Brian Stuart-Young examines how Antigua has learned from the mistakes made in the major money centres and successfully reshaped its regulatory and business operations.
Antigua and Barbuda is best known for its 365 beaches but, having established its International Financial Centre in 1982, one year after its independence from the United Kingdom, it is now a favourite destination in the Eastern Caribbean for both tourism and international financial services.
Notwithstanding the economic challenges created by a difficult world environment, Antigua and Barbuda received the commitment of both its government and private sector to ensure a financial services infrastructure which can respond to the special business needs and financial services of not only Caribbean but also international client relationships. Learning from mistakes made in major money centres, the jurisdiction has successfully reshaped its regulatory and business operations to herald the dawn of a new day in paradise.
A Regulatory Environment for Investment
The jurisdiction has a robust mutual legal regime which facilitates a transparent process under which information may be exchanged. It was one of the first Caribbean jurisdictions to establish a Tax Information Exchange Agreement with the United States, and has held tax treaties with the United Kingdom and the Caribbean Commonwealth Community for many years. It successfully completed more than 20 tax information exchange agreements by the last quarter of 2010, which made it fully tax compliant with the OECD requirements and which placed it on the OECD’s “white list”.
Mutual legal assistance in anti-money laundering and financing of terrorism matters is also provided for under the Mutual Assistance in Criminal Matters Act (MACMA). The MACMA provides for mutual assistance for all countries that are members of the British Commonwealth, the United States of America and for other countries for which Antigua and Barbuda has signed mutual legal assistance treaties (MLATs). There is no legal or practical impediment for rendering assistance where both countries criminalise the underlying offence.
The jurisdiction also benefits from being a member of the Egmont Group through Antigua’s supervisory authority, Office of National Drug and Money Laundering Control Policy (ONDCP), which assists communications between Financial Intelligence Units to prevent money laundering and the financing of terrorism. The governing legislation for the management of its international financial centre is regularly updated to ensure compliance with international standards.
An important feature of earlier legislation is the prohibition on Antigua’s banks, which provide international financial services, to accept cash deposits. This requirement has eliminated any threat posed by the anonymous nature of cash, making it necessary that all deposits must be made via a banking instrument, either a wire transfer or a bank cheque. In both cases the bank issuing the instrument will have been required to obtain customer information and practice due diligence on the remitting party. Therefore, if any suspicious circumstances should occur in respect of a deposit to an account in Antigua, the beneficiary bank will have a clear path on which it can direct an investigation. This regulatory innovation by Antigua has been well accepted by its international service banks, and welcomed by their correspondent banks.
The regulatory environment of banks providing international financial services is strongly supervised to ensure the safe and ethical depository of foreign currencies and the delivery of wealth management solutions. The jurisdiction undergoes regular peer evaluation by the Caribbean Financial Action Task Force (CFATF) as well as reviews by the World Bank and the IMF, all of which give enhanced scrutiny to the operations of the financial centre.
The supervision of banks is divided between domestic commercial banks, under the Eastern Caribbean Central Bank, and international service banks as well as non-financial institutions such as insurance companies, credit unions and money service businesses, which are licensed and regulated by the Financial Services Regulatory Commission (FSRC) and must maintain internal policies to govern compliance with international standards. The requirements for banks include annual third-party audits of their anti-money laundering (AML) and anti-terrorist financing (ATF) practices which must be submitted to the ONDCP and the FSRC for review.
The jurisdiction has been aggressively emulating the actions taken worldwide to strengthen the regulatory oversight of all financial systems. Annual financial audits are mandatory and are conducted by resident offices of well recognised auditing firms including PriceWaterhouseCoopers, PKF and KPMG.
Correspondent Banking Relations
A key issue for indigenous banks in Antigua and the Caribbean is that these banks have no parent offices located in major financial centres, and therefore must obtain correspondent banking relationships. These Caribbean banks require relations with other banks located in the major money centres, through which they can conduct international cash clearing and transfer services, and are entirely reliant on such correspondent facilities from those banks that provide intermediary services. In an initiative to grow the compliance culture in the region, the Caribbean Association of Indigenous Banks successfully launched The Caribbean AML/CTF Principles for Correspondent Banking, and it demonstrates the commitment of Caribbean owned financial institutions to meet and work with best practices. These Principles, with associated AML/CTF Guidelines, are a core set of standards to which member banks subscribe by having their board of directors agree to adopt and ensure the compliance of their institution. Banks subscribing to these Principles, including those from Antigua, are identified on the CAIB website www.caribbean-principles.com.
Small jurisdictions such as Antigua have few natural resources other than sun, sand and sea, and therefore the supply of services is critical to the success of the economy. In addition to tourism, financial and information technology services play an important role to support the economic health of the community. Caribbean financial centres compete with jurisdictions in many other regions and have had to identify strengths in certain niche areas in order to survive.
In the case of Antigua, the island has seen a growth in business with some Latin American jurisdictions with which it has resident diplomatic offices, and has also gravitated towards providing technology driven financial services.
The combination of well-regulated financial services, world class communications, driven by the telecom giants Cable and Wireless and Digicel, an English-speaking and skilled workforce and strong professional resources offers a positive environment for electronic and international business services. Antigua provides ideal support for information technology services and Internet-driven business opportunities that demand more sophisticated financial services.
The Antigua & Barbuda Investment Authority, established by the Government, assists the investment process and identifies related incentives for certain investment categories. International business companies (IBCs) will also benefit from a tax-neutral business environment.
Modern financial services include internet banking, mobile banking, wire transfers in major currencies, corporate and trust administration, pension and fund management, international payroll services, electronic commerce facilities, that allow online sales of international services, and products and the development of multi-functional prepaid debit cards to facilitate international small payments. These are powerful financial tools that enable business people to compete in an international and open market environment. The remarkable growth of the internet is impacting economies around the world, and Antigua is no exception. As an independent nation, it is well positioned to attract international business for electronic commerce. The government has passed the relevant legislation to govern e-commerce, the Electronic Transactions Act, and also to control abuse of electronic systems and protect the safety of online activity. The government is also committed to operating as an e-government and has positioned Antigua to become a leading Caribbean IT centre.
One growing sector of Antigua’s tourism product is a sophisticated yachting industry, which uses Antigua as a base to receive charters, stock up on supplies, and to conduct maintenance. Some banks provide important services to this community, such as payroll cards for crew members. The yacht owner will establish an account with an international bank and be able to provide a Visa branded prepaid card on which the crew member’s salary will be loaded. The crew member is able to use the card as a virtual bank account, with online access to its transactions and balance, and even the ability to remit funds home to an identified family member on the basis of a card to card transfer. The processing of these transactions is now migrating to platforms that support cell phone transfer messages that are linked to card to card transfers.
One of Antigua’s banks sponsors the Global Processing Centre, Ltd., which is a world class processing facility for electronic financial transactions that hosts a platform to support all types of issuing and acquiring transactions for ATM, Point of Sale and web based Ecommerce services. This helps to broaden the scope of services that can be arranged and offered from the jurisdiction, including micro-finance services, international remittances, and a variety of payroll and employee benefit programs, all of which can be successfully managed on payment cards. The processing and data centre helps to support enhanced due diligence for card holders by filtering all cardholder identities through the OFAC list of terrorists and drug offenders, and by hosting customer information details on card holders for all card programmes.
The local processing platform is expanding to support mobile commerce, which will allow it to play a greater role in facilitating small payments worldwide. The convergence of telecoms into the payment arena is rapidly changing the face of small payments. As the global remittance market continues to rebound, there is a strategic opportunity for Caribbean financial institutions to expand into the mobile payments sector local services and take advantage of new and emerging markets. Antigua has the potential to provide interconnection and interoperability technology and know-how for servicing mobile users in the region and globally through an enriched processing platform with a new range of solutions focused on the fast growing domain of mobile financial services. These processing services extend the reach of financial services to unbanked and underbanked people throughout the world by leveraging the convergence of mobility and finance.
Antigua has become attractive to international investors from Latin America, Europe and the Far East seeking private banking services and wishing to balance their portfolios with certain commodity and foreign exchange trading services, and who may be interested in property investment in the jurisdiction.
Increasingly, investors have been purchasing properties in Antigua and Barbuda as vacation and second homes. These investments also qualify them for Permanent Residency, and they can obtain advice from any of the major accounting firms with offices in Antigua such as PriceWaterhouseCoopers, PKF, KPMG or their own advisory resources for tax planning arrangements. Several major real estate developments are being undertaken in Antigua and Barbuda, and interest from international investors has been significant.
Antigua’s financial centre has legislation to govern the operation of various types of formal structures often required to support wealth management strategies, including the establishment of trusts and foundations and the incorporation of international businesses and limited liability companies. There is a fully experienced and professional sector comprised of attorneys-at-law and licensed company providers that can assist in the clearing of names, registration of corporate entities and referring clients for bank account relationships in the jurisdiction.
Antigua’s International Financial Centre
Antigua’s International Financial Centre has demonstrated its return to stability and growth as its public and private sectors overcome the challenges posed by the world financial crisis and has reorganised itself to meet the requirements of modern business and the surge of global demands for financial solutions for international business, wealth management and e-commerce services.
Strong and secure communications defy geographic constraints by putting the bank branch in your backyard and full banking services at your fingertips. The expansion of technology-driven facilities to support mobile payments will position the jurisdiction to be able to attract micro-finance and payment services. It is redefining the role of international banking relationships and complimenting global business opportunities that need modern financial solutions. The combination of well-regulated financial service providers and the ability to offer technology-driven financial services in a stable environment makes Antigua and Barbuda a premier location for doing global business.
Brian Stuart-Young, Chairman & CEO, Global Bank of Commerce, Antigua