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Offshore Banking - Belize and St. Vincent & the Grenadines

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06 March, 2014


Contrary to popular belief, it is not illegal to open or operate an offshore bank account, at least not in the vast majority of countries. Indeed, despite the ongoing campaign by the OECD, the EU and certain key members of these groupings to neutralise the tax and privacy advantages of offshore, there remains a wide choice of jurisdictions available specialising in offshore banking and other types of financial services. This feature looks at two popular offshore banking jurisdictions: Belize and St Vincent and the Grenadines.


Why an Offshore Bank Account?

There are a number of legitimate reasons why somebody would want to open a bank account offshore. The one that most people think of immediately is tax, and it is true that in most offshore jurisdictions, interest earned on bank deposits is free of tax for non-residents (although such income usually must be declared in your country of residence). However, offshore bank accounts aren't used solely as tax planning vehicles for residents of high-tax countries. Some of these other benefits include:

Convenience: Of great importance from the point of view of expats is the convenience factor associated with offshore, for example the ability to receive and deposit funds remitted from your home country, or income earned from working overseas (for example fees, salary and expenses), USD, EUR, GBP or any one of a number of hard currencies.

Privacy: Traditionally, offshore and low-tax banking jurisdictions have attracted many foreign clients because of their strong confidentiality and privacy laws which have prevented account holders' details from being disclosed in all but the most rare cases. Although most offshore jurisdictions now have anti-money laundering legislation and 'know your customer' rules in place, by and large this still holds true. Therefore, an offshore bank account is often used as part of an asset protection strategy, sometimes in combination with an offshore company or trust vehicle.

Stability: Those of us lucky to live in the West have for the most part enjoyed a period of unprecedented economic and political stability over the last few decades. However, not everybody is so lucky, and there are plenty of places around the world where political and economic turbulence is almost the norm rather than the exception. Therefore, offshore banks accounts can provide a safe haven for those whose fear their assets could be frozen, confiscated or rendered worthless by economic meltdown.

Interest: Unencumbered by high taxation and regulation, offshore banks have traditionally been able to pass on their lower overheads to clients in the form of higher rates of interest on their savings and investment accounts compared with the big onshore banks. It is true that this interest rate differential has narrowed in recent years, but offshore banks are still able to attract clients due to the broad range of services they offer and the flexibility they provide to account holders, in addition to the other benefits summarised above.

In the following sections, we describe the offshore banking sectors established in Belize and St Vincent and the Grenadines.


Belize: Fact File

Belize, previously known as British Honduras, lies on the East coast of Central America in the heart of the Caribbean Basin, bordering on Mexico to the North, Guatemala to the West and South, and flanked by the Caribbean Sea to the East. It has a population of approximately 330,000. The capital is Belmopan, in the centre of Belize, but the largest city is Belize City, on the north east coast, the country's business and industrial centre, with a population of approximately 70,000.

Belize was absorbed into the British Empire in 1871, but became self-governing in 1964 and the country's name was changed from British Honduras to Belize in 1973. Belize has a democratic, bi-cameral legislature based on the Westminster system and elections are held every five years. The country is both politically and economically stable.

As a consequence of Belize's historical links with Britain, English is the official language (although Spanish is widely spoken throughout the country) and the legal system is based on common law.

Economically, Belize has been historically dependant on sugar, but tourism now contributes substantially to GDP and there is a sizeable financial services industry, with offshore banking and trust services Belize's particular specialism.

The currency of Belize is the Belizean Dollar (BZD) which is fixed against the US Dollar at a rate of BZD2 to USD1.


Belize Financial Sector Overview

The introduction in the early 1990's of International Business Company legislation, together with a range of other offshore enabling laws, led to growth of interest in Belize as a low-tax jurisdiction. By March 2000, the total number of offshore companies reached 14,000, and by 2010 had surged to well over 100,000.

Companies formed under the International Business Companies Act are exempt from most types of taxation.

Offshore jurisdiction ratings issued by Swiss company Guaranty Trust Ltd put Belize at the head of its list, judged according to a variety of criteria including banking secrecy, legal system, communications and tax regime.

In addition to an IBC law, Belize has legislation in place for Ship Registration, Trusts, Offshore Banking, Online Gaming, Limited Life Companies, Limited Liability Partnerships, Mutual Funds, International Insurance, Protected Cell Companies, and a Financial Services Commission to regulate and monitor the industry.


Belize Offshore Banking Sector

Offshore banking in Belize began with the 1977 Banking Act, but this was repealed and replaced with more up-to-date legislation in the mid-1990s in the form of the Banks and Financial Institutions Act, 1995, the Offshore Banking Act, 1996, and the Money Laundering (Prevention) Act, 1996. These statutes incorporated the best features of offshore banking legislation in Panama, Cayman and the British Virgin Islands.

The Offshore Banking Act was amended in 2002 to change the name of the Offshore Banking Act and offshore banks to International Banking Act (IBA) and international banks, respectively.

The Belize banking sector is regulated by the Central Bank of Belize, which was established pursuant to the Central Bank Act of 1982.

The Central Bank has a statutory obligation under the Bank Act to foster monetary stability and promote credit and exchange conditions conducive to economic growth within the context of the government's economic policy. The Bank Act provides the Central Bank with the statutory authority for regulating the activities of the Belizean banking system.

Two categories of Belize International Banks are currently available, "A" Class - Unrestricted and "B" Class - Restricted. A "B" Class bank is restricted to carrying on such business as is specified in its license.

A Belize International Bank can carry on the following activities within Belize:

  • establish, maintain, and operate a business office in Belize;
  • transact offshore banking business through its business office in Belize without restrictions;
  • transact offshore banking business with a local entity in Belize licenced under the Banks and Financial Institutions Act, 1995.

Belize International Banks are not subject to exchange control regulations.


Belize's Tax Agreements and Anti-Money Laundering Laws

Belize has exchange of information relationships with 84 jurisdictions through 12 double tax avoidance agreements, 16 tax information exchange agreements and 1 multilateral mechanism, the Convention on Mutual Administrative Assistance in Tax Matters.

The Money Laundering and Terrorism (Prevention) Act, 2008 establishes provisions for the investigation and prosecution of money laundering, terrorism and other related crimes. The law allows for exchange of information in criminal tax matters with all countries, if it is considered to be a criminal offence in the requesting country. However, local authorities have no direct access to banking information and details of ultimate beneficial owners, and a court order is required to obtain such information.

The Financial Intelligence Unit Act was enacted in 2002 to transfer the Anti-Money Laundering Supervisory Authority from the Central Bank of Belize to the Financial Intelligence Unit (FIU). The FIU has the power to investigate and prosecute financial crimes, to coordinate the cooperation between law enforcement agencies, government departments and other regulatory bodies in evolving methods and policies to prevent and suppress financial crimes; and to process all requests for legal assistance from foreign countries relating to financial crimes.


Belize Bank Accounts

The usual array of offshore banking services are offered by banks in Belize, including: personal and business accounts; term deposits; international transfers; payment cards; cheque books; merchant accounts; and brokerage accounts. Accounts can be maintained in a number of currencies, including USD, GBP, CAD and EUR. Full Internet banking facilities with enhanced security are available.

While it is normally free to open an offshore bank account in Belize, an initial opening balance of at least USD1,000 (or its equivalent in another currency) is required, and clients must maintain a balance of at least USD1,000.

To open a bank account in Belize, applicants are usually required to supply the following documents: a notarised copy of their passport; a bank reference letter from their current bank showing they have had a banking relationship for at least 2 years; a professional reference letter (e.g. from an accountant or lawyer) showing that a professional relationship has existed for at least 2 years; and a utility bill showing place of residence. Companies need to present notarized copies of standard company documents, including certificate of registration, memorandum and articles of association, registers of directors and shareholders, certificate of good standing, and power of attorney if applicable.


St. Vincent and the Grenadines: Fact File

The state of St. Vincent and the Grenadines (SVG) forms part of the Windward Islands, approximately 1,600 miles southeast of Miami and 100 miles from Barbados. SVG consists of a group of 18 small islands the main island of which, St Vincent, has an area of 150 square miles. The capital, Kingstown, combines reminders of its colonial past with a modern commercial centre.

St Vincent and the Grenadines is in the Atlantic standard time zone, 1 hour ahead of Eastern Standard Time and 4 hours behind GMT. A former British possession, independence was granted on 27 October 1979, and today SVG is an independent democracy and part of the British Commonwealth. The official language of SVG is English, and it is the language for doing business. However, French and Spanish are widely taught on the Island.

SVG is a parliamentary democracy and is politically stable. Elections are held every five years. The basic law of SVG is the English common law but the country has developed its own set of statutory provisions especially in the area of trusts, banking and international finance. The local currency is the Eastern Caribbean Dollar (ECD) which is linked to the USD at an exchange rate of 2.7 ECD to 1 USD. This rate has remained unchanged since 1976.


SVG Financial Sector Overview

In the mid-1990s, SVG's international finance legislation was overhauled and a package of financial laws was introduced. In addition to international banks, these laws allow for the formation of international business companies, international trusts, mutual funds, international insurance companies and limited liability companies. Regulated and licensed agents and trustees, known in SVG as Registered Agents, provide international financial services in the jurisdiction.

Since securing its removal from the Financial Action Task Force (FATF) blacklist of Non-Cooperative Countries and Territories in 2003, the Caribbean jurisdiction of St Vincent and the Grenadines has reported strong growth in the registration of international business companies.

A new investment promotion agency, the National Investment Promotions Inc. (NIPI), commenced operations in August, 2004, taking over from the Development Corporation, which initially managed the investment promotion functions of St Vincent and the Grenadines. In an effort to bolster NIPI's image locally and internationally, it was rebranded as Invest SVG and launched in August, 2009. The agency reports to the Office of the Prime Minister.


SVG Offshore Banking Sector

St. Vincent and the Grenadines has a small, carefully vetted and properly regulated international private banking sector, governed by the International Banks Act of 2004 and Regulations.

The regulatory body, the Financial Services Authority (FSA), has concentrated its efforts on ensuring that only banks with a real presence, and sound business operations and policies, operate in the jurisdiction. There are no shell banks licensed in St. Vincent and the Grenadines, and all banks are subject to ongoing on-site examinations by the authorities which usually take place every 12-18 months.

The Eastern Caribbean Central Bank, based in St. Kitts and Nevis, promotes and maintains the monetary stability of the single common currency (the ECD) of the group of eight small island economies, including Anguilla, Antigua and Barbuda, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.

The FSA grants two classes of offshore banking licence: a Class I Offshore Banking Licence which is for the purpose of carrying on an offshore banking business generally; and a Class II Offshore Banking Licence which is for the purpose of carrying on offshore banking business subject to certain restrictions laid down in the licence.


SVG's Tax Agreements and Anti-Money Laundering Laws

Banking confidentiality is enforced by law; however recent legislation provides for international co-operation in various circumstances.

In April 2012, the OECD confirmed that the territory has adequate frameworks in place to meet international standards on tax transparency and information exchange. This confirmation followed the successful completion of the first Phase of the Global Forum's Peer Review Process, which assesses nations' frameworks for exchanging tax information, including agreements signed with other nations to facilitate such exchanges.

As part of efforts to meet the requirements of Phase 1, the government passed the International Co-operation (Tax Information Exchange Agreements) Act, 2011, to ensure effective information exchange. The SVG now has exchange of information relationships with 31 jurisdictions, through 10 double tax agreements, and 21 tax information exchange agreements.

St Vincent and the Grenadines has implemented a package of legislation aimed at detecting, preventing, and prosecuting money laundering and other serious crimes as well as confiscating the profits of crime. The legislative measures reflect international best practices and take account of the 40 Recommendations of the FATF on money laundering and the 19 Recommendations of the Caribbean FATF.

A Financial Intelligence Unit (FIU) was established in Saint Vincent and the Grenadines in May 2002, in accordance with the terms of the Financial Intelligence Unit Act 2001.

The functions of the FIU include:

  • receipt and analysis of suspicious transaction reports that are required to be made under the Proceeds of Crime and Money Laundering (Prevention) Act, Act No. 39 of 2001;
  • collection of information from financial institutions and other relevant bodies for the purpose of investigating relevant offences;
  • investigation of relevant offences;
  • dissemination of information;
  • international cooperation in the exchange of financial information;
  • awareness raising and education of financial and business institutions on their obligations to detect, prevent and deter money laundering and associated offences.

The FIU works in close partnership with other national agencies to ensure that the country has a comprehensive anti-money laundering system that identifies and effectively addresses suspected illegal activity.


SVG Bank Accounts

Banks in SVG provide a wide range of offshore banking services, including: personal and business accounts; term deposits; international transfers; payment cards; international trust solutions; escrow services; corporate payment systems; investment trading in forex and precious metals; and yacht registration. Bank accounts are available in a variety of currencies, including USD, GBP, EUR, CHF and JPY.

Full internet banking facilities are available allowing accounts to be managed from anywhere in the world, and additional internet banking security is available for a fee.

An initial opening deposit is not a specific requirement to open an account with an offshore bank in SVG, but customers are expected to maintain a reasonable sum for the account to remain active.

To open a bank account in SVG, individuals normally need to supply a notarised copy of their passport (US and Canadian citizens must additionally provide a notarized copy of their driver's license), a utility bill or other proof of address in original form and an original reference letter from their current bankers. Companies need to supply notarized copies of standard company documents including certificate of registration, memorandum and articles of association, registers of directors and shareholders, certificate of good standing, and power of attorney if applicable. Account opening and monthly servicing fees apply. An applicant does not, however, need to visit the jurisdiction in order to open a bank account in SVG.




 

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