Paolo baffi centre on central banking and financial regulation paolo baffi centre research paper series no. Offshore financial centers and tax havens an overview. Concept of offshore financial centers international monetary fund. Offshore financial centers and bank secrecy, crea discussion paper series 1402, center for research in economic analysis, university of luxembourg. Offshore identifies any item that is located or based outside of ones national boundaries. Bank secrecy, illicit money and offshore financial centers. Law, economics and finance fdef center for research in economic analysis crea. The book examines the existing legal agreements at the international, regional and national levels and their interaction in the substantive areas of confiscation, antimoney laundering and banking confidentiality laws.
Not only are governments now desperate for tax revenue to help fund bailouts, but a recognition of the role offshore financial centers played in the systems implosion is dawning. As defined by the international monetary fund imf, ofcs refer to countries or jurisdictions that provide some or all of the following three services. We study the impact of an offshore financial center on the economy in the presence or absence of bank secrecy in a twocountry setting with heterogeneous investors who choose where to deposit their savings. Paolo baffi centre on central banking and financial regulation. 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. Offshore banking and financial centers progress in strengthening the architecture of the international financial system. Best offshore jurisdictions tax havens offshore countries. Gray areas of offshore financial centers tennessee research. Luxembourg is the most important private banking and wealth management centre in the eurozone, with 143 banks holding. Switzerland, considered the grandfather of bank secrecy, has been one of the largest offshore financial centers and tax havens in the world since the mid20th century. Ireland is a top 5 conduit ofc, the largest global tax haven, and the 3rd largest ofc shadow banking centre.
The end of bank secrecy in offshore financial centers. Financial stability forum 2000, financial stability forum releases grouping of offshore financial centres ofcs to assist in setting priorities for assessment, may. Those pressure policies however harm both investors in the offshore and onshore financial centers but benefit both the onshore bank industry and tax administrations. Oct 22, 2001 banking on secrecy terrorists oppose scrutiny of offshore accounts. Switzerland have a long history of facilitating banking secrecy, which others. The role of offshore financial centres in globalization article pdf available in accounting forum 274. Abstract the panama papers and further revealed that leaks money laundering and tax evasion are important issues, which often go hand in hand. An empirical investigation of the relationship between offshore centre.
Bank secrecy, illicit money and offshore financial centers by. Money laundering and offshore banking crc press book this book brings together the issues surrounding banking secrecy and confiscation of criminal proceeds. Often due to territorial taxation, ofcs also levy little or no taxes on corporate andor personal foreign income. This paper discusses the effects of pressure policies on offshore financial centers as well as their ability to enforce the compliance of those centers with antimoney laundering regulations. Rather than focussing on tax competition, we acknowledge that countries use two instruments to attract investors. Money laundering and offshore banking crc press book. Some accounts, however, claim that offshore banking originated in the channel islands of france.
An offshore financial centre or ofc is defined as a country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy. Bank secrecy, illicit money and offshore financial centers, journal of public economics, elsevier, vol. Meaning and origin the term offshore financial center referred to as an ofc in this chapter is typically used for a country or a jurisdiction with financial centers comprising of financial institutions that. An offshore financial centre ofc is a jurisdiction specializing in providing corporate and commercial services, such as offshore banking licenses international banking license or the incorporation of offshore companies international business companies. Finally, new york and london are examples of true international financial centers because a broad range of high level economic activities. Research highlights offshore financial centers and their customers are subject to international pressure policies that aim at enticing those centers to implement a knowyourcustomer policy and eliminate money laundering.
As in other parts of the world in the aftermath of the global economic and financial crisis, the region is at a crossroads, facing the major challenges of creating jobs, making growth more inclusive, reforming the banking system, and managing volatility, while grappling with high public. Like switzerland, uruguay offers investors an enticing combination of low taxes and banking privacy. Offshore banking, is a segment of the finance industry whose birth can be traced back to vienna, austria. The eastern caribbean economic and currency union oecseccu is one of four currency unions in the world. This paper is a survey of the literature that studies the end of bank secrecy in offshore financial centers.
Download banking secrecy and offshore financial centers money laundering and offshore banking ebook. It proposes that there has long been concern over the illegitimate uses of offshore financial centres and that the continuing exploitatio. Offshore financial centre wikipedia republished wiki 2. Bank secrecy, illicit money and offshore financial centers by pierre. Meaning and origin the term offshore financial center referred to as an ofc in this chapter is typically used for a country or a jurisdiction with financial centers comprising of financial institutions that deal primarily with nonresidents andor in foreign currency on. Iip coverage because of concerns about confidentiality. Offshore businesses are categorized as such because they are incorporated or resident in the ofc but conduct business solely with nonresidents. The corrosive effect of offshore financial centers on. Offshore financial centres in a globalised world the emergence of ofcs has a complex history palan, 2002. It proposes that there has long been concern over the illegitimate uses of offshore financial centres and that the continuing exploitation of. The term offshore financial center referred to as an ofc in this chapter is. Any country or jurisdiction with a financial center that contains 1 a relatively large number of financial institutions engaged primarily in business with non. Despite an international push to meaningfully roll back banking secrecy laws in the country, swiss social and political forces have minimized and reverted much of proposed roll. An offshore bank is a bank regulated under international banking license often called offshore license, which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment.
How do offshore financial centers maintain secrecy but take action to reduce or eliminate money laundering and the unsavory business elements. On the one hand, the existence of the bank secrecy raises ethical issues like the respect of confidentiality, the equality of all before the taxation, tax evasion and the support. All these terms broadly refer to the same concept of offshore financial center. The world of offshore financial centers and the role of the eu in it supervisor arcada. Offshore banking has comparative advantage in term of property rights protection, legal and tax. Ofcs were alternatively defined imf, 1995 as countries where the banking system, acting as financial. This paper discusses the winners and losers of such policies. The term offshore is used to describe foreign banks, corporations, investments and deposits. These centers are considered to be offshore banking centers.
Bank secrecy, illicit money and offshore financial centers article in journal of public economics 9578. This paper proposes a new definition of offshore financial centers ofcs and develops a statistical. With the above criteria in mind, my team and i researched the best offshore banks in the world for 2020. Shadow banking, offshore financial centers, and jurisdictional competition. Pdf the role of offshore financial centres in globalization. The major role of offshore centres is to provide secrecy. Jul 05, 20 purpose the paper aims to highlight the relationship between money laundering and banking confidentiality in offshore financial centres particularly following the recent publicity and bbc expose surrounding the criminal use of offshore financial centres. Their shared determination to end offshore abuse is enabling them to deploy strategies, both individually and collectively, to crack down on offshore tax evasion and to integrate. Offshore banks can be encouraged to comply with rigorous monitoring of an investors identity and the origin of hisher funds when pressure creates a sufficiently high risk of reputational.
The paper aims to highlight the relationship between money laundering and banking confidentiality in offshore financial centres particularly following the recent publicity and bbc expose surrounding the criminal use of offshore financial centres. There are individuals and enterprises who rely on banking secrecy and opaque. However, before we dive into the list of the best offshore banks, i want to address a few caveats to this list. Picard and patrice pieretti this paper can be downloaded without charge from the social science research network electronic paper collection. Paolo baffi centre on central banking and financial. Tax havens and the financial crisis from offshore havens to financial centers, banking secrecy faces scrutiny. Offshore financial centers and tax havens nishith desai associates.
Countries have moved rapidly to take advantage of this new environment, using new information tools as they become available. In some offshore financial centres and bank secrecy jurisdictions serious efforts have been made to minimize the influx of dirty money through more careful regulation. The cayman islands is one of the five largest offshore financial centers worldwide, providing services such as offshore banking, offshore trusts. Money laundering and offshore banking routledge research in finance and banking law.
Overview while there exists no single accepted definition for ofcs, for the purpose of this note, an ofc shall be understood to mean. An empirical investigation of the relationship between. Private banking services and offshore financial centers are the major conduits and repositories. Offshore financial centres bank secrecy money laundering. Offshore does not refer to the location of the ofc many fsfimf ofcs, such as luxembourg and hong kong, are located onshore, but to the fact that the largest users of the. Offshore banking was born when the neutrality of switzerland was established during the vienna congress in 1815. Many variants of the term have been used, including international financial center ifc, international banking center ibc, international banking facilities ibfs, and offshore banking center. International and national institutions regularly put pressure on offshore financial centers and their clients to enforce compliance with antimoney laundering regulations and that in spite of the existence of bank secrecy. Ofcs of the caribbean generally fall into the latter group. Jan 28, 2020 the cayman islands is one of the five largest offshore financial centers worldwide, providing services such as offshore banking, offshore trusts, and the incorporation of offshore companies. Role of offshore financial centers while it is generally perceived that corporations or individuals used ofcs primarily because of the minimal taxes and the banking secrecy anonymity afforded by the ofcs, there are a number of bona fide purposes for which ofcs could be and are used by corporations or individuals for conducting business.
With its connotations of banking secrecy and tax avoidance, tax haven is not always an appropriate term for offshore financial centres, many of which have no statutory banking secrecy, and most of which have adopted tax information exchange protocols to allow foreign countries to investigate suspected tax evasion. There really is no easy way to differentiate one type of offshore financial centre from another, whether it is a traditional tax haven or modern corporate financial centre as many share the same favorable laws supporting finance, banking, capital and the possibility of nonresident companies benefiting from keeping income offshore. May 29, 2009 international and national institutions regularly put pressure on offshore financial centers and their clients to enforce compliance with antimoney laundering regulations and that in spite of the existence of bank secrecy. Banking on secrecy terrorists oppose scrutiny of offshore accounts. Note for the imf executive board june 29, 2001 offshore financial centers the role of the imf june 23, 2000. The term offshore financial center or later simply offshore has widely. Research in this area can be read under two perspectives.
Offshore financial centers the role of the imf june 23, 2000. Bank secrecy, illicit money and offshore financial centers picard. Money laundering and offshore banking routledge research in finance and banking law young, mary alice on. Since the 1980s, jurisdictions that provide financial services. The estimates are not confounded by contemporaneous shocks such as civil conflicts, natural disasters, and financial crises, and are robust to instrumenting with predetermined aid com.
By the same token, in spite of efforts to regulate the offshore banking world, not all jurisdictions are equally regulated. Money laundering and offshore banking routledge research in finance and banking law ebook. The subject of the thesis is the world of the offshore financial centers in the global economy, understanding which services. Jul 24, 2017 why reregulation after the crisis is feeble.
On the other hand, offshore financial centers can also be used for legitimate. The geography of offshore financial centres and bank secrecy jurisdictions. This book brings together the issues surrounding banking secrecy and confiscation of criminal proceeds. Offshore banking constitutes a sizable portion of the international financial system. The financial secrecy index center for global development. The subject of the thesis is the world of the offshore financial centers in the global economy, understanding which services are offered by main ofcs and the kind and size of the. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. The economic impact of offshore banking centers on the.
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