Perspective: Caribbean Offshore Financial Crossroads

• Author: Shazeeda Ali
• Pages: 151-155

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Perspective: Caribbean Offshore Financial Crossroads

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Perspective: Caribbean Offshore Financial Crossroads

Shazeeda Ali

THE OFFSHORE FINANCIAL WORLD of the Commonwealth Caribbean is

characterised by offshore banks, companies, insurance and trusts. The genesis

of this industry can be traced to the 1960s when financial institutions in the

industrialised countries began to be confronted by strict regulations and high

taxation at home. For example, it was the imposition of capital controls by

the US government that prompted many US banks to conduct some of their

financial activities in those territories that offered low or no taxes.1

The proximity of the Caribbean to the US, plus the combination of new

fund transfer mechanisms and telecommunication devices encouraged US

financial entities to set up international operations in the newly emerging

Caribbean international financial centres. The simultaneous quest for financial

autonomy enticed several Caribbean territories to embark into the offshore

financial world, as they sought to diversify their economy from tourism, and

so a new niche was born.

However, as competitors around the world increased and restrictions in

the US softened, Caribbean offshore centres were forced to improve their

appeal by offering financial services that were subject to minimal controls

and stricter financial secrecy. Furthermore, in the rush to stay afloat in the

volatile offshore seas, many centres endeavoured to compete without first

implementing the supporting legislative infrastructure needed to screen

financial intermediaries and their clients.

Consequently, although not targeted at illegitimate wealth, the Caribbean

offshore centres began to attract notoriety as havens for the proceeds of tax

evasion and other serious criminal activities. Indeed, it became the norm for

any international criminal seeking to continue operations, boost profit and

evade detection to run a critical phase of his business through the offshore

haven bank, trust and company system.2 This was attributed to the ease of

information, lenient supervision and confidentiality of these financial vehicles.