Saint Vincent and the Grenadines: Offshore Business Sectors
The International Banks Act of 1996 and Regulations together with the International Banks (Amendment) Act (No 30 of 2002) and the International Banks (Amendment) Regulations 2002 (S R & O No. 31 of 2002) govern the registration of international banks.
Until 2005, the International Financial Services Authority (previously the Offshore Finance Authority) collaborated with the Saint Kitts-based Eastern Caribbean Central Bank, (ECCB), in the licensing and supervision of international banks. Although the IFSA is ultimately responsible for granting all international bank licenses, the International Banks Act was amended to provide for the ECCB to cooperate with the IFSA in reviewing all bank applications as well as in ongoing supervision of banks.
In May, 2005, the ECCB gave notice to terminate its involvement in the regulation/supervision of the International Banking sector in Saint Vincent and the Grenadines. The ECCB stated that it would continue to provide assistance with capacity building/training to IFSA, and with conducting due diligence checks on prospective entrants applying for licences under the International Banks Act.
In 2008, amendments to The Banking Act repatriated control over international banks to the International Financial Services Authority (IFSA). The tightening of the regulatory regime for banks after 2000 resulted in a sharp drop in the number of offshore banks operating in the jurisdiction, from 40 in 2001 to just four at the end of June, 2011. The government is thought not to be keen to see rapid expansion of the banking sector.
All banks are subject to onsite inspections at least every 12 – 18 months.
The IFSA grants two Classes of Offshore Banking Licence:
- A Class I Offshore Banking License which is for the purpose of carrying on an offshore banking business generally. Each Class I bank must establish and maintain a capital fund with fully paid-up capital of not less than USD1,000,000.00 or its equivalent in another currency, and Class I banks are required to hold a deposit or invest the sum of USD500,000 or its equivalent in another currency, in such a manner as the Authority may prescribe.
- A Class II Offshore Banking License which is for the purpose of carrying on offshore banking business subject to the restriction that the licensee shall not offer or provide its offshore banking business services, or otherwise receive or solicit funds by way of trade or business, except from non-Resident persons specifically named or described in an undertaking accompanying the application for the license, which undertaking shall, without further notice, constitute a condition to the Class II license, if and when the same is granted. Each Class II bank must establish and maintain a Capital fund with fully paid-up capital of USD500,000.00 or its equivalent in another currency. In addition, Class II banks are required to hold a deposit or invest the sum of USD100,000.00 or its equivalent in another currency in such a manner as the Authority may prescribe.
The holder of a Class I or a Class II Offshore Banking License shall not, without the written approval of the Authority, carry on any banking business with any Resident except in connection with the rendering of offshore banking business services from within the State or as expressly provided herein or in other laws governing the operations and activities of the licensee.
All Offshore banks applying for a licence to operate in Saint Vincent and the Grenadines must submit a completed application (in duplicate) along with the prescribed fee to the IFSA. All applicants are required to complete a ‘fit and proper’ questionnaire. The following requirements apply to all banks that are issued with a licence to operate in Saint Vincent and the Grenadines:
- They must establish a physical presence in the island;
- They must have local employees;
- There must be at lease one local Director approved by the Offshore Finance Authority.
There is a non-refundable application fee, initially set at USD1,000 for Class 1 applicants; the fee is USD1,000 for Class 2 applicants. Annual fees are USD10,000 for Class 1 and USD5,000 for Class 2 banks.
Banking confidentiality is enforced by law; however the Exchange of Information Act, 2002 provides for international co-operation in various circumstances. See Other International Agreements for further details.
The Banking Act was, in 2006, updated with regard to information sharing, limits on large exposures, fit and proper criteria for directors and management, and increased enforcement powers to supervisors.
In March, 2009, after the US US Securities Exchange Commission accused Millennium Bank of being involved in a USD68 million Ponzi scheme, the government moved swiftly to close the bank down, saying that it had not wished to give it a banking license in the first place. “The funds alleged to be defrauded from investors did not pass through Millennium Bank in Saint Vincent and the Grenadines nor our National Commercial Bank,” said Prime Minister Gonsalves. “It is believed that domestic banks in the US were used to deposit funds from investors in the name of United Trust Switzerland and then payments made to the defendants.”