Offshore Financial Centers - PowerPoint by gdDK26

VIEWS: 112 PAGES: 28

									Offshore Financial Centers


    Chapter 7
    Hughes and MacDonald Text
Key Questions You need to Be able to
answer
   What is an offshore financial center?
   List some common offshore financial centers by region of the world:
   What are some common reasons why countries seek to develop
    themselves as offshore financial centers
   Arguments Against offshore financial centers
   What reasons do clients have to become associated with an offshore
    financial center?
   Are bank secrecy laws absolute?
   What two major issues have forced offshore financial centers to
    moderate their strict bank secrecy laws?
   How do offshore financial centers maintain secrecy but take action to
    reduce or eliminate money laundering and the unsavory business
    elements?
Key Chapter Concepts
What is an offshore financial center?
Key Chapter Concepts
What is an offshore financial center?

   Offshore financial centers exist for the
    benefit of foreign customers

   Governments of offshore financial
    centers have decided strategically,
    that this is an industry that they want
    to attract and build within their
    borders…partly for the industry
    employment, but also because of the
    economic spin-offs, in particular, the
    tourist expenditures that can be
    attracted (especially in warm weather
    countries).
Key Chapter Concepts
List some common offshore financial centers by region
of the world
Key Chapter Concepts
 List some common offshore financial centers by region
 of the world
Europe/ Middle East      North America                  Asia Pacific
     Bahrain                 Anguilla                       Cook Islands
     Cyprus                  Aruba                          Hong Kong
     Gibraltar               Bahamas                        Lubuan Island
     Guernsey
                              Barbados                       Palau
     Ireland (Dublin)
     Isle of Man             Bermuda                        Nieu
     Jersey                  British Virgin Islands         Singapore
     Liechtenstein           Cayman Islands                 Vanuato
     Luxembourg              Grenada
     Monaco                  Montserrat
     Switzerland             Netherlands Antilles
                              Asia/Pacific
Key Chapter Concepts
What are some common reasons why countries
seek to develop themselves as offshore financial
centers?
Key Chapter Concepts
What are some common reasons why countries
seek to develop themselves as offshore financial
centers?
The country may have little land base and few
opportunities to develop other types of economic activity
because of:
                  Limited energy supplies at high cost
                  Limited raw materials and other natural resources
                  Long distance from raw material and energy sources so secondary manufacturing
                   options are few


The country may possess natural characteristics that make it an ideal offshore
financial center:
                  Political stability
                  Close geographical proximity to wealthy countries
                  Well educated workforce
                  Some natural amenities that make to possible to develop its potential as a tourist
                   attraction
                  A political willingness to pass bank secrecy laws and at the same time be prepared
                   to invest in policing and security infrastructure to assure personal safety and to
                   address the potential to attract unsavory elements.
Key Elements Shared By Offshore
Financial Centers
   Low or no taxes
   Services are provided mainly, but not exclusively, for
    nonresident clients
   There are no or few foreign exchange controls
   Geographical proximity to a major economy and good
    communications infrastructure
   A legal regime that upholds bank secrecy
   A high degree of political stability is also important – no
    one wants to put their money into a country that cannot
    guarantee personal safety or the ability to extract one’s
    funds.
Key Chapter Concepts

What are the arguments often cited against
offshore financial centers?
Key Chapter Concepts



What are the arguments often cited against offshore
financial centers?
      They attract unsavory business elements including money
       launderers and terrorists and dictators and expatriates who
       have funneled ill-gotten gains to the offshore financial center for
       their own purposes
      They help people evade taxes in their own country which
       means that a disproportionate tax burden is shouldered by the
       middle-income tax payer – effectively undermining sovereignty
       and tax fairness.
Key Chapter Concepts
What reasons do clients want to become associated with
an offshore financial center?
Key Chapter Concepts
What reasons do clients want to become associated with
an offshore financial center? What factors do they consider
when choosing an offshore financial center?


    Do some research:
    •   Anguilla as an offshore center.
Key Chapter Concepts
What reasons do clients have to become associated with
an offshore financial center?
 Legitimate Reasons:
 •   Privacy for personal, family, business or
     political reasons (purposes)
 •   Try to keep funds separate in case of
     inheritance battles, divorce or personal
     bankruptcy
 •   Keep funds in a secure bank in a secure
     country
 Illegitimate/Illegal Reasons:
 •   Launder money from criminal activities
 •   Evade Taxes
Key Chapter Concepts

Are bank secrecy laws
   absolute?
Key Chapter Concepts

Are bank secrecy laws
   absolute?

   In practice no…under the
    laws in most offshore
    financial centers, they can be
    lifted to pursue and
    investigate criminal activities.
Key Chapter Concepts

What two major issues have forced offshore financial centers to
moderate their strict bank secrecy laws?
Key Chapter Concepts

What two major issues have forced offshore financial centers to
moderate their strict bank secrecy laws?


•   Disclosure that wealth that was
    taken from Jews by the Germans
    during WW II was stored in banks
    in Switzerland
•   After September 11, 2001, the
    U.S. realized that offshore
    financial centers may be involved
    in providing the secrecy
    necessary for terrorists to finance
    their plots world wide.
Key Chapter Concepts
How do offshore financial centers maintain
secrecy but take action to reduce or eliminate
money laundering and the unsavory business
elements?




 Do some searching of offshore financial centers
 •   Switzerland
 •   Isle of Man – Supervision Commission
Key Chapter Concepts
How do offshore financial centers maintain secrecy but take
action to reduce or eliminate money laundering and the
unsavory business elements?

Each offshore financial center has its own set of laws …and based on the
   countries culture, history and traditions, may hold different views of what
   is legal and what is illegal.
      •   For example, Switzerland does not view tax evasion as illegal and will not
          cooperate with foreign governments in those cases…strangely enough, the
          Swiss will cooperate in the case of Tax Fraud
      •   Bank secrecy is lifted in the case of serious crime like money laundering –
          hence bank secrecy laws are not an impediment to controlling criminal
          activity…however, the standards of proof a judge will require are high.
      •   Bank secrecy, in practice, is NOT lifted in private matters such as
          inheritance and divorce.
 Key Chapter Concepts
 How do offshore financial centers maintain secrecy but take
 action to reduce or eliminate money laundering and the
 unsavory business elements?

Common controls in most jurisdictions focus on
   due diligence rules over bank personnel
   including:
      •   Know your client rules (verifying the contracting
          partner, verifying the beneficial owner, clarification of
          the economic background of a transaction and
          retaining documents attesting to the verifications
          made.)
      •   Reporting of suspicious transactions – obligation to
          inform
      •   Serious sanctions against bank personnel if they
          violate the rules

  In addition, the lifting of bank secrecy can be ordered by the country’s judges if there is
  proof that the account is a criminal matter.
Key Chapter Concepts
How do offshore financial centers maintain secrecy but take
action to reduce or eliminate money laundering and the
unsavory business elements?




Under the OECD, The Financial Action Task Force on Money Laundering
     (FATF) is an intergovernmental body that was set up in 1989 at the G7
     economic summit in Paris and is open to most members of the OECD.
     Its purpose is to develop and promote strategies to combat laundering of
     the proceeds of criminal activities.
In 1990 it implemented 40 recommendations that all countries are
     encouraged to adopt.
Question 1

What are the key elements that all offshore
 financial centers share?
Question 1

Key Elements Shared By Offshore Financial Centers
     Low or no taxes
     Services are provided mainly, but not exclusively, for nonresident
      clients
     There are no or few foreign exchange controls
     Geographical proximity to a major economy and good
      communications infrastructure
     A legal regime that upholds bank secrecy
     A high degree of political stability is also important – no one
      wants to put their money into a country that cannot guarantee
      personal safety or the ability to extract one’s funds.
Question 2

What are the advantages and disadvantages of
 going to an offshore financial center?
Question 3

What factors contributed to the emergence of
 Switzerland and Luxembourg as important
 offshore financial centers?
Question 4

Hong Kong and Singapore are major offshore
 financial centers in Asia. Compare and
 contrast the development of each city as
 important offshore financial center
Question 5

What is an International Banking Facility?

								
To top