Offshore Banking Licenses - Offshore Banking Act of 1996
As Belize’s benchmark reputation for integrity has grown and its underlying infrastructure of innovative, integrated network of professionals and legal system have expanded in tandem with each stage of its growth, the offshore banking legislation became effective with the enactment of the Banks and Financial Institutions Act of 1995 and the introduction of the Offshore Banking Act of 1996.
In an additional move designed to attract international banks to relocate to Belize, the Money Laundering Prevention (Act) of 1996 led to the introduction of a “know-your-client” rule and made it known to the worldwide financial community that Belize was taking a stand against international money laundering. The government’s consistent refusal to enter into treaties that would lead to information exchange on banking and fiscal matters has further enhanced Belize’s commitment to its status as a reputable offshore banking center with the necessary laws and infrastructure that are designed to ensure privacy and protect one’s assets.
An applicant for an offshore banking license can be either an International Business Company (IBC) from Belize or a local company (250 onshore company) registered in Belize. The offshore banking license application process begins with an initial introductory meeting with the Central Bank of Belize that is followed by a second pre-filing meeting that enables the application to be reviewed by the Central Bank and the Belize government. To facilitate the application process, local representative agents along with the bank’s principal officers are required to attend the initial introductory meeting with the Central Bank of Belize. It is mandatory that the bank principals (officers and directors) be qualified and experienced in international banking business and be of suitable character and financial status. The application should be as complete as possible and submitted with substantial documentary support for the application. The entire application process can take anywhere from six months to one year to be completed.
After the approval for bank licensing is granted, the license remains valid for an unlimited period of time and enables the establishment of an office in Belize to commence operations in foreign currencies, securities and assets exclusively for any person not resident in Belize.
The prerequisite for anyone wanting to establish a private offshore bank account in the Belize jurisdiction would have to be its state-of-the-art communication facilities that include access to international air travel in a convenient gateway between the Americas, an efficient mail service, a reliable telecommunication systems that is supported by excellent bandwidths, a suitable time zone and an English speaking population; all factors which contribute to the feasible conducting of international banking from within Belize.
Offshore banks fulfill many inter-group treasury and management functions and are often effective as part of the overall banking mechanism for international restructuring and corporate financing. The utilization of Belize as a low tax base and as a conduit for funds to pass through an offshore bank can result in the achievement of two-fold benefits i.e. (i) meeting the need for capital expenditure in a high tax jurisdiction in a form which does not give rise to tax as the funds cross frontiers and (ii) to enable the further extraction of subsequent profits in the form of dividends and interest. There are also exchange control benefits to be achieved and registered offshore banks in Belize are exempt from all forms of taxation or stamp duty on its Bills of Exchange, promissory notes, financial instruments or upon any profits or gains, interest or dividends that are earned during its ongoing banking business.
Essentially, two types of offshore banking licenses are available in Belize. An “A’ class banking license allows you to transact offshore banking business without any type of restrictions. The minimum capital requirement for a Class “A” bank is US$3,000,000. The annual licensing fee for a Class “A” License is US$20,000.
Class “B” banking licenses are allowed to establish, maintain and operate a business office in Belize with certain restrictions that include being prohibited from issuing a check book to any depositor nor is it allowed to provide any current deposit or checking facilities for the transaction of offshore banking business. The minimum capital requirement for a Class “B” bank is US$500,000. The annual licensing fee for a Class “B” License is US$15,000.
Georgetown Trust, Ltd. has served as the representative processing agent for several offshore banking licenses in Belize and is well placed to take you through all the stages necessary to ensure that your application for either a Class A or Class B offshore bank is successful. Our representative services start with the consultation and vetting process and continues through to the completion of your bank’s local office set-up and the establishment of operations that include the facilitation of local management and administrative staffing and the necessary back-office support services.
When you are ready to proceed with an offshore banking license registration, please contact us and complete the application form. Ensure that all forms are completed in full, signed where requested and are accompanied by the necessary supporting documents. Send by fax to +501 223-2497.
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International Insurance License - International Insurance Act of 1999
According to Belize’s International Insurance Act of 1999, the categories of business included under the International Insurance Act are long-term insurance business, general insurance business, reinsurance business or captive insurance business. The Act further classifies international insurance as “the business of a company whose risks and premiums originate outside Belize and whose liquidation monies payable to shareholders are payable to or for the benefit of persons resident outside of Belize.”
As the government of Belize continues to demonstrate its commitment to advancing the development of its offshore insurance industry, the passage of the International Insurance Act of 1999 has facilitated international investors who are seeking a reputable tax neutral jurisdiction to establish self-insurance ventures that will provide insurance for risks which may not otherwise be normally insurable. Furthermore, the International Insurance Act is there to facilitate those investors who are seeking to ultimately lower their insurance premium costs through self-insurance ventures that will allow them to establish a realistic spread between risks and control. This knowledge will assist investors to further leverage their company’s key risks against company performance and financial results.
Self-insurance is the concept of insuring risks internally rather than through the commercial market. In making the decision for the viability of self-insurance, an analysis of the company’s insurable risks as between normal or expected losses and catastrophic losses must be made. The decision is often made to self-insure the normal or expected losses and to cover the potential catastrophic losses in the commercial insurance market by means of reinsurance.
Self-insurance can be affected in several ways. For example, funds can be appropriated from a company’s annual net profits to create capital reserve provisions against losses which are not covered by commercial insurance underwriters. The most common and perhaps the most effective method of self-insurance, however, is through the establishment of a captive insurance company. In commercial terms, a captive insurance company can be defined as a subsidiary company which is wholly owned by a non-insurance company and which carries on business exclusively to underwrite the insurable risks of its parent company or of its related or associated companies. Usually, a captive insurance company is located in an offshore jurisdiction for potential tax savings. The captive insurance company may take various forms:
- The “pure” captive i.e. a company wholly owned by its parent and insuring the risks of that specific corporate group
- The “mutual” captive, i.e. a company set up to insure the collective risks of members of mutual organizations such as trade or industry associations
- The “reciprocal” captive, i.e. an association of separate entities who undertakes self-insurance on a collective basis under a general management structure
- The “pure” captive turned commercial underwriter or reinsurer i.e. a pure captive which enters into the competitive commercial insurance market by seeking business from external sources in addition to the insurance risks underwritten from within the group.
The desire to reduce the costs of insurance is one of the principal reasons for considering the use of self-insurance. Corporate groups with large insurable risks i.e. pharmaceuticals, power industry firms and even the financial services industry have been among the hardest hit in recent years by soaring insurance excess that is a significant proportion of the group’s overhead. This has been largely due to increased premium costs which have arisen from inflationary factors affecting the value of insurable risks, the administrative costs of insurers and the level of “real” investment income derived by the underwriters.
The increased costs to the insurer of administering and marketing insurance policies also lead to inflexibility in policy terms and conditions. Furthermore, most insurance policies are standardized products that are seldom drawn to suit the particular needs of the insured.
Similarly, the fundamental rating system used to assess premium levels is standardized on the record of losses experienced on an industry or group classification basis. Again the insured, who has a better than average claim record, is penalized through its contribution to industry wide losses. Further, a corporate group may find that with the growth of its operations, a large number of individual risks are being insured unnecessarily i.e. the possibility of a significant percentage of such risks materializing in any one year would be remote.
The rationalization of insurance cover to meet the specific requirements of a corporate group would therefore result in an immediate reduction of insurance costs. At present, the commercial underwriters are only able to offer these reductions to the insured through the medium of deductibles. The alternative of a captive insurance company coupled with a reinsurance program will provide greater cost reductions than the adequate premium credits attaching to deductibles under conventional insurance.
The more specific cost advantages provided by reinsurance take the form of premium credits and commissions. These credits and commissions are of course immediate reductions in premium cost to the corporate group but are retained in the captive insurance company.
The use of reinsurance in conjunction with a captive can also provide cash flow benefits to the corporate group. The corporate group, through its captive insurance company, retains the gross premium until the reinsurance premium falls due and is able to generate investment income during the retention period. The ability of the captive insurance company to determine when the annual premiums should be paid by group members can also assist the group cash flow program, provided such payments meet the reinsurance premium requirements.
Cash flow benefits can also be derived from the taxation advantages which accrue from using a captive insurance company. The funds accumulated in the captive insurance company are retained under the control of the corporate group. A flexible policy of investment is therefore possible and prudent investment of such funds should further enhance group profitability. The offshore-based captive provides greater benefits and flexibility for investment of accumulated funds.
The use of a captive insurance company also expedites the settlement of insurance claims. However, the settlement of a loss claim between the captive and the group member must be affected in the proper commercial manner.
The captive insurance company therefore offers the most expedient and beneficial means of obtaining self-insurance backed by reinsurance coverage. It follows that a captive insurance company should be used to complement the activities of the commercial insurance underwriters and not as an alternative to them. The self-insurance of risks which are outside the scope of commercial insurers must also be considered in conjunction with an assessment of your group’s overall risk position. The coverage for this form of self-insurance will be funded entirely from within your group.
Consequently, structural and taxation problems are factors of prime importance and inevitably result in the utilization of a captive insurance company to insure the designated risk. The payment of premiums for insurance coverage is, in most countries, tax deductible irrespective of the nature of the recipient entity. However, self-insurance affected through the creation of internally funded provisions of reserves does not normally generate tax deductions until losses are substantiated. The use of a captive insurance company is therefore a means of crystallizing self-insurance into a distinct corporate entity.
Georgetown Trust, Ltd. has extensive experience in the establishment of all types of offshore insurance arrangements and can provide you with consultation on the formation and management of insurance companies as well as arrange for access to professional risk managers and consultants to handle the day-to-day administration. We also provide international investment management.
When you are ready to proceed with an international insurance company registration, contact us and complete the application form. Ensure that all forms are completed in full, signed where requested and are accompanied by the necessary supporting documents. Send by fax to +501 223-2497.
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Mutual Funds Licensing and Administration – The Mutual Fund Act of 1999
As the only financial center in Central America where English is the official language to conduct business, Belize has endeavored to further strengthen its economic legislation with the introduction of the Mutual Fund Act of 1999. As a result, Belize is now ranked among the top ten offshore financial jurisdictions in the world; and, an invitation has been extended to qualified investors to participate in the three types of offshore mutual funds that encompass the mutual fund industry of Belize i.e. public, private and professional funds. The conditions under which these funds are registered, administrated and managed from within Belize (or elsewhere) are expressly anchored in the Mutual Fund Act and provides for the basic protection of mutual fund investors. The Act does not impose specific requirements with regard to the location of the manager, investment advisor, administrator or the custodian of a public, private or professional fund. As is defined under the Mutual Fund Act, the expression “carrying on business from within Belize” includes carrying on business outside of Belize from a place of business or from a registered office within Belize. For the purpose of “carrying on business as a mutual fund”, a manager or administrator, shall, if carrying on business anywhere outside of Belize, be deemed to be carrying on business from within Belize.
A Public Mutual Fund is allowed to conduct business only after its official prospectus has been inspected by the Registrar of Mutual Funds for official recognition and registration. A public fund is further required by law to maintain a custodian for the day-to-day activities involved in the safekeeping of the fund property that is separate and apart from the activities of the Fund Manager and Administrator. The custodian’s role is to ensure that investors’ interests are protected by checking that the Manager’s actions are in line with the fund regulations and with the particulars of the investment scheme. A licensed trustee is often the custodian for the fund’s underlying property. A public fund has to prepare financial statements and maintain adequate accounting records that are reviewed annually by a recognized auditor from Belize (or elsewhere). The approved financial statements and accounting records for a registered public fund should be kept at its principal place of business in Belize and be made available to all investment shareholders and to the Registrar of Mutual Funds. The Public Mutual fund is widely considered to be one of the most important forms of investment available in a capital market and public offerings made for the purchase of its multiple share class subscriptions provide mutual fund investors with the potential for long-term capital appreciation and growth.
A Private Mutual Fund is prohibited from the offering up of its common stock for subscription by the general public. Consequently, this type of fund is limited only to private stock offerings after it has first applied for and received official recognition from the Registrar of Mutual Funds. Thereafter, it can commence its operations with a closed-end group of investors (less than fifty). Certain private funds are designed primarily to provide capital growth while others are intended to preserve capital.
The Professional Mutual Fund is solely able to offer up its shares for subscription or purchase only to investment professionals. A professional investor is specified as being one whose ordinary business involves the acquisition/disposal of shares in an investment fund or who has a declared net worth of one million United States dollars. The initial investment in respect of each investor in a professional fund is a minimum of one hundred thousand United States dollars (US$100,000) or its equivalent in any currency as is designated by the mutual fund regulations. The professional fund must first receive official recognition from the Registrar of Mutual Funds before it can commence its business operations from Belize.
Mutual funds require reputable third party functionaries (administrators, managers and custodians). Georgetown Trust, Ltd., as a licensed administrator in Belize for mutual funds, can assist you with the fund’s formation and is able to hold the underlying fund property, receive subscriptions and pay out dividends. Georgetown Trust, Ltd. also offers discretionary investment management services and works with some of the best brokerage and offshore hedge fund managers spanning the globe thereby providing our clients with an individualized and structured portfolio of offshore funds that may include specialized funds.
An international business company (IBC), partnership (LLP) or a Unit Trust can be the applicant for a Mutual Fund license. Funds that are recognized and registered under the Mutual Fund Act of Belize are exempted from Exchange Control regulations and from all income tax, business tax and stamp duty. This is therefore a unique and diverse investment opportunity that yields tax free dividends and capital gains for mutual fund investors.
When you are ready to precede with an offshore mutual fund license registration, contact us and complete the application form. Ensure that all forms are completed in full, signed where requested and are accompanied by the necessary supporting documents. Send by fax to +501 223-2497.