Gian Gandhi evaluates recent developments within the jurisdiction’s financial services sector.
In THE POST 9/11 era of intense regulation and control, Belize has pursued an aggressive and proactive approach with regard to compliance with enhanced standards set by supranational organisations such as the Financial Action Task Force (FATF), the International Monetary Fund ( IMF) and the Organisation for Economic Cooperation and Development (OECD).
Despite initial setbacks, the Belize offshore finance sector has grown steadily over the years. With 31,500 active international business companies on the Register and 900 ships flying the Belize flag around the world, Belize has gained a respectable place among the international finance centres and has become a major player in the Caribbean.
Belize offers a variety of financial services to international investors. These include formation and management of international business companies (IBCs); the formation and management of offshore trusts; provision of offshore trustee services; international asset protection and management; international insurance services; international collective investment schemes; and international banking services.
There are at present 52 licensed registered agents for IBCs; 29 trustee services providers; nine international insurance services providers; and seven licensed providers of international banking.
The list of licensed service providers continues to grow even though there are stringent requirements for obtaining a licence.
Open ships registry
In addition to the traditional financial services, Belize has established an open ships registry – the International Merchant Marine Registry of Belize (IMMARBE). Today, 900 vessels are registered with IMMARBE and there is a network of IMMARBE offices around the world. Belize has ratifi ed most of the International Maritime Organisation safety conventions. In 2005 Belize ratified the International Convention for the Conservation of Atlantic Tunas (ICCAT) and six other international conventions including nine ILO conventions relating to shipping.
In 2004 Belize issued comprehensive ship security regulations, containing special measures to enhance maritime security. Belize was recently awarded the Quality Shipping in the 21st Century (QUALSHIP 21) Award by the US Coast Guard.
The Director General of the International Financial Services Commission also acts as the Registrar of Merchant Shipping.
For better control and efficiency, the regulation of Belize’s offshore services industry is shared between the Central Bank of Belize and the International Financial Services Commission (IFSC). While the banking sector (including international banking) is regulated by the Central Bank, the rest of the international financial services fall within the jurisdiction of the IFSC.
Established in 1999, the IFSC is the premier regulatory body for the offshore industry in Belize. Membership of the IFSC includes representation from both the public and private sectors.
The IFSC’s mandate includes promoting and developing Belize as a centre for international financial services, protecting and enhancing the reputation of Belize as an offshore financial centre and providing appropriate supervision and regulation of international financial services.
International (or offshore) banking is regulated by the Central Bank of Belize. The Bank has deliberately pursued a policy of conservatism in issuing banking licences.
There are seven licensed international banks in Belize – a number that is expected to grow as the services industry gathers momentum.
The Central Bank issues two classes of international banking licences: the unrestricted A class licence and the restricted B class licence.
The holder of an A class licence may transact any international banking business without restriction, but a B class licence holder may transact only such business as may be specifi ed in the licence. B class banks are private banks formed by a group of people who use the bank as an investment vehicle.
The Offshore Banking (Amendment) Act 2002 strengthened prudential standards for offshore banks to meet the Basel Core Principles for effective banking supervision. It also repealed the secrecy provisions of the Act in the interest of transparency and international financial stability.
In 2005 the Belize government enacted a spate of legislation to strengthen its regulatory framework for the offshore sector. This included the Credit Unions (Amendment) Act, the Free Zones Act, Mutual Legal Assistance in Criminal Matters Act and the Exchange Control (Amendment) Regulations.
Credit Unions (Amendment) Act 2005
In keeping with the recommendations of the International Monetary Fund (IMF) and the Caribbean Regional Technical Assistance Centre (CARTAC), Belize amended the Credit Unions Act to provide for the supervision of credit unions by the Central Bank of Belize.
The Act is designed to achieve threemain objectives.
Free Zones Act 2005
Free zones are often criticised as conduits for money laundering. In 2005 Belize took a giant step forward by enacting a new Free Zones Act for better regulation and control of free zones. It provides, among other things, that certain businesses cannot be conducted in a free zone without a licence from the respective regulatory body as required under the laws of Belize. These controlled businesses and services include banking services, financial business, international financial services, internet or computer gaming services, foreign exchange business, and radio and telecommunications services.
The Central Bank has an increasing role in the supervision of free zones.
Mutual Legal Assistance in CriminalMatters (Belize/USA) Act 2005
This legislation was enacted to give legal effect in Belize to the provisions of the Mutual Legal Assistance in Criminal Matters Treaty between Belize and the United States which was signed on 19 September 2000. Belize has provided critical assistance to the US authorities in investigating and prosecuting money laundering and other financial crimes.
Belize has also recently signed and given legal effect to the Caribbean Treaty on Mutual Legal Assistance in Serious Criminal Matters.
Abolition of Casa de Cambios 2005
Cambios or Casa de Cambios (money exchange houses) were established in Belize in 2001 to regulate the exchange of foreign currency outside the normal banking system. However, cambios were attacked by the IMF and the FATF as facilitating money laundering and possibly terrorist financing. In 2005, by the Exchange Control (Amendment) Regulations, Belize abolished cambios by repealing the provisions relating to the licensing of such exchange houses.
Belize now intends to push through Parliament a further Bill designed to promote and regulate its offshore industry.
Revised Money Laundering Prevention and Anti-Terrorism Bill 2005
With technical assistance from the IMF, Belize is presently studying a new and strengthened Money Laundering Prevention and Anti-Terrorism Bill. The Bill consolidates the current anti-money laundering and combating the financing of terrorism (AML/CFT) framework which is rather fragmented. The new Bill will expand the scope of the money laundering offence, it will introduce the financing of terrorism as a specific offence; and provides for the identification, restraint and forfeiture of the proceeds of all serious crimes, including the proceeds from money laundering.
With this expansion, there will be two investigating agencies; the police and the Financial Intelligence Unit (FIU).
The FIU will continue to have the investigative powers in relation to the financial crimes, as set out in the FIU Act, while the police will also be given powers to investigate money laundering offences as well as the powers to enable the forfeiture of the proceeds of all serious crimes.
Trusts (Amendment) Bill 2006
The Trusts Act of Belize which was first enacted in 1992 provides for optional registration of trusts. There is no compulsory registration of trusts, whether for domestic or offshore trusts.
Under the existing law a trust other than a unit trust can be created by mere oral declaration but this leaves a lacuna in the law insofar as the fight against money laundering is concerned.
The Trusts (Amendment) Bill 2006 provides for the compulsory registration of offshore trusts and establishes an Offshore Trusts Registry. While some basic information about the trust will be kept at the Registry, more detailed information will be kept by the Trust Agent and will be available to the Registrar, when required.
Limited Liability Companies Bill 2005 (LLCs)
This Bill provides for the establishment of US type limited liability companies (LLCs) and will be a useful addition to Belize’s offshore industry legislation. The Bill takes into account not only the Caribbean experience, but also the US LLCs, which are acclaimed as being the best in the world.
The Bill is currently undergoing the consultative process and is expected to be introduced into the National Parliament before long.
A bright future
The government of Belize is committed to diversifying the economy by expanding the services sector without diluting supervisory standards. Belize is increasingly becoming a favourite jurisdiction for international investors who find the English-speaking country in the heart of Spanish-speaking Central America a haven of peace and stability, with a forward-looking government and user-friendly legislation. The volume of business is expected to grow further in the years ahead, placing Belize prominently on the world map.
Gian C Gandhi, Barrister-at-Law, Director General of the Belize International Financial Services Commission, Belize