In a recently -published book under the rather provocative title The Washing Machine: Money, Crime and Terror in the Offshore System, the author, Nick Kochan, impliedly blames “the loosely regulated offshore world” (to use his words) for creating “legal and political fictions to allow organised criminal groups to cover up crooked deals”. Had Kochan visited the regulatory regime in Belize and some other reputable jurisdictions, he would have hesitated before making such a sweeping statement.
The cornerstone of Belize’s offshore sector policy has invariably been to develop the industry without sacrificing or diluting regulatory standards. In keeping with its mandate to promote and protect the reputation of Belize as an international financial centre, the Belize International Financial Services Commission (IFSC) has recently complemented its already impressive suite of legislation with certain new measures. The following are some of the highlights:
International Financial Services Commission (Amendment) Act, 2007
This Act, which came into force on 30 May, 2007, vastly enlarges the jurisdiction of the IFSC to issue licenses for the carrying on of international financial services. The original mandate of the IFSC was confined to licensing and regulating the formation and management of international business companies and offshore trusts, international insurance services, international asset protection and management, and international collective investment schemes or mutual funds.
Under this new law, the IFSC will also be responsible for licensing:
The Act further provides that every company or other entity incorporated and existing under the laws of Belize shall, if providing, carrying on or transacting any of the international financial services anywhere outside Belize, be deemed to be providing such services from within Belize, and would therefore require a licence from the IFSC. This provision was inserted for the protection of international investors by ensuring that all Belize entities are properly licensed and regulated by the home jurisdiction, wherever they may be operating abroad.
International Financial Services Commission (Licensing) Regulations, 2007
These regulations are complementary to the International Financial Services Commission (Amendment) Act, 2007, and give full effect to the enlarged jurisdiction of the IFSC. They deal with such matters as the procedure for obtaining a licence, the prescribed fees, and capital requirements. The annual licence fees vary from US$2,500 to US$5,000, while the minimum capital requirements range from US$5,000 to US$100,000, depending upon the type of licence required.
Trusts (Amendment) Act, 2007
Belize took a bold new step by providing for the compulsory registration of international trusts to replace a voluntary registration regime. This Act, which came into force on 15 June 2007, establishes an international trusts registry under the auspices of the Belize International Financial Services Commission. It defines an “international trust” (or “offshore trust” or “exempt trust”) as a trust where:
The key features of this law are:
On the whole, the Act strikes a balance between transparency and the need for confidentiality, and has been endorsed by certain major trust service providers.
International Trusts Regulations, 2007
These regulations go hand-in-hand with the Trusts (Amendment) Act, 2007, and set out the procedure and the fees for the registration of an international trust. The International Trusts Registry is now fully functional and, during the first three months of is operation, as many as 90 international trusts have been registered. The Registry is computerised and uses state-of-the-art technology.
Trust and Company Service Providers (Best Practices) Regulations, 2007
These regulations, which came into force on 16 April, 2007, are based on the ‘Statement of Best Practice’ prepared by the Trust and Company Service Providers’ Working Group, which had been set up by the Offshore Group of Banking Supervisors to make recommendations for minimum standards to be adopted as an international standard and implemented on a global basis.
These regulations supplement, but do not supplant, the International Financial Services Practitioners (Code of Conduct) Regulations, 2001, which will continue to apply to all service-providers in the Belize offshore sector .
Under these new regulations, the service-providers must provide for:
A key feature of these regulations is that they are legally enforceable in that a breach there of or non-compliance therewith shall constitute professional misconduct, and shall be punishable by the IFSC.
Money Laundering and Terrorism (Prevention) Bill
Belize has finalised a revised Bill, which makes new and improved provisions for the investigation and prosecution of money laundering, terrorist financing, and other financial crimes, and which will replace the 1996 Money Laundering (Prevention) Act. The new Bill reflects the recommendations of the International Monetary Fund (IMF) and the Caribbean Financial Action Task Force (CFATF) for the further strengthening of Belize’s antimoney laundering regime.
This Bill is expected to be passed into law before the end of 2007.
New Banking Legislation
The Central Bank of Belize, which is responsible for regulating domestic as well as international banks, has prepared revised Bills to augment the prudential standards for banks and financial institutions. The Bills are currently undergoing the consultative process and are expected to be finalised shortly.
Belize currently has a sizeable trust market with over 30 trust providers, including some big names such as Morgan and Morgan Trust Services (Belize) Ltd with headquarters in Panama. However, to give the investors a choice of vehicle for asset management, Belize has prepared a Foundations Bill which is geared to meet the demands of civil law countries, as well as those of common law jurisdictions. The Bill is due to be introduced into the National Assembly (Parliament) as soon as the consultative process is complete.
Limited Liability Companies (LLCs) Bill
Designed to capture the US market, a Bill to provide for the establishment of LL Cs is currently undergoing the consultative process with relevant stakeholders. The Bill takes into account not only the Caribbean experience, but also the US LL Cs, which are acclaimed as the best in the world. This Bill is also expected to be passed into law before the close of 2007.
Why Choose Belize?
Belize is a stable and peaceful democracy in the heart of Central America. It is a well regulated, yet user-friendly, jurisdiction and offers a wide variety of international financial services. The Government of Belize is committed to the sustained growth and development of the offshore sector. Belize has concluded Investment Promotion and Protection Agreements with several countries, and potential investors can rest assured that their investment would be fully protected.
The Constitution of Belize guarantees to all persons certain fundamental rights, including the right to property. There is an independent judiciary to protect the rights of the people, with the Privy Council in London at the head of the judicial hierarchy.
The International Financial Services Commission of Belize further protects investors by regularly issuing warning notices on its website against any unlicensed promotional activities on the internet involving Belize.
Indeed, Belize takes good care of its rapidly growing international financial services industry, and is becoming a choice jurisdiction for offshore investment.
Gian C . Gandhi, Barrister-at-Law, Director General of the Belize International Financial Services Commission