the past year, the OCC has issued four alerts about purported Internet-only banks that have no charters or deposit insurance. OCC investigators reportedly are scrutinizing at least six others.

Generally, these Web sites offer high interest rates on deposits and promise privacy protections, Mr. Stipano said.

"Some of these institutions may be attracting the wrong element and could be used to launder money," Mr. Stipano said. "They are offering a level of secrecy that is normally associated with countries that are money- laundering havens."

Mr. Stipano said he also is concerned about the effect these institutions may have on the reputation of legitimate banks. "These types of entities can pose an external threat to banks we regulate," he said.

Among the institutions in OCC's spotlight are:

Netware International Bank, which uses an address in Mooresville, N.C., but North Carolina officials report it holds no state charter.

The Federal Bureau of Investigation raided Netware's offices July 1, seizing records and computers and freezing three of its financial accounts, said Otis M. Meacham, deputy commissioner of banks in North Carolina. An FBI source confirmed the raid.

A grand jury likely will consider "several felony charges" against Netware, Mr. Meacham said, but he declined to specify them.

European Union Bank, on the Caribbean island of Antigua, bills itself on-line as "the first offshore bank on the Internet." In October, the OCC warned that this entity is not overseen by any U.S. regulator. "It is urged that due diligence be conducted before any involvement" with European Union Bank, the agency cautioned.

First Bank of Internet, the first Web site to draw a warning from OCC, listed its address as Chicago even though Illinois authorities said it has no charter. Regulators feared consumers would confuse it with First Bank System Inc. of Minneapolis, which has branches across the Midwest.

None of these Internet banks has been charged with any crime. The case against Netware is still being built, and the Comptroller's Office has asked the Justice Department to investigate Freedom Star.

Accepting deposits in the United States without a charter or licensed foreign branch is illegal. Falsely claiming to be a national bank also is a crime.

Jon Boulet, president of Freedom Star, defended his enterprise. "There's absolutely nothing illegal about what we are doing," Mr. Boulet said.

He declined to reveal how many customers or deposits Freedom Star has or where it invests. Formed last November, the entity can pay high interest rates because of low overhead and investments in "better places and safer places" than commercial banks, he said.

After being contacted by the OCC, Mr. Boulet said, he removed the word "national" from the bank's name. The sole remaining reference on the Web site to Freedom Star as a national bank was mistakenly left there and will be removed, he added.

He said his depositors are insured by the assets of the Shangri-La Mining & Development Co. of Alaska and Arizona, and he said he rejects deposits from suspicious groups.

These Internet institutions expose policy gaps that will make prosecution in the electronic age problematic.

For example, Stipano said it is unclear whether deceptive solicitations alone by an unauthorized bank constitutes illegal banking business. Because these firms exist only in cyberspace, it is uncertain which authorities have jurisdiction over them, he said.

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