Island Lifemoney laundering The process of taking the proceeds of criminal activity and making them appear legal.
Laundering allows criminals to transform illegally obtained gain into seemingly legitimate funds. . The result is that the line between "off-shore" and "onshore" financial centers has become so blurred that the International Monetary Fund (IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). ) has declared the term Offshore financial center" obsolete.
The changes have taken place just in time for the Caribbean centers, which have been feeling the heat of intensifying competition from new financial centers sprouting up around the globe.
One of the advantages of the Caribbean's financial centers-as well as Bermuda, which is commonly grouped with the Caribbean centers-is that they are well established. "There are no major surprises in the region. It offers stability," says Olga Kalinina, credit analyst in the sovereign ratings group at Standard & Poors in New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . "There is a strong institutional framework and policy predictability. Investors know that this will not change. There won't be any nationalizations."
But officials in this diverse group of more than two-dozen islands, stretching from Bermuda in the north Atlantic to Trinidad and Tobago Trinidad and Tobago (trĭn`ĭdăd, təbā`gō), officially Republic of Trinidad and Tobago, republic (2005 est. pop. 1,088,000), 1,980 sq mi (5,129 sq km), West Indies. The capital is Port of Spain. in the southern Caribbean This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.
You can assist by [ editing it] now. , have their work cut out for them as they struggle with competition from newer financial centers such as Dubai, Singapore and Botswana. And like any location struggling with labels such as "tax haven Tax Haven
A country that offers individuals and businesses little or no tax liability.
There are several countries in the Caribbean that are considered tax havens. " or "offshore financial center" and their association, fair or not, with images of tax evasion The process whereby a person, through commission of Fraud, unlawfully pays less tax than the law mandates.
Tax evasion is a criminal offense under federal and state statutes. A person who is convicted is subject to a prison sentence, a fine, or both. and the laundering of tainted cash, these countries and territories must now deal with the tougher laws and edicts slapped down by international and national authorities.
"The labeling of these countries as tax havens created a lot of negative reaction," says Trevor Alleyne at the IMF, adding that the greater international scrutiny of money-laundering activities also hurt these centers' images. "There was a stigma around the fact that they were poorly regulated," he adds.
In mid-2000 the Organization for Economic Cooperation and Development Organization for Economic Cooperation and Development (OECD), international organization that came into being in 1961. It superseded the Organization for European Economic Cooperation, which had been founded in 1948 to coordinate the Marshall Plan for European (OECD OECD: see Organization for Economic Cooperation and Development. ), for example, launched an initiative to crack down on money laundering and tax evasion while encouraging greater financial transparency at offshore financial centers around the world. At that time, nearly half of the 35 jurisdictions targeted by the OECD were in the Caribbean. Two years later the Caribbean countries had moved themselves off the hot seat by vowing to help other countries track down tax cheats.
The heat was turned up again after the terrorist attacks on the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. in September 2001, when international organizations and many national governments demanded more diligent tracking of financial flows around the globe. Legislation such as the US Patriot Act US PATRIOT ACT Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act affected all financial jurisdictions, not just the Caribbean, as US treasury officials attempted to block funding conduits for terrorists.
Officials in the Caribbean agree that one result of the greater scrutiny was a stronger financial services regulatory regime, more transparent governance and greater adherence to international best practices by corporations operating there. "After the blacklisting, the countries moved to improve their anti-money-laundering regulations," says Howard Edmonds, financial sector adviser at the Caribbean Regional Technical Assistance Center (Cartec) in Barbados. The countries with larger and more established financial centers, such as the Bahamas, Bermuda, Cayman Islands and Barbados, actually fared well as investors and institutions sought out reliable sources for their investments.
Uniform Regulations Emerge
In a move meant to reflect the global shift to more uniform regulation of offshore and onshore financial centers, the IMF in early July dropped the distinction between offshore and onshore financial centers, saying globalization globalization
Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation had blurred the distinction. The IMF says it is moving toward a more uniform and risk-based approach to financial sector surveillance.
The Caribbean region's financial services sector has also been strengthened by the guidance provided through the Caribbean Financial Action Task Force, an organization of 30 Caribbean Basin states created in the early 1990s to establish common measures to counter money laundering.
Edmonds says the more stringent regulations and greater scrutiny have generally made it more difficult, and frequently more expensive, for offshore companies to set up entities in the region. "There are higher standards now," says Edmonds. "Nobody wants to be associated with lax supervision."
Daniel Mitchell, a senior fellow at the Cato Institute in Washington, DC, says the development of the financial services sector is crucial for the long-term economic growth of the Caribbean. Too sparsely populated and too far removed from major population centers to make the region a viable manufacturing locale, it has relied on tourism to diversify from agriculture. "Growing sugar cane is not competitive anymore," says Mitchell, who specializes in tax reform and supply-side tax policy. "And serving pina coladas to tourists isn't going to produce great wealth for the local population."
Banks, insurers, insurance captives and hedge funds can boost the local economies through better-paying jobs and tax revenue that can improve the physical infrastructure and develop the human capital with stronger schools, adds Mitchell. Yet at this point only the more developed financial centers, such as the Cayman Islands, Bermuda and Bahamas, have seen the higher-paying jobs in the law, accounting and actuarial fields trickle down Trickle down
An economic theory that the support of businesses that allows them to flourish will eventually benefit middle- and lower-income people, in the form of increased economic activity and reduced unemployment. to the local populace. "[Financial services] is not a silver bullet, but the sector helps in direct ways, such as jobs and tax revenues," says Mitchell.
Therese Turner-Jones, program coordinator at Cartec in Barbados, says policymakers need to keep diversifying the economy away from agriculture, tourism and apparel, which has lost ground to the low-cost manufacturing factories in Southeast Asia.
Several of the smaller Caribbean countries, such as St. Lucia and St. Vincent, were hit by a World Trade Organization ruling opening the banana market to more competition. The recent drop in sugar prices has left only Barbados, which produces rum for export, with a significant sugar industry, notes Turner-Jones.
The islands continue to face other challenges, as well-from the perennial rebuilding after a severe hurricane season, to the more recent soaring costs of fuel and food, both of which must be imported in large quantities.
"The financial sector is on everybody's mind," says Turner-Jones. "But officials should also be using their welleducated citizens to develop other industries, such as offshore medical services and investing in technology-not just call centers, but education in technology, as was done in India."
Even with a limited retail or corporate banking market that dampens the region's draw for foreign banks, the Caribbean has had its share of foreign banking activity over the past several years. Last year CIBC CIBC Canadian Imperial Bank of Commerce
CIBC Centres Interinstitutionnels de Bilan de Compétences
CIBC Commonwealth Institute of Biological Control (Trinidad)
CIBC Commercial International Brokerage Company assumed sole ownership of FirstCaribbean International Bank
- For other banks with a similar name, see First Bank.
FirstCaribbean International Bank (FCIB) is a Barbados-based, publically held Caribbean financial services company formed in 2001 as a joint venture merging the Caribbean operations of Barclays in Barbados, points out Leonardo Bravo, a credit analyst with the financial ratings group of Standard & Poor's in Mexico City.
That followed an earlier acquisition of Bank of Bermuda The Bank of Bermuda Limited is a leading financial services company in Bermuda providing fund administration, trust, custody, asset management and banking services to institutions and individuals. by HSBC HSBC Hongkong and Shanghai Banking Corporation
HSBC Humane Society of Broward County (Florida)
HSBC Humane Society of Bay County (Bay County, Michigan) in 2004. Bank of Bermuda, which had assets of $10.7 billion at year-end 2007, caters to the island's wealthy residents, with asset management and trust services. The island's other large bank is the Bank of N.T. Butterfield, which had assets of $12.3 billion at the end of the second quarter. With 20% annual growth rates Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.
Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , the retail banking sector in Bermuda is experiencing stronger growth than the corporate loan market, which is expanding at 10% to 15%, says Robert Hansen, a credit analyst at S&P's financial institutions ratings group in New York. Those rates should slow this year and next, he says, adding that conservative lending policies have allowed Bermudan banks to largely avoid the subprime mortgage crisis hitting banks in the US and Europe.
Bankers agree that the limited size of the Caribbean banking market makes it an unlikely target for future acquisitions by foreign banks. Yet Royal Bank of Canada Bank of Canada
Canada's central bank, established under the Bank of Canada Act (1934). It was founded during the Great Depression to regulate credit and currency. The Bank acts as the Canadian government's fiscal agent and has the sole right to issue paper money. recently expanded its extensive presence in the region by buying the RBTT RBTT Royal Bank of Trinidad & Tobago Financial Group.
Sealed in June, the $2.2 billion transaction creates one of the largest banking networks in the Caribbean, with operations in 18 countries and territories. The transaction will also mark RBC's return to Trinidad and Tobago, where it had maintained operations from 1902 to 1987, when it sold off its remaining shares in RBTT. RBC RBC red blood cell.
RBC or rbc
red blood cell
n See red blood cell count.
red blood cells; red blood (cell) count (see blood count). plans to shift its Caribbean headquarters from the Bahamas to Trinidad and Tobago's capital, Port of Spain Port of Spain, city (1990 pop. 50,878), capital of Trinidad and Tobago, on the Gulf of Paria. It is the industrial and commercial center of the country. From 1958 to 1962, Port of Spain was the capital of the dissolved Federation of the West Indies; in 2005 it became , a move that coincides with the country's efforts to build on its oil and natural gas wealth and develop itself as a financial center for the Caribbean.
Suresh Sookoo, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of RBTT Financial Group, says the country plans to use its proximity to Central America, its English-speaking population, strong air transportation links and fiscal incentives to develop as an international financial center.
A senior executive at Citi sees all international financial centers playing an increasing role in the modern business world as it becomes more global. "But each center needs to offer a unique service," says Suresh Maharaj, corporate and investment banking head for Citi in Central America and the Caribbean. He says Trinidad and Tobago has played a major role in the development of the region's capital markets by "raising capital for regional governments and private institutions."
Michael Cormier, managing director of captive solutions at Marsh, the global insurance broker and risk adviser based in New York City New York City: see New York, city.
New York City
City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , agrees that offering a unique asset to foreign clients is essential if a country is to thrive as a financial center. Nations such as Bermuda, the Cayman Islands and Barbados that have gained revenue from the captive insurance industry for years have to contend now with competition from about 20 states in the US that have set up legislation to lure captives.
At the same time, North America, the main driver for captives based in the Caribbean, has registered a slow to flat market for new captives over the past three to four years. As of March the number of captives in Bermuda totaled 958, followed by 765 in Cayman and 567 in Vermont, which has had legislation encouraging the growth of the captive market for many years.
"That's going to be one of the challenges for them-differentiating yourself," says Cormier. "There are many more options for companies to remain onshore. And there's not the stigma of going offshore."
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