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Offshore banking or Offshore banks refers to the many banking and investment institutions available in countries and jurisdictions other than the depositor’s home country. While technically any bank can be considered an Offshore bank when it meets the above criteria, the term is generally reserved for the banking institutions located in what are consider low-regulation, low-taxation “haven” jurisdictions. Since their origin, offshore banks tended to be unfairly portrayed by both media and the home jurisdictions alike--the accusations have ranged from tax evasion to money laundering, but careful examination of the true purpose of the offshore banks, and an unbiased examination of where illicit funds are truly held or “laundered” sheds light on the situation. Other false accusations have centered around criticism of unsafe environments, poor regulation, etc. Again, these could not be further from the truth. Most Offshore banking jurisdictions of any repute have very sophisticated, stable banking regulations, and because it is in their best interest to attract and keep depositors, these regulations are geared towards meeting the needs of the depositor. Many of these jurisdictions rely on foreign capital held in their banks as their primary economic factor, and as their only source of foreign investment.
WHAT IS OFFSHORE BANKING?
The broad definition of an offshore bank is that of a bank that is located in a jurisdiction or country that is different from the jurisdiction or country that the depositor or investor resides in. One of the many benefits of holding an offshore banking account is that they are usually located in tax havens that provide substantial asset protection and confidentiality benefits to the account holder. These jurisdictions also often allow for a relaxation of restrictions with respect to the types of accounts available to depositors or investors, and how then can be manipulated. This amounts to decreased regulation. The more popular offshore jurisdictions often provide a substantial decrease in tax liability. While technically any bank outside of a depositor’s home country can be called an “offshore bank,” for our purposes here we will focus only on those proven to provide quantifiable benefits as outlined above. These Offshore banks can be located in actual island-states such as the Caymans or Channel Islands or in landlocked countries such as Switzerland--being surrounded by water is no longer a determining factor.
WHERE SHOULD AN OFFSHORE BANK ACCOUNT BE ESTABLISHED?
It is important that the proper jurisdiction be selected when deciding which jurisdiction to use as an offshore banking jurisdiction. The majority of the offshore
jurisdictions have prudent, sound regulations in place geared towards safeguarding the deposits and maintaining their confidentiality. However, some weigh their benefits in taxation, while others in confidentiality, and so forth. Though they all offer a comparatively confidential and secure environment, it bears consideration to outline what the banking goals are and then choose the jurisdiction accordingly. A small minority of the offshore jurisdictions do a poor job of managing and regulating their banking institutions, but the informed investor or advisor will deem these as unsuitable for themselves or their clients. Further, these poorly organized and run jurisdictions are often manipulated by illicit depositors and hence prove easy targets of the FATF (Financial Action Task Force) looking for money laundering or other criminal activity
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically include:
1. 2. 3.
Greater privacy Low or no taxation (i.e. tax havens) Easy access to deposits (at least in terms of regulation)
although critics such as the Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC) nongovernmental organization (NGO) maintain that they have been insufficient. REGULATION OF OFF SHORE BANKS: In the 21st century. A few examples of these are: • The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers are required.4. Simplicity 5. The quality of the regulation is monitored by supra-national bodies such as the International Monetary Fund (IMF). by good faith. Protection against local political or financial instability Protection from lawsuits 6. 2001. there have been a number of initiatives to increase the transparency of offshore banking. although critics maintain it remains largely insufficient. especially following September 11. Since the late 1990s. to report suspicion of money laundering to the local police authority. Banks are generally required to maintain capital adequacy in accordance with international standards. Asset protection 7. regardless of . regulation of offshore banking is allegedly improving. They must report at least quarterly to the regulator on the current state of the business.
such as the UK Offshore Islands. the major G7 banks will not deal with offshore bank centers that don't comply with G7 banks regulations. In the US the Internal Revenue Service (IRS) introduced Qualifying Intermediary requirements. The European Union has introduced sharing of information between certain jurisdictions. and enforced this in respect of certain controlled centers. They only exist because they engage in transactions with standard banks. which mean that the names of the recipients of USsource investment income are passed to the IRS. Following 9/11 the US introduced the USA PATRIOT Act. Similar measures have been introduced in some other countries. so that tax information is able to be shared in respect of interest. these banks could not exist. It's not an accident. if there's an important role for a regulated banking system. the UK.• • • banking secrecy rules. Joseph Stiglitz. do you allow a non-regulated banking system to continue? It's in the interest of some of the moneyed interests to allow this to occur. where it is believed that the bank holds assets for a suspected criminal. investigating on the Clearstream scandal: "You ask why. 2001 Nobel laureate for economics and former World Bank Chief Economist." . it could have been shut down at any time. which authorizes the US authorities to seize the assets of a bank. told to reporter Lucy Komisar. There is more international co-operation between police authorities. If you said the US.
the Organization for Economic Cooperation and Development (OECD)) at the forefront of a crackdown on tax evasion. whose canal is currently needed by all Western nations. Weakened Bank Secrecy: Since starting to survey offshore jurisdictions on April 2. Liechtenstein and Luxembourg. The recent sharing of confidential UBS bank details about 285 clients suspected of willful tax evasion by the United States Internal Revenue Service was ruled a violation of both Swiss law and the country’s constitution by a Swiss federal administrative court. Countries that do not comply may face sanctions. from a so-called "grey list" of nations that did not offer sufficient tax transparency. A notable exception is Panama. Given the enlargement of the canal to accommodate larger shipping. OECD has removed 18 countries. Nevertheless. and has re-categorized them as “white list” nations. provides it with a unique type of immunity to international pressure. 2009. . including Switzerland.In the 1970s through the 1990s it was possible to own your own personal offshore bank. Changes in offshore banking regulation in the 1990s in the form of "due diligence" (a legal construct) make offshore bank creation really only possible for medium to large multinational corporations that may be family owned or run. won't object to governments using stolen bank data to track down tax cheats in offshore center. it is unlikely in the foreseeable future that Panama would likely succumb to international pressure toward transparency. mobster Meyer Lansky had done this to launder his casino money.
developed countries with regulated banking systems offer the same advantages in terms of stability. This will be an advantage for residents in areas where there is risk of political turmoil. or who do not pay tax • • • . in which geographically remote island nations can competitively engage.ADVANTAGES: • Offshore banks can sometimes provide access to politically and economically stable jurisdictions. reducing interest rates on deposits. along with tourism. This is an advantage to individuals who do not pay tax on worldwide income. Offshore finance is one of the few industries. seized or disappear. However. It can help developing countries source investment and create growth in their economies. and can help redistribute world finance from the developed to the developing world. Advocates of offshore banking often characterize government regulation as a form of tax on domestic banks. who fear their assets may be frozen. Interest is generally paid by offshore banks without tax being deducted. Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention.
Offshore banking is often linked to other structures. • • DISADVANTAGES: . which may have specific tax advantages for some individuals. arguing with Charles Tiebout that tax competition allows people to choose an appropriate balance of services and taxes. claim this competition as a disadvantage. however. arguing that it encourages a "race to the bottom" in which governments in developed countries are pressured to deregulate their own banking systems in an attempt to prevent the off shoring of capital. or who feel that they can illegally evade tax by hiding the interest income. such as offshore companies. • Some offshore banks offer banking services that may not be available from domestic banks such as anonymous bank accounts. Many advocates of offshore banking also assert that the creation of tax and banking competition is an advantage of the industry. trusts or foundations. Critics of the industry. higher or lower rate loans based on risk and investment opportunities not available elsewhere.until the tax return is agreed.
Those who had deposited with the same banks onshore received all of their money back. In 2009 The Isle of Man authorities were keen to point out that 90% of the claimants were paid. Both offshore and onshore banking centers often have depositor compensation schemes.• Offshore bank accounts are less financially secure.2% in December 2009. In a banking crisis which swept the world in 2008 the only savers who lost money were those who had deposited their funds in offshore branches of Icelandic banks such as Kaupthing Singer & Friedlander. Onshore depositors have been refunded in full regardless of what the compensation limit of that country has stated thus banking offshore is historically riskier than banking onshore. .000 for most other categories of depositor and point out that potential depositors should be aware that any deposits over that amount are at risk.8% in September 2009 and 15.000 of net deposits per individual depositor or £20. In reality only 40% of depositor funds had been repaid 24. although this only referred to the number of people who had received money from their depositor compensation scheme and not the amount of money refunded. For example The Isle of Man compensation scheme guarantees £50. However only offshore centers such as the Isle of Man have refused to compensate depositors 100% of their funds following Bank collapses.
have been accused of helping various organized crime gangs. offshore banks and tax havens. terrorist groups. through money laundering. as previously sheltered income is brought back into the mainstream economy. 2001.• Offshore banking has been associated in the past with the underground economy and organized crime. • • . However. so physical access and access to information can be difficult. simple savings accounts can be opened by anyone and maintained with scale fees equivalent to their onshore counterparts. Following September 11. by phone or by mail. because of the costs of establishing and maintaining offshore accounts. offshore banking is a legitimate financial exercise undertaken by many expatriate and international workers. and other state or non-state actors. Accounts can be set up online. and therefore costly to visit. Historically. Offshore private banking is usually more accessible to those on higher incomes. Offshore jurisdictions are often remote. The tax burden in developed countries thus falls disproportionately on middle-income groups. tax cuts have tended to result in a higher proportion of the tax take being paid by high-income groups. However. along with clearing houses. Yet in a world with global telecommunications this is rarely a problem for customers.
The intent was to seize upon the frustration of UK and European residents fed up with oppressively high rates of taxation and insufficient safeguards to privacy and confidentiality in their home countries. thus becoming offshore banking jurisdictions and offshore financial centers. This became particularly popular in the small island nations of the Caribbean which is what many tend to associate with offshore banking jurisdictions. other small island nations and jurisdictions seized upon the opportunity and began strengthening regulations regarding banking practices and client confidentiality in the hopes of attracting foreign depositors. These offshore banking institutions and new offshore financial centers gained instant notoriety and popularity. financial and asset protection strategy but this is often much more exaggerated than the reality. As word spread across Europe and indeed throughout the world. Several years ago a group of like minded bankers and government officials decided to offer an offshore remedy of lower taxation and promises of anonymity and confidentiality. HISTORY OF OFF-SHORE BANKING The origins of the offshore banking industry are found in a group of islands off the northwest coast of France: the Channel Islands.• Offshore bank accounts are sometimes touted as the solution to every legal. Investors and depositors seeking politically . The offshore banking industry was born.
. however. OFF SHORE FINANCIAL CENTRES: In terms of offshore banking centers. offshore banking is really just the practice of banking in another country.and economically stable jurisdictions found their way to these offshore financial centers and this practice continues today. the global market is dominated by two key jurisdictions: Switzerland and the Cayman Islands. although numerous other offshore jurisdictions also provide offshore banking to a greater or lesser degree. Although an abbreviated and perhaps oversimplified version of history. these are. Austria. in terms of total deposits. the roots of the modern offshore banking industry. Similar to offshore companies. fundamentally. the term is generally associated with "tax haven" jurisdictions characterized by low or zero taxation on interest. dividends. Over time this term has evolved to include other onshore ﾝ popular banking jurisdictions such as Switzerland. royalties and foreign derived income as well as having some degree of banking confidentiality. In particular. Guernsey and the Isle of Man are known for their well regulated banking infrastructure. low taxation and security. Lichtenstein. Jersey. Luxembourg and more recently Asian jurisdictions such as Singapore and Hong Kong These jurisdictions gained considerable popularity for the same reasons as the small island offshore financial centers: they implemented sound banking practices codified in law and regulations guaranteeing confidentiality.
Malaysia Liechtenstein Luxembourg Malta Macau Mauritius Monaco Montserrat Nauru . No new Exempt Company certificates are being issued from that date. as difficult to properly regulate and liable to give rise to financial scandal. List of offshore financial centers: Offshore financial centers include: • • • • • • • • • • • • • • • • • • • • • • • • Antigua and Barbuda Bahamas Barbados Belize Bermuda British Virgin Islands Cayman Islands Channel Islands (Jersey and Guernsey) Cook Islands Cyprus Dominica Gibraltar is no more an offshore centre since 30 June 2006.Some offshore jurisdictions have steered their financial sectors away from offshore banking. Ghana Hong Kong Isle of Man Labuan.
private jets and criminals of all kinds. an offshore bank is merely a bank domiciled in a country other than that of the person's country of residence. • Offshore banks are only used to evade taxes Fact: Popular offshore banking jurisdictions often provide a number of benefits over onshore banks including lower administration costs. It is important to note that just like an offshore company. Hollywood has also done a good job of associating offshore banking with cigarette boats.• • • • • • Panama Saint Kitts and Nevis Seychelles Singapore Switzerland Turks and Caicos Islands OFFSHORE BANKING FACTS Offshore banking and offshore banks are often misunderstood and intentionally maligned by governments of high taxing jurisdictions. the ability to . domicile or citizenship. higher interest rates. Let us look at some myths and facts about offshore banking with an unbiased and historical perspective. these offshore jurisdictions and offshore banks are very different than what typically conjures in the mind. In reality.
Offshore banks have strict account opening procedures and follow internationally accepted best practices for screening new applicants as well as ongoing due diligence to monitor account activity. drug dealers. etc. in these two countries. • Offshore banking is only conducted by money launderers. Let us also maintain a proper perspective on this. particularly through securities firms. the ability to facilitate international business transactions. offshore banking provides increased asset protection from potential extraneous lawsuits. These same unwanted elements have been "offshore" banking in the US and UK for many years due to the lax restrictions on foreign deposits.deposit and transact in multiple currencies. Fact: There is no question that offshore banks have been abused in the past by some of these unwanted elements. • Offshore banks are less secure than onshore banks. . sophisticated private banking. access to otherwise unavailable international investments. increased privacy. unstable economic conditions. unlawful seizure. unstable governments. The days of showing up to the bank with a bag full of cash are long over however. etc. weapons smugglers and terrorists. Additionally.
we often field questions regarding these issues and find it necessary to explain a few simple strategies often utilized. Many have lending practices (reserve requirements.Fact: Depositors need to consider all factors when choosing a banking jurisdiction. The latest wave of bank failures around the world were mostly contained in the major "onshore" banking centers due to loose reserve requirements and investment banking practices. These strategies may . Many of these offshore banks and banking jurisdictions have histories far superior to that of banks in their own country. Many offshore banks make the bulk money off of traditional commercial banking rather than investment banking and lending as well. however. risk tolerance. OFFSHORE BANKINS STRATEGIES We generally leave the offshore banking business and questions about potential uses to our offshore partner banks. etc. The offshore banks in traditional offshore banking jurisdictions fared much better on the whole.) that are much stricter than that of the banking institutions in their big "onshore" countries. None of the information in this section and indeed in this website should be construed as tax advice in your home country.
It is generally a simple concept. a back to back loan may be an option. You deposit funds with the bank in one currency and the bank issues a loan in another currency using your deposit as collateral. In practice. these loans have several uses which have contributed to their popularity. A situation arises and you find your onshore business is in need of a cash infusion. Back to Back Loan Back to back loans are generally intended to hedge against changes in currency valuations. The bank loans the funds to you solving your cash flow problem and allowing you to show the cash as a liability on your books This may be an instance when you actually prefer to pay .or may not be legal in your home country. You deposit funds at the bank and using your deposit as security they draft a loan agreement at an interest rate and term decided by you. You may be able to structure a "back to back"ﾝ loan with your offshore bank. For clients looking to repatriate funds from an offshore account without having to "cash out". We can only advise on legal uses in the countries where we establish corporations and bank accounts on behalf of our clients. Scenario #1 (Business Loan) You have an offshore company and bank account with funds you have been accumulating over time. The concept is relatively simple.
especially if you have the good fortune of being in the highest tax brackets. As with the business loan. These loans may be kept "topped up"ﾝ to 100% of the value of the home as well. Any searches for assets would turn up a fully mortgaged home rather than one owned free and clear. Many high net worth individuals prefer not to own property and investments in their own names and seek arrangements which make their assets more difficult to locate for potential adversaries. Your interest payments may be tax deductible expenses allowing you to save taxes in future years. Scenario #2 (Property Mortgage) You are building a new house or buying a piece of property and need cash. This is a popular strategy in these cases. Your offshore bank can draft a back to back loan as a mortgage at an interest rate and term of your choosing (usually at a fairly high rate within reason) allowing you to purchase the property and maintain a lien on the property by filing the mortgage.a higher rate of interest. . interest payments are often tax deductible providing future income tax savings which may come in handy.
OFFSHORE BANKING – A LUCRATIVE PROPOSITION BY C. Murasoli Maran's cherished goals? ONE of the significant features of the Exim Policy is the proposal to permit offshore banking units (or overseas banking units) in Special Economic Zones (SEZs). It refers to the banking operations that cover only non-residents. Geographically. because it has a stable economic and political performance. Offshore banking refers to the international banking business involving non-resident foreign currencydenominated assets and liabilities. and does not include domestic banking. A more important relaxation is the exemption of the offshore banks from restrictions on operations. a vast market.JEEVANANDAM Financial experts have been pleading to establish an offshore banking centre in India. technical manpower that could find employment in these centers. Offshore banking units in these centres can carry on their activities . The question is: Will these offshore banking units fulfill Mr. India provides distinct advantages in attracting offshore banking units. An offshore banking centre is a place where deliberate attempt is made to attract international banking by offering many concessions in the form of taxes and levies imposed at lower rates.
issue of short-term and medium term instruments. and deferring tax by floating subsidiary units in such centres and delaying . which provides a link between eurocurrency markets and the final borrowers. The deals are mostly between banks or with large borrowers or multinational corporations. what distinguishes it from the mainstream euro market is that it was specially set up by host countries to promote international banking. Offshore banking is an extension of the euro-currency concept to the East. but generally provide wholesale banking services — project financing. MNCs prefer transacting in offshore financial centres because of certain apparent advantages: Avoidance of high tax incidence. They provide essential time zone links that are truly world-wide. They do not carry retail business. Offshore banking units are branches of international banks or other subsidiaries or affiliates.with international enterprises or investors without conflicting with the domestic fiscal and monetary policy. such as negotiable certificates of deposits and capital notes — as well as merchant banking activities in foreign currency denominated bonds and equity shares. freedom from exchange control. and ensure that the market operates 24 hours a day. While offshore banking is an integral part of the euro-market. maintenance of secrecy of deals due to non-interference from government and regulatory authorities. syndicated loans.
Offshore banking centre in India Financial experts have been pleading to establish an offshore banking centre in India. Indian Bank. Bank of Baroda and Union Bank of India jointly floated a deposit taking company. With multi-currency deposit bases. Participation of the Indian banks Few Indian banks.their remittance of profits to the parent company. Indian Overseas Bank. and so on. IBU International Finance. India provides distinct advantages in attracting offshore . The benefits for the Indian banks from these ventures are: Sizeable profits — as these ventures involve relatively low operating costs. have set up offshore banking units for deposit taking and final lending at Bahrain. Geographically. the banks would be able to serve better the needs of their customers who have set up joint ventures abroad in the form of foreign currency finance. Bank of India and Bank of Baroda. Cayman Islands. such as State Bank of India. in Hong Kong for both offshore and onshore banking. Colombo. The banks would strengthen the country's balance of payments through repatriation of profits from the venture. Hong Kong. when it would be taxed.
profit taxes imposed on the banks operating in the area. For a larger country such as India. this may not form a significant portion of the total income. For smaller countries. Another advantage is that the Indian market would open a little before the Tokyo market closes. and many corporations are granted permission to seek overseas finance. thus providing a vital time link for international money market dealers. establishing an offshore unit will help tap the resources: Exporters would benefit in terms of finer margins on loans and better foreign exchange rates available via an offshore banking unit.banking units. The benefits of multi-currency operations which. minimize currency fluctuation risk will be an added advantage. Salaries paid by offshore banks and local expenditure incurred by them contribute to the economy's welfare. however. to an extent. because it has a stable economic and political performance. a vast market. the benefit would be greater. In an era where many Indian corporations are functioning abroad. . and close before New York opens. India may earn revenue in the form of license fees. It may also get the benefit of banks' funds in the form of capital and liquidity requirements. technical manpower that could find employment in these centers.
Offshore banking provides scope for tax evasion by residents. The offshore banking centers will provide opportunities to train the local staff which will. . But establishing offshore centers also comes with a price: The supervision and regulation of offshore banks may involve substantial costs. particularly in the absence of exchange control. The offshore banking units would help channelize nonresident Indian investments. it was found that residents place deposits with offshore banks and take loans of the same amount. contribute to faster economic growth. The country can gain improved access to the international capital markets. since it is difficult to draw a line always between the offshore and onshore operations. For instance. in Hong Kong. Encouraging offshore banking may result in the diminution in autonomy of domestic monetary policy. The domestic financial system may become more efficient through increased competition and exposure of the domestic banks to the practices of offshore banks. in turn. while the income from interest on deposits is not taxed. The interest on loan would be a deductible expenditure for taxation. Setting up offshore banking centers would trigger enforced development of more advanced communication facilities — a must for their functioning.
The Sodhani Committee on Foreign Exchange Reforms (1996) has recommended allowing Indian banks and financial As against the general recommendation of permitting offshore banking units only at Mumbai. abundant and well-trained manpower and presence of many international banks. This is a wise move since both offshore banking centers and SEZs have many things in common as regards administration and purpose. both Indian and foreign. Maran's cherished goals? The RBI is expected to bring out regulations regarding setting up these units in India. The question is: Will these offshore banking units fulfill Mr. A lot depends on how far these regulations are liberal and pragmatic. The city has all the requirements — goods infrastructure in the form of telecommunications and services. CASE STUDY . For long. The establishment of offshore centers in India was foreseen when the Foreign Exchange Regulation Act (FERA) was replaced by the Foreign Exchange Management Act. Article 10 of FEMA included offshore banking units as one of the authorities to whom the RBI could delegate powers for dealing in foreign exchange. the present proposal is to permit them at Special Economic Zones. 1999 (FEMA). Mumbai was considered suitable for establishing offshore banking here. Offshore banks may prove to be harmful competitors to the local banks and may inhibit their growth. already engaged in international banking.
OCRA Worldwide is not an offshore bank. Worldwide investment and business perspective. The objective of our website is to advise potential clients of the "basics" and to provide answers to the more common questions relating to offshore banks and establishing and administering an offshore bank account. we are a licensed international and offshore corporate and trust services provider. However. Offshore Bank Account Opening Procedures & Maintenance All the offshore and international banks we work with . Most importantly. Tax-efficiency. Confidentiality. a significant percentage of the companies and trusts we administer establish accounts with international and offshore banks rather than domestic banks because often their characteristics include: • • • • • • Familiarity with offshore and international business. Lack of foreign exchange controls.For over 25 years OCRA Worldwide has been assisting clients to establish and administer offshore and international bank accounts and has developed useful expertise in identifying and working with suitable offshore banks and international banks. Access to special investment opportunities.
Risks assess each and every client. Identify the source of funds paid into accounts to ensure that such funds are not derived from criminal activity and to document evidence relating to source of funds. This means that offshore account opening procedures can be onerous and time consuming. Consequently the offshore and international banks we work with will seek to: • • • • • Obtain evidence of our clients' identities. Monitor banking transactions to identify and forestall money laundering. the culture and business ethos of such offshore banks must not be flawed. apart from our own desire to only work with reputable partners. so do we. Typically offshore banks will require some or all of the following information to open and operate an offshore account for a simple offshore company which is owned by individuals (rather than a corporation. trust or other form of entity): .regard the prevention of money laundering and terrorist financing to be of the utmost importance. Develop a documented understanding of our client's banking and business activities. OCRA Worldwide does not seek to work with offshore banks which have low standards of compliance as.
Acceptable proof of residence would typically include an original bank statement or credit card statement. Acceptable proof of identity would normally include a passport copy certified in a prescribed manner by an officer of the bank.• • • • • • • • Certified proof of identity of owners. An initial meeting with potential bankers possibly with an OCRA Worldwide Manager. contract or similar. the bank will seek to obtain documentary evidence relating to the source of such funds in the form of a bank statement. e. copies of contracts. the geographic spread of the proposed business and the amount of money that will be left on deposit at the bank. directors. Information relating to the expected annual income or asset base of the offshore company. account signatories and all parties connected with the offshore company. enhanced due diligence will be undertaken if the affairs of the offshore company are complex or if it. is associated with what banks or regulators perceive to . In addition. the number of transactions per month. if a million dollars is to be paid into an offshore company's account. a notary or an authorized OCRA Worldwide Manager. or any party connected to it. audited accounts. Documented evidence relating to source of funds. Proof of residence of all parties associated with the offshore company. A detailed description of the proposed business activity. often supported by documentation such as brochures.g. business plans and details of trading partners or investments. Some banks require clients to visit them on an annual basis.
For example. . its officers must control any underlying bank accounts. stringent enhanced due diligence is typically applied to business emanating from countries which were former members of COMECON. Why OCRA Worldwide controls its client company and trust bank accounts When OCRA Worldwide provides Directors. Banks do not react well to unexplained account activity. Maintaining an efficient relationship with a bank is a twoway process. Managers and officers to a client company or when OCRA Worldwide provides trustee services. or countries associated with the production and distribution of illegal drugs or infamous for corruption. so if a company's trading pattern is set to change or a large or unusual transaction is about to occur it always wise to pre-warn the bank and provide documentation such that the bank can understand and maintain evidence of the wholesomeness and reason for the proposed transaction. Offshore Bank Account Maintenance Once an offshore account is opened it is important to keep the offshore bank briefed and current with the affairs of a client company or trust.be high-risk. counties classified as "non co-operative" by the Financial Action Task Force.
Put more simply. if they did not control the company's or trust's bank account? If our clients were to exercise control over bank accounts it could be perceived that they are controlling the affairs of the company or trust even though they may not be officers or trustees. would any reasonable businessperson. then a regulatory authority may deem that our clients are effectively managing and controlling the company or trust in their countries of residence or more radically may seek to pierce the corporate veil or judge a trust to be a "sham". aware of the duties and liabilities of directors or trustees. . There is an inherent possibility that if we allowed clients to control bank accounts.Why? • • There are various legislative and regulatory requirements and precedents relating to the duties of directors and trustees relating to their obligations to exercise effective management and control over a company's or trust's assets and affairs. Statutory authorities in high tax and other areas often seek to apply "the management and control test" to assess whether the profits/income earned by an entity controlled in a low tax area should be taxed as if they were resident in the high tax area. be prepared to act as a director of a company or act as a trustee.
iii. 2002 In exercise of the powers conferred by Section 6. ii. unless the context requires otherwisei. . ‘Offshore Banking Unit’ means a branch of a bank in India located in the Special Economic Zone and holds an authorisation issued under clause (a) of sub-section(1) of section 23 of the Banking Regulation Act. 1999 (Act 42 of 1999). the Reserve Bank of India makes the following Regulations.Definitions: In these Regulations. Short title and commencement i. ‘Regulations’ means the Regulations made under the Act.RB Dated September 7. ii. These Regulations shall be called the Foreign Exchange Management (Offshore Banking Unit) Regulations. 1999 (Act 42 of 1999) and all other powers enabling it in this behalf. 1949 (10 of 1949). 2002 They shall come into force from the date of their publication in the Official Gazette. 2. Section 8.REGULATION IN RBI Notification No: FEMA71/2002. ‘Act’ means the Foreign Exchange Management Act. namely: CHAPTER I 1. Section 7. Section 9 and Section 47 of the Foreign Exchange Management Act.
the Offshore Banking Unit shall not be regarded as an authorised dealer for the purpose of the Act. rules or regulations made thereunder. an Offshore Banking Unit shall not conduct any activity or undertake any transaction with residents in India.iv.II PART 1 3. PART II Transactions which may be undertaken by an Offshore Banking Unit 6. THIS INFO IS 4M www. v. Notwithstanding the status. within the ceilings and subject to the conditions specified in the Regulations governing such transaction. CHAPTER. Words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act. 7. Save as otherwise provided in these Regulations or with the permission of the Reserve Bank. as an authorised dealer. and save as otherwise directed by the Reserve Bank. An Offshore Banking Unit may undertake transaction in foreign change with a unit located in Special Economic Zone to the extent the latter is eligible to enter into or undertake such transaction. 1949 shall be only in foreign exchange and shall be subject to these Regulations and the conditions of licence issued under the said Act.in THIS INFO IS 4M www. Save as otherwise provided in these or any other Regulations or directed by the Reserve Bank. Engagement of an Offshore Banking Unit in any of the forms of business specified in subsection (1) of section 6 of the Banking Regulation Act.com . 8. of the bank setting up the Offshore Banking Unit.rbi. nothing contained in any other Regulations shall apply to an Offshore Banking Unit.org.hinduonnet. 5. ‘Special Economic Zone’ means the Special Economic Zone notified by the Government of India. 4. An Offshore Banking Unit may undertake foreign exchange transactions with any authorised dealer in India only on principal-to-principal basis.
BIBLIOGRAPHY www.com www.hinduonnet.sterlingoffshore.org.com www.google.com .in www.rbi.
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