Offshore Shore Centres (OFCs) are generally small, low tax jurisdictions. In defining International Financial Centers (IFC’s) the International Monetary Fund (IMF) notes that there must be a large number of financial institutions functioning in a simplified regulatory environment, with low or no tax, and with the majority of its transactions initiated offshore. Regional Financial Centres (RFCs) are groups or blocks of countries, viewed as IFCs and which have specialties in the offshore financial business .
Many Caribbean islands, including Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, the British Virgin Islands, the Caymans Islands, the Bahamas, Barbados, and Aruba, can be categorised as RFCs. In the early 2000s, the sector was thriving, and positively contributing to the foreign exchange inflows to these countries.
In the aftermath of the 2008-2009 global financial crises, several regulatory jurisdictions have made attempts to strengthen their financial sector regulation, supervision, and risk management. The objective was to increase the resilience of financial institutions, and prevent another financial sector collapse in the future. Moreover, the regulators sought to restrict potential money laundering and the financing of terrorism, via the implementation of more strict anti-money laundering (AML), countering the financing of terrorism (CFT) and know-your-customer (KYC) regulations.
Post the 2008-2009 financial crisis, several Caribbean countries, including the Bahamas, the Cayman Islands, Saint Kitts and Nevis and Saint Vincent and the Grenadines have been subjected to increased financial regulations by the international financial authorities. This has limited the growth of the offshore financial sector.
This policy brief therefore aims to assess existing and potential threats to the Offshore Financial Sector to selected countries in the Caribbean, with the view of developing recommendations for addressing these challenges. Particular focus is placed on Saint Kitts and Nevis, and Antigua and Barbuda. Interviews were also conducted with stakeholders in other Caribbean countries to assess the wider implications for the subregion.