International Finance Centres: A Force for Good

Written by Henry Martin. Posted in Finance

CEO Insight sets the record straight as to the inherent force for good credentials of International Finance Centres, and showcases those jurisdictions with the best propositions.

Investments and vehicles emanating from International Finance Centres (IFCs), particularly small island IFCs, continue to play an essential role in any managed wealth portfolio; a role that is about much more than simply offering tax mitigation opportunities. Despite being subjected in recent years to unprecedented scrutiny and increased compliance criteria, given the precarious state of the global economy and subsequent prevailing regulatory winds of the day, as G8 politicians seek out scapegoats in their lust for votes, it is no exaggeration to say that these jurisdictions continue to play a pivotal role in the ongoing renaissance of the global economy, not least since they act as essential conduits for FDI elsewhere.

 

Moreover, their conduct evidences an admirable willingness to adapt, evolve and diversify in an effort to seek acceptance and legitimacy from a wider global financial system that sees the deck stacked heavily against them. In so doing, select IFCs have become models of collaboration, pro-activeness, transparency and accountability, as they evolve into financial centres of expertise, with each displaying noteworthy strengths in distinct areas. Here, we put under the spotlight those jurisdictions that are leading the way.

Mauritius
Mauritius, has a long established IFC pedigree and offers investors a unique combination of regulation that is flexible and not too overbearing, yet nonetheless complies with the increasingly exacting criteria all IFCS are now subject to. It is extremely well-positioned to assist investors mitigate risk, optimise opportunity and align strategies to achieve their financial objectives, and has become something of a model 21st Century International Financial Centre, held in high esteem for its deep well of expert knowledge and comprehensive product portfolio.


"It offers a platform for responsible, well-regulated island jurisdictions to play a central global role, which sees them acting as an essential conduit for FDI into developing regions of the world."


Recent developments have seen the opening of the Financial Services Institute as Mauritius continues its transition from a back- to front-office focused IFC, with specialised human resources. In this respect, the Financial Services Promotion Agency acts as the first point of contact for the international business community using the Mauritius IFC.

Known for its sound regulatory environment, good governance, the availability of a highly qualified bilingual workforce, as well as for its status as a platform into the wider African market with its vast growth potential, there have been numerous recent noteworthy developments across a range of areas. These include insurance; global fund management and administration; banking, encompassing traditional retail, private, investment, Islamic and structured trade finance; and the global business segment, where GBC1 and GBC2 companies are the order of the day, offering respective benefits in terms of risk mitigation and fiscal efficiency.

In addition, Mauritius is also renowned for its prowess in the capital markets arena, where it is successfully implementing a revised internationalisation strategy, and in respect of which it enjoys the status as No.2 in Africa. Furthermore, its credentials concerning Fintech and Innovation are to be applauded, the jurisdiction being able to point to an impressive narrative around the likes of connectivity, the ICT labour pool, infrastructure investment protection, promotion agreements and its test-bed status. Equally, it has developed into something of a region-leading international arbitration centre, thanks to pertinent and timely enabling legislation. All told, Mauritius would appear to be the complete package.

Turks and Caicos Islands
The Turks and Caicos Islands jurisdiction in the Caribbean is increasingly synonymous with the watchwords of transparency, accountability, and responsibility. This British Overseas Territory can lay claim to a BBB+ credit rating, an absence of corporate, personal, capital gains or inheritance taxes and exchange controls, a strong legal system, as well as regulation that is strong, fit for purpose and fully internationally compliant, all of which equates to a pro-investment climate. Moreover, its early adoption of the OECD's Common Reporting Standard, sound annual growth rate and having the US Dollar as its currency combine to further enhance its credentials.

Having signed up to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and published an Action Plan on Beneficial Ownership, as well as being an active member of the Caribbean Financial Action Task Force (CFATF), it's not hard to see why the Turks and Caicos Islands are an increasing force to be reckoned with on the international financial services stage.

In this it is helped, thanks to renewed political and economic stability, and a location ideally suited to the world's prime US investor market, on top of progressive, business-enabling legislation, and public and private sectors successfully unified in pursuit of a common goal.

Cook Islands
The Cook Islands' reputation for premium international financial services both fit for purpose and fully compliant, has been further reinforced by a favourable Phase 2 Peer Review from the Global Forum on Transparency & Exchange of Information for Tax Purposes. In terms of its USPs, it offers something unique and distinct from the competition in its provision of pioneering products such as asset protection trusts, the innovative legislation for which many other jurisdictions have attempted to ape in their quest to offer similar levels of protection. Perhaps the most noteworthy provision here is that which avoids forced heirship, allowing for flexible succession planning and wealth structuring.

When it comes to wealth, asset and succession planning, the Cook Islands has proactively embraced the increasing culture of compliance now prevailing, with its service providers held in high esteem, as testified to by the recent third party endorsement of Capital Security Bank by Christian Biel at BNP Paribas for its status as a safe liquid haven for deposits. This objective validation acts to bestow increased authority and legitimacy on the Cook Islands financial services industry.

Samoa
With a new CEO at the helm in the form of Tootooleaava Dr. Fanaafi Aiono-Le Tagaloa , and a new “Invest Samoa” brand, Pacific jurisdiction Samoa is coming to be known as one of the safest and most secure financial centres in the world, especially important given the jittery nerves in evidence following the release of the toxic Panama Papers, which unfortunately tarred all IFCs with the same brush. In response to its release, anxious investors the world over are increasingly seeking safe yet compliant havens and IFCs which put due diligence first.

Samoa is perhaps best known for its innovative Special Purpose International Company legislation, which has addressed the quandary of how to introduce the benefits of the civil law concept of the Foundation into common law arenas. In addition, its close ties with the Chinese market, which increasingly recognises the cross-border structuring, wealth planning and asset protection solutions Samoa provides, see it well placed to prosper in the years to come. Moreover, with strong established links between the public sector and private sector service providers, there is definitely the sense that everyone is singing from the same hymn sheet in Samoa, which should be music to the ears of investors.

The country's credentials are further cemented by way of its strong and thriving banking and trust management sectors, while its comprehensive range of corporate vehicles includes companies, insurance products, segregated funds, and a public, private or professional mutual fund offering. Meanwhile, Samoa's membership of the Group of International Finance Centre Supervisors (GIFCS), Group of International Insurance Centre Supervisors (GIICS), Corporate Registers Forum (CRF) and the OECD's Peer Review Group, evidences the jurisdiction's solid regulatory credentials and proactive stance regarding compliance, on top of the fact that Samoa has committed to undertaking first exchanges of information by 2018.

British Virgin Islands
The British Virgin Islands (BVI) is an international finance centre which allows for legitimate risk management and financial planning and acts as an essential conduit for foreign direct investment (FDI) into developing regions of the world. Since the passing of its trailblazing IBC Act over 30 years ago, the BVI has worked in close consultation with the private sector at every turn to ensure its regulation and legislation are fit for purpose, therein lying the secret of the jurisdiction’s success and enduring appeal. In addition, the BVI has become the ‘go to’ IFC in China, thanks in part to its capacity to mitigate legal and financial challenges related to the successful management, ownership and control of investments into and out of that country.

It is now acting to consolidate its long-held position as a trusted pioneer at the forefront of international financial services, post-Panama Papers through the implementation of a holistic, jurisdiction-wide revitalisation programme known as “BVI Forward”, which aims to identify core strengths to exploit and weaknesses to address and have everyone within the BVI working in harmony to a collective agenda. As part of this, great efforts are being made to engage with the population and strengthen BVIslander capability. In parallel, BVI Finance, the body synonymous with the BVI's IFC status, is expected to soon transition to the public/private “BVI Finance Limited”, with a view to strengthening and repositioning the BVI's financial services industry.

Republic of the Marshall Islands
The Republic of the Marshall Islands (RMI) is a politically stable, English-speaking, independent, democratic, sovereign nation located in the Pacific Ocean.

Known principally for its shipping registry, which constitutes the world’s third largest, the RMI Corporate Registry is also flourishing, having experienced noteworthy growth over recent years. Not only is it the number one “port of call” for international shipping companies applying for IPOs on stock exchanges on London, New York and Singapore, but the ever-increasing volume of publicly traded RMI business entities evidences the high regard in which the Corporate Registry is held.

International Registries, Inc (IRI) administers both the corporate and maritime programs out of a global network of offices, affording clients the benefits of a decentralised operating structure, that sees them able to converse in their own language and in their own time zone when availing themselves of IRI’s portfolio of services. Moreover, with IRI able to point to a pedigree stretching back over 60 years that has bred innovative and flexible legislation largely modelled on Delaware’s corporate laws, it has become known for its ease of business entity formation and value for money among both financial advisors and professionals, as well as a regulatory environment that is both fully compliant with the more exacting criteria all IFCs are now subject to, yet not too overbearing.

Conclusion
The international financial services sector is an oft misunderstood one. As well as allowing for legitimate risk management and financial planning, it offers a platform for responsible, well-regulated island jurisdictions to play a central global role, which sees them acting as an essential conduit for FDI into developing regions of the world. Select island jurisdictions offer world-leading expertise across the financial services spectrum, are increasingly cooperating at regional and inter IFC levels, and provide highly skilled training and employment opportunities for locals, thereby helping to stem the migratory flow away from island shores. It amounts to an unrivalled opportunity for them to diversify, innovate and grow into fiscally independent jurisdictions, unchecked by the usual restrictions associated with geography.

Under ever tighter scrutiny from various forces ranged against them, island IFCs have been quick to adapt to ensure compliance with new directives from various international bodies, and have made proactive efforts to combat tax evasion and illicit tax flows as part of a concerted effort to have legitimacy bestowed upon them.

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