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