The term international banking or offshore banking originates from the Channel Islands which enjoy fiscal and tax autonomy from the British Crown. Offshore banks are banks located outside of the account holder’s residence in a jurisdiction typically offering financial privacy, international investment opportunities, asset protection, tax and other financial benefits. They are regulated by local monetary authorities but cannot take domestic deposits. Offshore centers, numbered seventy in the world, have grown phenomenally since the 1970s with the advance of technology and globalization.
Uses of International Banking
Legal uses include setting up holding and investment companies for international transactions, processing international trade, protecting private wealth and business patents as well as investing in foreign countries, asset classes and funds without restrictions.
An offshore bank account can benefit users such as expatriates and travelers who live or travel overseas and want access to their funds in a timely and cost-effective manner, business owners who transacts with customers globally, and property owners with foreign properties and can benefit from cross-border financial management.
Growth of Belize as an Offshore Banking Center
Belize, an English-speaking democracy, is located on the north-easterly tip of Central America, with a size comparable to Massachusetts. Belize is situated between Mexico and Guatemala with the Caribbean Sea in its eastern shore. It was ruled by the British from 1862 to 1981 and was named “British Honduras” until the official name was changed to Belize in 1973. The country is rich in timber, minerals and seafood. Its major exports are cane sugar, marine products, bananas and oil with the U.S. being its largest trading partner. The Belize currency has been pegged to the U.S. dollars at 2 to 1 since 1976.
With the enactment of the Offshore Banking Act and the Money Laundering Act in 1996, Belize’s offshore banking industry has grown. The British, by putting in the best components of banking laws, helps Belize to become a “banking haven”. Belize has 5 commercial banks and several offshore banks, all regulated by the Banks and Financial Institutions Act.
What Advantages does Belize Offer
Belize is a relatively stable parliamentary democracy and is a Commonwealth member. It offers a low tax regime with no taxes on interest income or capital gains on foreign investment. Depositors and investors’ confidentiality are protected by strict privacy laws. Banks in Belize are mandated to keep a high liquidity ratio of 24 percent. Belize does not have exchange control, allowing flexible money movement. Setting up Belize International Business Companies (IBCs) and trusts can protect investments from taxes as well as legal judgments. Belize is easily accessible by international flights from major onshore centers and offers excellent communications facility with English as the official language.
In conclusion, the ideal offshore banking center should have a stable economy and political environment, effective banking regulations, international law compliance, easy communication and consumer protection rules – many advantages Belize currently offers.