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jurisdictions have prudent, sound regulations in place
geared towards safeguarding the deposits and
maintaining their confidentiality. However, some weigh
their benefits in taxation, while others in confidentiality,and so forth. Though they all offer a comparatively
confidential and secure environment, it bears
consideration to outline what the banking goals are and
then choose the jurisdiction accordingly. A small minority
of the offshore jurisdictions do a poor job of managing
and regulating their banking institutions, but the
informed investor or advisor will deem these as
unsuitable for themselves or their clients. Further, these
poorly organized and run jurisdictions are often
manipulated by illicit depositors and hence prove easy
targets of the FATF (Financial Action Task Force) looking
for money laundering or other criminal activity
DEFINITION:An offshore bank is a bank located outside the country of
residence of the depositor, typically in a low tax
jurisdiction (or tax haven) that provides financial and
legal advantages. These advantages typically include:
1. Greater privacy
2. Low or no taxation (i.e. tax havens)
3. Easy access to deposits (at least in terms of
regulation)
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4. Protection against local political or financial
instability
5. Protection from lawsuits
6.Asset protection7.Simplicity
REGULATION OF OFF SHORE BANKS:
In the 21st century, regulation of offshore banking is
allegedly improving, although critics maintain it remainslargely insufficient. The quality of the regulation ismonitored by supra-national bodies such as theInternational Monetary Fund (IMF). Banks are generallyrequired to maintain capital adequacy in accordance withinternational standards. They must report at leastquarterly to the regulator on the current state of thebusiness.
Since the late 1990s, especially following September 11,2001, there have been a number of initiatives to increasethe transparency of offshore banking, although criticssuch as the Association for the Taxation of FinancialTransactions for the Aid of Citizens (ATTAC) non-governmental organization (NGO) maintain that theyhave been insufficient. A few examples of these are:
• The tightening of anti-money laundering regulationsin many countries including most popular offshorebanking locations means that bankers are required,by good faith, to report suspicion of moneylaundering to the local police authority, regardless of
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banking secrecy rules. There is more internationalco-operation between police authorities.
• In the US the Internal Revenue Service (IRS)introduced Qualifying Intermediary requirements,
which mean that the names of the recipients of US-source investment income are passed to the IRS.
• Following 9/11 the US introduced the USA PATRIOTAct, which authorizes the US authorities to seize theassets of a bank, where it is believed that the bankholds assets for a suspected criminal. Similarmeasures have been introduced in some othercountries.
• The European Union has introduced sharing of information between certain jurisdictions, andenforced this in respect of certain controlled centers,such as the UK Offshore Islands, so that taxinformation is able to be shared in respect of interest.
Joseph Stiglitz, 2001 Nobel laureate for economics and
former World Bank Chief Economist, told to reporter LucyKomisar, investigating on the Clearstream scandal:
"You ask why, if there's an important role for a regulatedbanking system, do you allow a non-regulated bankingsystem to continue? It's in the interest of some of themoneyed interests to allow this to occur. It's not anaccident; it could have been shut down at any time. If yousaid the US, the UK, the major G7 banks will not deal with
offshore bank centers that don't comply with G7 banksregulations, these banks could not exist. They only existbecause they engage in transactions with standardbanks."
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In the 1970s through the 1990s it was possible to ownyour own personal offshore bank; mobster Meyer Lansky had done this to launder his casino money. Changes inoffshore banking regulation in the 1990s in the form of
"due diligence" (a legal construct) make offshore bankcreation really only possible for medium to largemultinational corporations that may be family owned orrun.
Weakened Bank Secrecy :
Since starting to survey offshore jurisdictions on April 2,
2009, the Organization for Economic Cooperation andDevelopment (OECD)) at the forefront of a crackdown ontax evasion, won't object to governments using stolenbank data to track down tax cheats in offshore center.The recent sharing of confidential UBS bank details about285 clients suspected of willful tax evasion by the UnitedStates Internal Revenue Service was ruled a violation of both Swiss law and the country’s constitution by a Swiss
federal administrative court. Nevertheless, OECD hasremoved 18 countries, including Switzerland,Liechtenstein and Luxembourg, from a so-called "greylist" of nations that did not offer sufficient taxtransparency, and has re-categorized them as “white list”nations. Countries that do not comply may facesanctions. A notable exception is Panama, whose canal iscurrently needed by all Western nations, provides it witha unique type of immunity to international pressure.Given the enlargement of the canal to accommodatelarger shipping, it is unlikely in the foreseeable future thatPanama would likely succumb to international pressuretoward transparency.
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ADVANTAGES:
• Offshore banks can sometimes provide access to politically
and economically stable jurisdictions. This will be anadvantage for residents in areas where there is risk of
political turmoil, who fear their assets may be frozen,
seized or disappear. However, developed countries with
regulated banking systems offer the same advantages in
terms of stability.
• Some offshore banks may operate with a lower cost baseand can provide higher interest rates than the legal rate in
the home country due to lower overheads and a lack of
government intervention. Advocates of offshore banking
often characterize government regulation as a form of tax
on domestic banks, reducing interest rates on deposits.
• Offshore finance is one of the few industries, along withtourism, in which geographically remote island nations can
competitively engage. It can help developing countries
source investment and create growth in their economies,
and can help redistribute world finance from the developed
to the developing world.
• Interest is generally paid by offshore banks without tax
being deducted. This is an advantage to individuals who do
not pay tax on worldwide income, or who do not pay tax
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until the tax return is agreed, or who feel that they can
illegally evade tax by hiding the interest income.
•
Some offshore banks offer banking services that may notbe available from domestic banks such as anonymous bank
accounts, higher or lower rate loans based on risk and
investment opportunities not available elsewhere.
• Offshore banking is often linked to other structures, such as
offshore companies, trusts or foundations, which may have
specific tax advantages for some individuals.
• Many advocates of offshore banking also assert that the
creation of tax and banking competition is an advantage of
the industry, arguing with Charles Tiebout that tax
competition allows people to choose an appropriate balance
of services and taxes. Critics of the industry, however,
claim this competition as a disadvantage, arguing that itencourages a "race to the bottom" in which governments in
developed countries are pressured to deregulate their own
banking systems in an attempt to prevent the off shoring of
capital.
DISADVANTAGES:
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• Offshore bank accounts are less financially secure. In a
banking crisis which swept the world in 2008 the only
savers who lost money were those who had deposited their
funds in offshore branches of Icelandic banks such asKaupthing Singer & Friedlander. Those who had deposited
with the same banks onshore received all of their money
back. In 2009 The Isle of Man authorities were keen to
point out that 90% of the claimants were paid, although this
only referred to the number of people who had received
money from their depositor compensation scheme and notthe amount of money refunded. In reality only 40% of
depositor funds had been repaid 24.8% in September 2009
and 15.2% in December 2009. Both offshore and onshore
banking centers often have depositor compensation
schemes. For example The Isle of Man compensation
scheme guarantees £50,000 of net deposits per individual
depositor or £20,000 for most other categories of depositor
and point out that potential depositors should be aware that
any deposits over that amount are at risk. However only
offshore centers such as the Isle of Man have refused to
compensate depositors 100% of their funds following Bank
collapses. Onshore depositors have been refunded in full
regardless of what the compensation limit of that country
has stated thus banking offshore is historically riskier than
banking onshore.
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• Offshore bank accounts are sometimes touted as the
solution to every legal, financial and asset protection
strategy but this is often much more exaggerated than the
reality.
HISTORY OF OFF-SHORE BANKING
The origins of the offshore banking industry are found in
a group of islands off the northwest coast of France: the
Channel Islands. Several years ago a group of likeminded bankers and government officials decided to offer
an offshore remedy of lower taxation and promises of
anonymity and confidentiality. The intent was to seize
upon the frustration of UK and European residents fed up
with oppressively high rates of taxation and insufficient
safeguards to privacy and confidentiality in their home
countries. These offshore banking institutions and new
offshore financial centers gained instant notoriety and
popularity. The offshore banking industry was born. As
word spread across Europe and indeed throughout the
world, other small island nations and jurisdictions seized
upon the opportunity and began strengthening
regulations regarding banking practices and client
confidentiality in the hopes of attracting foreign
depositors; thus becoming offshore banking jurisdictions
and offshore financial centers. This became particularly
popular in the small island nations of the Caribbean which
is what many tend to associate with offshore banking
jurisdictions. Investors and depositors seeking politically
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and economically stable jurisdictions found their way to
these offshore financial centers and this practice
continues today. Although an abbreviated and perhaps
oversimplified version of history, these are,fundamentally, the roots of the modern offshore banking
industry.
Similar to offshore companies, offshore banking is really
just the practice of banking in another country; however,
the term is generally associated with "tax haven"
jurisdictions characterized by low or zero taxation on
interest, dividends, royalties and foreign derived incomeas well as having some degree of banking confidentiality.
Over time this term has evolved to include other
onshore ン popular banking jurisdictions such as
Switzerland, Austria, Lichtenstein, Luxembourg and more
recently Asian jurisdictions such as Singapore and Hong
Kong These jurisdictions gained considerable popularity
for the same reasons as the small island offshorefinancial centers: they implemented sound banking
practices codified in law and regulations guaranteeing
confidentiality, low taxation and security.
OFF SHORE FINANCIAL CENTRES:
In terms of offshore banking centers, in terms of total
deposits, the global market is dominated by two keyjurisdictions: Switzerland and the Cayman Islands,although numerous other offshore jurisdictions alsoprovide offshore banking to a greater or lesser degree. Inparticular, Jersey, Guernsey and the Isle of Man areknown for their well regulated banking infrastructure.
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Some offshore jurisdictions have steered their financialsectors away from offshore banking, as difficult toproperly regulate and liable to give rise to financialscandal.
List of offshore financial centers:
Offshore financial centers include:
• Antigua and Barbuda • Bahamas • Barbados • Belize • Bermuda • British Virgin Islands • Cayman Islands • Channel Islands (Jersey and Guernsey)• Cook Islands • Cyprus • Dominica • Gibraltar is no more an offshore centre since 30 June
2006. No new Exempt Company certificates arebeing issued from that date.
• Ghana • Hong Kong • Isle of Man • Labuan, Malaysia • Liechtenstein • Luxembourg • Malta • Macau • Mauritius • Monaco • Montserrat • Nauru
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• Panama • Saint Kitts and Nevis • Seychelles • Singapore • Switzerland • Turks and Caicos Islands
OFFSHORE BANKING FACTS
Offshore banking and offshore banks are often
misunderstood and intentionally maligned by
governments of high taxing jurisdictions. It is important to
note that just like an offshore company, an offshore bank
is merely a bank domiciled in a country other than that of
the person's country of residence, domicile or
citizenship. Hollywood has also done a good job of
associating offshore banking with cigarette boats, private
jets and criminals of all kinds. In reality, these offshore
jurisdictions and offshore banks are very different than
what typically conjures in the mind. Let us look at some
myths and facts about offshore banking with an unbiased
and historical perspective.
• Offshore banks are only used to evade taxes
Fact: Popular offshore banking jurisdictions often provide
a number of benefits over onshore banks including lower
administration costs, higher interest rates, the ability to
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deposit and transact in multiple currencies, increased
privacy, access to otherwise unavailable international
investments, sophisticated private banking, the ability to
facilitate international business transactions, etc.Additionally, offshore banking provides increased asset
protection from potential extraneous lawsuits, unstable
governments, unstable economic conditions, unlawful
seizure, etc.
• Offshore banking is only conducted by money
launderers, drug dealers, weapons smugglers
and terrorists.
Fact: There is no question that offshore banks have been
abused in the past by some of these unwanted elements.
The days of showing up to the bank with a bag full of
cash are long over however. Offshore banks have strict
account opening procedures and follow internationally
accepted best practices for screening new applicants aswell as ongoing due diligence to monitor account activity.
Let us also maintain a proper perspective on this. These
same unwanted elements have been "offshore" banking
in the US and UK for many years due to the lax
restrictions on foreign deposits, particularly through
securities firms, in these two countries.
• Offshore banks are less secure than onshore
banks.
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Fact: Depositors need to consider all factors when
choosing a banking jurisdiction. Many of these offshore
banks and banking jurisdictions have histories far
superior to that of banks in their own country. Many havelending practices (reserve requirements, risk tolerance,
etc.) that are much stricter than that of the banking
institutions in their big "onshore" countries. Many
offshore banks make the bulk money off of traditional
commercial banking rather than investment banking and
lending as well. The latest wave of bank failures around
the world were mostly contained in the major "onshore"
banking centers due to loose reserve requirements and
investment banking practices. The offshore banks in
traditional offshore banking jurisdictions fared much
better on the whole.
OFFSHORE BANKINS STRATEGIES
We generally leave the offshore banking business and
questions about potential uses to our offshore partner
banks; however, we often field questions regarding these
issues and find it necessary to explain a few simple
strategies often utilized. None of the information in this
section and indeed in this website should be construed as
tax advice in your home country. These strategies may
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a higher rate of interest. Your interest payments may be
tax deductible expenses allowing you to save taxes in
future years.
Scenario #2 (Property Mortgage)
You are building a new house or buying a piece of
property and need cash. Your offshore bank can draft a
back to back loan as a mortgage at an interest rate and
term of your choosing (usually at a fairly high rate within
reason) allowing you to purchase the property and
maintain a lien on the property by filing the mortgage.Many high net worth individuals prefer not to own
property and investments in their own names and seek
arrangements which make their assets more difficult to
locate for potential adversaries. This is a popular
strategy in these cases. Any searches for assets would
turn up a fully mortgaged home rather than one owned
free and clear. These loans may be kept "topped up"ン to100% of the value of the home as well. As with the
business loan, interest payments are often tax deductible
providing future income tax savings which may come in
handy, especially if you have the good fortune of being in
the highest tax brackets.
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OFFSHORE BANKING – A LUCRATIVE
PROPOSITION
BY C.JEEVANANDAM
Financial experts have been pleading to establish an
offshore banking centre in India. Geographically, India
provides distinct advantages in attracting offshore
banking units, because it has a stable economic and
political performance, a vast market, technical manpower
that could find employment in these centers. Thequestion is: Will these offshore banking units fulfill Mr.
Murasoli Maran's cherished goals?
ONE of the significant features of the Exim Policy is the
proposal to permit offshore banking units (or overseas
banking units) in Special Economic Zones (SEZs).
Offshore banking refers to the international banking
business involving non-resident foreign currency-denominated assets and liabilities. It refers to the
banking operations that cover only non-residents, and
does not include domestic banking. An offshore banking
centre is a place where deliberate attempt is made to
attract international banking by offering many
concessions in the form of taxes and levies imposed at
lower rates.
A more important relaxation is the exemption of the
offshore banks from restrictions on operations. Offshore
banking units in these centres can carry on their activities
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with international enterprises or investors without
conflicting with the domestic fiscal and monetary policy.
Offshore banking is an extension of the euro-currency
concept to the East, which provides a link between euro-
currency markets and the final borrowers. They provide
essential time zone links that are truly world-wide, and
ensure that the market operates 24 hours a day. While
offshore banking is an integral part of the euro-market,
what distinguishes it from the mainstream euro market is
that it was specially set up by host countries to promote
international banking.
Offshore banking units are branches of international
banks or other subsidiaries or affiliates. They do not carry
retail business, but generally provide wholesale banking
services project financing, syndicated loans, issue of
short-term and medium term instruments, such as
negotiable certificates of deposits and capital notes aswell as merchant banking activities in foreign currency
denominated bonds and equity shares.
The deals are mostly between banks or with large
borrowers or multinational corporations. MNCs prefer
transacting in offshore financial centres because of
certain apparent advantages: Avoidance of high tax
incidence; freedom from exchange control; maintenanceof secrecy of deals due to non-interference from
government and regulatory authorities; and deferring tax
by floating subsidiary units in such centres and delaying
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their remittance of profits to the parent company, when it
would be taxed.
Participation of the Indian banks
Few Indian banks, such as State Bank of India, Indian
Overseas Bank, Bank of India and Bank of Baroda, have
set up offshore banking units for deposit taking and final
lending at Bahrain, Hong Kong, Colombo, Cayman
Islands, and so on. Indian Bank, Bank of Baroda and
Union Bank of India jointly floated a deposit taking
company, IBU International Finance, in Hong Kong forboth offshore and onshore banking.
The benefits for the Indian banks from these ventures
are:
Sizeable profits as these ventures involve relatively
low operating costs.
With multi-currency deposit bases, the banks would be able to serve better the needs of their customers who
have set up joint ventures abroad in the form of foreign
currency finance.
The banks would strengthen the country's balance of
payments through repatriation of profits from the
venture.
Offshore banking centre in India
Financial experts have been pleading to establish an
offshore banking centre in India. Geographically, India
provides distinct advantages in attracting offshore
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banking units, because it has a stable economic and
political performance, a vast market, technical manpower
that could find employment in these centers. Another
advantage is that the Indian market would open a littlebefore the Tokyo market closes, and close before New
York opens, thus providing a vital time link for
international money market dealers.
In an era where many Indian corporations are functioning
abroad, and many corporations are granted permission to
seek overseas finance, establishing an offshore unit will
help tap the resources:
Exporters would benefit in terms of finer margins on
loans and better foreign exchange rates available via an
offshore banking unit.
The benefits of multi-currency operations which, to an
extent, minimize currency fluctuation risk will be an
added advantage.
Salaries paid by offshore banks and local expenditure
incurred by them contribute to the economy's welfare.
For smaller countries, the benefit would be greater. For a
larger country such as India, however, this may not form
a significant portion of the total income.
India may earn revenue in the form of license fees, profit taxes imposed on the banks operating in the area.
It may also get the benefit of banks' funds in the form of
capital and liquidity requirements.
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The country can gain improved access to the
international capital markets.
The domestic financial system may become more
efficient through increased competition and exposure of the domestic banks to the practices of offshore banks.
The offshore banking centers will provide opportunities
to train the local staff which will, in turn, contribute to
faster economic growth.
The offshore banking units would help channelize non-
resident Indian investments.
Setting up offshore banking centers would trigger
enforced development of more advanced communication
facilities a must for their functioning.
But establishing offshore centers also comes with a price:
The supervision and regulation of offshore banks may
involve substantial costs.
Encouraging offshore banking may result in the
diminution in autonomy of domestic monetary policy,
since it is difficult to draw a line always between the
offshore and onshore operations, particularly in the
absence of exchange control.
Offshore banking provides scope for tax evasion by
residents. For instance, in Hong Kong, it was found that
residents place deposits with offshore banks and takeloans of the same amount. The interest on loan would be
a deductible expenditure for taxation, while the income
from interest on deposits is not taxed.
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Offshore banks may prove to be harmful competitors
to the local banks and may inhibit their growth.
For long, Mumbai was considered suitable for establishing
offshore banking here. The city has all the requirements
goods infrastructure in the form of telecommunications
and services, abundant and well-trained manpower and
presence of many international banks, both Indian and
foreign, already engaged in international banking.
The Sodhani Committee on Foreign Exchange Reforms
(1996) has recommended allowing Indian banks andfinancial As against the general recommendation of
permitting offshore banking units only at Mumbai, the
present proposal is to permit them at Special Economic
Zones. This is a wise move since both offshore banking
centers and SEZs have many things in common as
regards administration and purpose. The establishment of
offshore centers in India was foreseen when the ForeignExchange Regulation Act (FERA) was replaced by the
Foreign Exchange Management Act, 1999 (FEMA). Article
10 of FEMA included offshore banking units as one of the
authorities to whom the RBI could delegate powers for
dealing in foreign exchange. The question is: Will these
offshore banking units fulfill Mr. Maran's cherished goals?
The RBI is expected to bring out regulations regarding
setting up these units in India. A lot depends on how far
these regulations are liberal and pragmatic.
CASE STUDY
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For over 25 years OCRA Worldwide has been assistingclients to establish and administer offshore andinternational bank accounts and has developed usefulexpertise in identifying and working with suitable offshore
banks and international banks.
Most importantly, OCRA Worldwide is not an offshorebank, we are a licensed international and offshorecorporate and trust services provider. However, asignificant percentage of the companies and trusts weadminister establish accounts with international andoffshore banks rather than domestic banks because often
their characteristics include:
• Familiarity with offshore and international business.• Worldwide investment and business perspective.• Tax-efficiency.• Confidentiality.• Lack of foreign exchange controls.• Access to special investment opportunities.
The objective of our website is to advise potential clients
of the "basics" and to provide answers to the more
common questions relating to offshore banks and
establishing and administering an offshore bank account.
Offshore Bank Account Opening
Procedures & Maintenance
All the offshore and international banks we work with
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regard the prevention of money laundering and terrorist
financing to be of the utmost importance, so do we.
OCRA Worldwide does not seek to work with offshorebanks which have low standards of compliance as, apart
from our own desire to only work with reputable partners,
the culture and business ethos of such offshore banks
must not be flawed.
Consequently the offshore and international banks we
work with will seek to:
• Obtain evidence of our clients' identities,• Develop a documented understanding of our client's
banking and business activities,• Identify the source of funds paid into accounts to
ensure that such funds are not derived from criminalactivity and to document evidence relating to sourceof funds.
• Monitor banking transactions to identify and forestallmoney laundering,
• Risks assess each and every client.
This means that offshore account opening procedures can
be onerous and time consuming.
Typically offshore banks will require some or all of the
following information to open and operate an offshore
account for a simple offshore company which is owned by
individuals (rather than a corporation, trust or other form
of entity):
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• Certified proof of identity of owners, directors,account signatories and all parties connected withthe offshore company.
• Acceptable proof of identity would normally include a
passport copy certified in a prescribed manner by anofficer of the bank, a notary or an authorized OCRAWorldwide Manager.
• Proof of residence of all parties associated with theoffshore company. Acceptable proof of residencewould typically include an original bank statement orcredit card statement.
• Information relating to the expected annual income
or asset base of the offshore company, the numberof transactions per month, the geographic spread of the proposed business and the amount of moneythat will be left on deposit at the bank.
• A detailed description of the proposed businessactivity, often supported by documentation such asbrochures, copies of contracts, audited accounts,business plans and details of trading partners or
investments.• Documented evidence relating to source of funds,
e.g. if a million dollars is to be paid into an offshorecompany's account, the bank will seek to obtaindocumentary evidence relating to the source of suchfunds in the form of a bank statement, contract orsimilar.
• An initial meeting with potential bankers possibly
with an OCRA Worldwide Manager. Some banksrequire clients to visit them on an annual basis.• In addition, enhanced due diligence will be
undertaken if the affairs of the offshore company arecomplex or if it, or any party connected to it, isassociated with what banks or regulators perceive to
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Why?
• There are various legislative and regulatory
requirements and precedents relating to the dutiesof directors and trustees relating to their obligationsto exercise effective management and control over acompany's or trust's assets and affairs. Put moresimply, would any reasonable businessperson, awareof the duties and liabilities of directors or trustees, beprepared to act as a director of a company or act asa trustee, if they did not control the company's or
trust's bank account?• If our clients were to exercise control over bank
accounts it could be perceived that they arecontrolling the affairs of the company or trust eventhough they may not be officers or trustees.Statutory authorities in high tax and other areasoften seek to apply "the management and controltest" to assess whether the profits/income earned by
an entity controlled in a low tax area should be taxedas if they were resident in the high tax area. There isan inherent possibility that if we allowed clients tocontrol bank accounts, then a regulatory authoritymay deem that our clients are effectively managingand controlling the company or trust in theircountries of residence or more radically may seek topierce the corporate veil or judge a trust to be a"sham".
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REGULATION IN RBI
Notification No: FEMA71/2002- RB
Dated September 7, 2002
In exercise of the powers conferred by Section 6, Section 7, Section 8, Section 9 and Section 47
of the Foreign Exchange Management Act, 1999 (Act 42 of 1999) and all other powers enabling
it in this behalf, the Reserve Bank of India makes the following Regulations, namely: -
CHAPTER I
1. Short title and commencement
i. These Regulations shall be called the Foreign Exchange Management (Offshore Banking
Unit) Regulations, 2002
ii. They shall come into force from the date of their publication in the Official Gazette.
2.Definitions:
In these Regulations, unless the context requires otherwise-
i. ‘Act’ means the Foreign Exchange Management Act, 1999 (Act 42 of 1999);
ii. ‘Offshore Banking Unit’ means a branch of a bank in India located in the Special
Economic Zone and holds an authorisation issued under clause (a) of sub-section(1) of
section 23 of the Banking Regulation Act, 1949 (10 of 1949);
iii. ‘Regulations’ means the Regulations made under the Act;
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iv. ‘Special Economic Zone’ means the Special Economic Zone notified by the Government
of India;
v. Words and expressions used but not defined in these Regulations shall have the same
meanings respectively assigned to them in the Act.
CHAPTER- II
PART 1
3. Notwithstanding the status, as an authorised dealer, of the bank setting up the Offshore
Banking Unit, and save as otherwise directed by the Reserve Bank, the Offshore Banking Unit
shall not be regarded as an authorised dealer for the purpose of the Act, rules or regulations made
thereunder.
4. Save as otherwise provided in these or any other Regulations or directed by the Reserve Bank,
nothing contained in any other Regulations shall apply to an Offshore Banking Unit.
5. Save as otherwise provided in these Regulations or with the permission of the Reserve Bank,
an Offshore Banking Unit shall not conduct any activity or undertake any transaction with
residents in India.
PART II
Transactions which may be undertaken by an Offshore Banking Unit
6. An Offshore Banking Unit may undertake foreign exchange transactions with any authorised
dealer in India only on principal-to-principal basis.
7. An Offshore Banking Unit may undertake transaction in foreign change with a unit located in
Special Economic Zone to the extent the latter is eligible to enter into or undertake such
transaction, within the ceilings and subject to the conditions specified in the Regulations
governing such transaction.
8. Engagement of an Offshore Banking Unit in any of the forms of business specified in sub-
section (1) of section 6 of the Banking Regulation Act, 1949 shall be only in foreign exchange
and shall be subject to these Regulations and the conditions of licence issued under the said Act.
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BIBLIOGRAPHY
www.rbi.org.in www.sterlingoffshore.com
www.hinduonnet.com
www.google.com