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CHAPTER 4 : OFFSHORE FINANCIAL CENTRES (Functions (Manage financial…
CHAPTER 4 : OFFSHORE FINANCIAL CENTRES
Functions
Manage financial systems with external assets and liabilities to domestic financial intermediations to finance domestic markets
International centres that provide low/zero taxation, moderate or light financial regulation and banking secrecy
Jurisdictions provider that has large number of financial institutions primarily in business with non-residents
Maintain extensive legislation and to measure to reduce criminally related activities and information sharing with other nations
Maintain necessary structure for providing the varied services required by global clientele from different background
Facilities
Offshore Savings Account
Can deposit as little as USD1 and should be denominated in foreign curenncy
Invest minimum USD5000 to open offshore savings account
Charges may be high
eg : fee can be as high as USD25 a time, so depositing a small balance in an account may not make financial sense
Offshore Current Account
Can use a debit card to withdraw money in either Dollar, Euro and Sterling
Ease the movement between accounts means whoever can protect their money against currency fluctuations
Helping to save on chargers
FOREX Services
Covert money for a a property
Making regular payments in a foreign currency
Managing the client's overall foreign currency exposure
Forwards contracts and spot transaction
Offshore Investments
structured notes and structured deposits
no capital tax, no interest, no capital gains and no corporation tax
Institutions
International Investment Bank
Deposit may not be subject to reserve requirement
May be free of interest and exchange controls
Bank transactions may be tax-exempt
Offshore Banks
It may be subject to lesser form of regulatory scrutiny and information disclosure requirements may not be rigorously applied
Offshore Corporations
Limited liability vehicles registered
may be set up with one director only
used to create complex financial structure
residents of host country may act as nominee directors to conceal identity of tru company director
bearer share certificates may be used
popular vehicle for managing investment funds
Insurance Companies
Captive insurance company to manage risk and minimize taxes
Establishes a subsidiary to reinsure certain risks underwritten by the parent and reduce overall reserve and capital requirement
Reinsure catastrophic risks
Attractions include favourable income and low enforced actuarial reserve requirements and capital standards
Introduction
:!: OFC s are jurisdictions (authority) that provide financial services to non-residents on a scale that is excessive compared to the sie & the financing of their domestic economies.
:!: Can be defined as any financial centre where offshore activities take place.
:!: A centre where the bulk of financial sector activity is offshore on both sides of the balance sheet.
:!: Offer significant tax and regulatory advantages as well as providing clients from other.
:!: Services offered are mainly for non-resident clients.
Common reasons countries seek to develop themselves as OFCs