Barbados: Barbados – A Unique Offshore Domicile

Last Updated: 29 November 2000

Barbados, has traditionally been considered as a tropical paradise for tourists. The wonderful weather year round, white sandy beaches, wide and varied attractions and interest for our tourists coupled with the warm and friendly hospitality exhibited by Barbadians, has made this island, the choice of many visitors.

Increasingly, Barbados is being considered as a premier international financial services jurisdiction. The country has enjoyed spectacular growth from marketing itself as an attractive, reputable and well regulated domicile for international financial services. Its development and progress has been assisted by modern and appropriate legislation catering specifically to the unique needs of the industry.

Infrastructure

The most easterly of the Caribbean islands, Barbados is located in a convenient time zone (- 4hrs GMT). The island has a modern airport and is serviced by several major international airlines namely, BWIA West Indies Airways, Air Jamaica, British Airways, Virgin Atlantic, Air Canada and American Airlines. There are regularly scheduled flights to New York, Miami, Toronto and London. The country has had a long history of political and economic stability complemented by a modern telecommunications system and supporting infrastructure. There is a high level of literacy and the workforce is highly educated and well trained. Special tax and other concessions are available for skilled non-residents working in the international business industry.

The sector is adequately supported by a solid base of professionals providing legal, accounting and management services. There are four major international banks operating in Barbados, with three of these banks being Canadian.

Successive governments have indicated their willingness to support the development of the international business and financial services industry, with The Ministry of Industry and International Business having broad responsibility for the sector.

Barbados distinguishes itself, from other international financial services jurisdictions, as being a "treaty" country. It has to date entered into a number of double-taxation and bi-lateral investment treaties with several major countries including the United States of America, Canada and the United Kingdom, amongst others. The presence of treaties encourages trade and investment activities, provide incentives for businesses and promote business contacts. The combination of tax treaties and fiscal incentives provide distinct advantages to the international investor.

Offshore Banking

Offshore Banking in Barbados is governed by the Offshore Banking Act 1979. The Act provides for the licencing and regulation of offshore banking activities and is administered by the Central Bank of Barbados with the Minister of Finance responsible for the issuance of licences. An offshore bank cannot operate in Barbados unless it is licensed and extensive and exhaustive investigations are carried out on applicants before a new licence is issued. At present there are only 48 offshore banks licensed on the island and this is testimony to the importance that the regulators have placed in maintaining the country's reputation as a high quality international financial services centre. The Offshore Banking Act has undergone a comprehensive review over the last 24 months and is expected to be replaced by new and modern legislation shortly.

The major users of offshore banking services are those international corporate customers (such as International Business Companies, Foreign Sales Corporations, Societies with Restricted Liabilities, other Offshore Banks and Exempt Insurance Companies) operating in and from Barbados. The products and services utilized by this group cover deposit taking, international payment services, foreign exchange transactions, commercial loans, investment management, safekeeping and custodial services and these have been traditionally provided by the major Canadian and British financial institutions through their local affiliates and subsidiaries.

Offshore banking also encompass the global private banking market with services targeted specifically to High Net Worth Individuals (HNWI) and to a lesser extent to expatriate employees. Such services include the full range of multi-currency banking products, credit cards and loan products including mortgage financing. It also includes the provision of trust administration services and asset management services, ranging from the offering of global mutual funds to full discretionary investment portfolios. The private banking market is considered to be one of the fastest growing segments of the offshore market.

Anti-money Laundering measures

The Government and the banking community are extremely conscious of their responsibilities in the fight against money laundering. The Central Bank has distributed anti-money laundering guidelines to be used by all offshore banks. The guidelines require banks to be diligent, especially with respect to large transactions, and to apply the "know your customer" principle. The Money Laundering (Prevention and Control) Act, 1998 was enacted by Parliament in December 1998. The Act provides for the proper identification and verification of customers and the need to ensure that adequate financial records are maintained. This Act also provides for the establishment of an Anti-Money Laundering Authority to which financial institutions, including offshore banks, are obligated to report all unusual transactions. Responsible financial institutions have always avoided illegal business activities and the enactment of this legislation is merely an affirmation of existing business practices.

Impact of the Internet

The use of the internet has impacted significantly on the offshore banking industry globally. The internet has provided a medium for offshore financial institutions to market their range of products and services to a global marketplace on a cost-effective basis. In addition, the capability that allows customers to access their account and other information, and which until now was available only to large international institutions, in now universally available and affordable. For the expatriate or HNWI customer, who is increasingly mobile, this is a convenient feature; allowing them to have access to their accounts, investments, and information online and in real time, 24hrs a day from any place in the world, without ever having to visit the financial institution in person.

While the benefits to the customer can be readily determined, the use of the internet, unfortunately, has created challenges for the traditional financial institutions to retain and grow their customer bases. Competition has increased with new players, both financial and non-financial, entering the growing global offshore private banking market. Offshore financial institutions will be constantly challenged to deliver cost-effective products and services aligned to the individual customer's requirements. The market driven by offer is rapidly becoming a market driven by demand.

Our Services

CIBC West Indies Offshore Banking Corporation, subsidiary of the Barbados' headquartered CIBC West Indies Holdings Limited, is part of the Canadian Imperial Bank of Commerce, one of the leading financial institutions in Canada and amongst the largest banks in North America. Canadian Imperial Bank of Commerce's presence in the Caribbean dates back to 1920 when it established a branch in Bridgetown, the capital of Barbados. Subsequently the bank expanded its representation, both in Barbados and the wider Caribbean. Today there are a number of subsidiaries across the region providing a wide range of services including international banking, investment, trust and advisory services.

CIBC West Indies Offshore Banking Corporation, licensed under the Offshore Banking Act of Barbados, provides from the island a comprehensive range of financial services, including the provision of current accounts, international funds transfer, fixed deposits, safe keeping and custodial services, and foreign currency mortgages to non-residents for the purchase of properties in Barbados. Trust services and company formation and administrative services are provided through the Trust and Corporate Services Department of CIBC Trust And Merchant Bank (Barbados) Limited, a company licensed under the Financial Institutions Act of Barbados. CIBC has the added advantage of being able to access the international network of its Canadian parent and this affords the strength and security of a well capitalized and recognized institution along with the capability to provide a wider range of financial services to our clients.

The bank is dedicated to establishing long-term relationship through the provision of professional, personalized services to all its customers. CIBC's client base consists of both corporate and individual customers from around the world. The majority of the corporate customers are established under the various international financial services legislation enacted in Barbados including, the International Business Companies Act, the Exempt Insurance Companies Act, Foreign Sales Corporations Act and the Offshore Banking Act. The bank is determined to expand its presence within the international financial services sector in Barbados through the delivery of value-added service, while advancing the vision and goals of our customers.

International Developments

International Financial Services Centres are currently under threat as there is an increasing trend towards transparency in international financial activities. Following the issue of the 1998 Report on Harmful Tax Competition, the OECD is continuing its work in identifying those jurisdictions that function as tax havens and to 'influence' them in eliminating those perceived harmful practices that have consequential effects on the world economy. The Financial Action Task Force (FATF) has also published the Report on Non-Cooperative Countries and Territories which sets out criteria designed to identify non-cooperative jurisdictions in the international fight against money laundering. The criteria is consistent with the international money-laundering standards established in the Forty FATF Recommendations.

Conclusion

Barbados is fast developing as a major international banking centre. It is expected that the existence and expansion of its tax treaty network, and the appropriateness of other fiscal incentives would continue to be the major catalyst in attracting new business to Barbados. The transparency of international financial services will grow in popularity not only with regulators both onshore and offshore, but with the support of the major international financial institutions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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