Prospects for Offshore Private Banking in St. Lucia
ndustry experts have estimated that the Caribbean basin has attracted well over USD$3 trillion through the provision of international financial services. Despite pressures from the OECD, FATF, and other non-governmental organizations and interest groups, the well regulated Caribbean international financial services jurisdictions have been able to remain attractive to international investors and are now poised to facilitate any type and size of investment within frameworks that rival, and in some respects, surpass traditional financial centers.
International private banking attracts primarily the medium to high net worth international investor who seeks flexible investment products, multi-currency facilities, personal account management services, online banking and securities trading services, and confidentiality. Other services such as corporate and trust services must also be offered by international private banks in order to meet customers’ demands for ‘one-stop shopping’ facilities. There has been an industry trend to move towards outsourcing the best investment products on the market. This allows a private bank to offer the best products and services and keep overheads such as back office administration and extra staffing to a minimum.
International private banks in the Caribbean will become more attractive to European investors in the near future because of issues such as the European Savings Tax Directive which will directly affect the European banking sector. Estimates show that the European banking sector will lose billions of dollars in capital flight to other banking jurisdictions. Countries such as Singapore and some smaller Caribbean centres have aggressively marketed themselves as world class financial centers and this move has paid great dividends. Credit Suisse has opened a subsidiary operation in Singapore where many European investors have chosen to shift their investments. Royal Bank of Canada, CIBC, and London Life have all established successful subsidiary operations in the region. Australian investors have been showing interest in international financial services and private banking in the Caribbean as tax efficient corporate structuring has become an exploding Australian trend. Latin America is a burgeoning investment market and the close proximity of the Caribbean islands from Latin America will undoubtedly prove to be an incentive for investors in that region seeking private banking services. Overall, net flows through international financial services jurisdictions are still in excess of five trillion dollars per year.
Offshore private banks are generally located in stable political and economic jurisdictions. The main environmental factors threatening the industry and its participants are the pressures exerted by NGO’s such as the OECD and the FATF. These NGO’s wield considerable influence on national governments and, consequently, their agendas permeate through to the legislative process and eventually end up as law in international financial services jurisdictions. However, there have been many recent challenges to the tax and anti-money laundering recommendations of the OECD and the FATF which have considerably impeded the advancement of their agendas. For example, the Society of Trust and Estate Practitioners has recently successfully argued for a revision of the OECD international financial services reform recommendations which are premised on a quirky mix of double standards that do not impose the recommendations on all OECD member states. Adequate anti-money laundering structures have been implemented in most international financial services jurisdictions which, in effect, has exhausted the main argument relied upon by the OECD and FATF for international financial services reform.
The reforms legislated by many Caribbean jurisdictions have actually strengthened and refined the jurisdictions and the net effect has been the evolution of world class international business centers which can boast sound and practical regulatory frameworks, expert service providers, and proactive public sector support bases. For the foreseeable future, as long as the industry maintains sound regulatory policies, the offshore private banking industry will continue to expand and will not cease to provide a more attractive and efficient alternative to onshore banking. St.Lucia is a model international financial services jurisdiction and has been very proactive in the areas of regulation and marketing. 2004 is projected to be a breakout year for St.Lucia in the area of private banking and the next newsletter will illustrate the steady pace of advancement in this particular area of international financial services in St.Lucia.
