Offshore Financial Services Research Articles

All exclusive: the politics of offshore finance in Mexico

At first sight, Mexico appears to be a textbook example of a state affected by offshore finance. Offshore financial services allow corporations and the wealthy to plan taxes, avoid regulations or to launder money. The literature holds that large, developing, open economies, with geographical proximity to offshore centers and problems of crime and corruption are particularly affected by offshoring. By this logic, we should expect Mexico to show a significant demand for offshore financial services. Yet, new empirical evidence derived from interviews and banking statistics suggests otherwise. Mexican firms and individuals make only limited use of offshore finance. The article explains why. Building on a Weberian notion of the state, the article shows that the historically exclusive nature of Mexico’s state concentrates political and economic power such that the onshore economy offers similar rents for economic elites as offshoring. Moreover, in instances where economic actors use offshore services it is driven by banking, not taxation. These findings have two theoretical implications. First, they confirm that institutions matter, though differently than hitherto thought. Second, we must look beyond taxation to include banking into our analyses.

Investment Migration and Subnational Jurisdictions

This chapter sets out to explain the position of small islands, focusing on their economic and citizenship dependence on metropolitan states. These small jurisdictions argue that their market operations could be legitimately described as improving the institutional ‘efficiency’ of financial markets. Moreover, and quite realistically, they have limited development choices to consider and are effectively playing to their narrow competitive edge, as rendered by their sub-national status, small size and islandness. These acts, suitably ring fenced, are expressions of ‘creative governance’, a blatant and market driven exploitation of political geography for economic, fiscal or strategic gain. Furthermore, the ‘governmentality’ of the territorial state – its clout and reach over the behaviour of its citizens – is being sorely tested, with the proliferation of offshore banking and dual nationality/multi-passporting for various clients, ranging from transnational corporations to ‘cosmopolites’ to those unable or unwilling to tolerate particular leaders at home. Such practices are being also abetted by the politico-economic elite at the helm of small, often island, jurisdictions: these policy shapers sense – and are reminded by the international corporate world – that they have a rare competitive advantage in widening their jurisdiction’s tax base by reducing tax rates and offering citizenship schemes. Criticism and conceptual provocations, of course, abound, and especially since the 2008 global financial crisis, when leading economies have been naming and shaming individual and corporate tax offenders in attempt to collect their tax. The very principle of ‘offshore financial services’, for all its veneer of respectability, has been subjected to disrepute because the legal products being offered are tantamount to acts of ‘selling sovereignty’. The practice has been sometimes viewed as part of a suite of desperate measures taken by small and chronically vulnerable and cash strapped territories, often connived by external elites who can capture the state to do their bidding. That said, citizenship by investment programs have recently been proliferating and this trend is expected to continue. The extra-territoriality potential offered by such spaces as the high seas, the Moon and the Planet Mars renders them attractive locales for novel governance regimes that may wish to escape the clutches of rapacious, tax-seeking states. Meanwhile, here on Planet Earth and on solid ground, subnational jurisdictions are ‘territories sui generis’ that already offer their own opportunities for creative endeavour.

The impact of the 2008 global crisis on small economies in the Caribbean

ABSTRACTThis paper investigates the impact of the global 2008 crisis on the Caribbean region, with particular focus on its many small tourism-dependent economies. Specialization in tourism and, in some cases, offshore financial services has been a successful specialization strategy for many small economies but has made them highly susceptible to exogenous economic shocks. The paper utilizes cluster analysis to identify five distinct pre-crisis patterns of sectoral specialization in Caribbean economies generally. The 2008 crisis is shown to have had very distinct cluster-specific effects, with small economies specializing in tourism and financial services being the worst affected. These findings raise important questions regarding the future sustainability of this sectoral growth template, previously adopted by many successful small economies.

La armonización en materia de protección al consumidor financiero en América Latina

Globally, both States and the international financial architecture have searched all the rules governing the financial markets have intended the stability of financial markets. This situation has resulted in the prudential regulation of Latin American States. The process of integration of financial markets is a dynamic global, regional and bilateral. Similarly, technological advances and the generation and marketing of products and offshore financial services have led to the disappearance of borders in the global financial markets. However, the protection of financial consumers is an issue that has not had the expected development just having a particular importance because of the dire consequences of financial crises. Thus, financial consumer of Latin American countries in addition to state protection should have a regional protection to guarantee their rights in the process of financial integration that are being developed.

From Boom to Doom to Boom: Offshore Financial Centres and Development in Small States

During the 1990s tax havens and offshore financial centres (OFCs) were subject to a string of initiatives designed to raise their tax and regulatory regimes to accepted international standards. Many commentators forecast that this would lead to the demise of OFCs, a worry for the many small states whose economic well being depended heavily on the provision of offshore financial services. Despite this regulatory onslaught many small state OFCs have prospered in the new millennium. This paper seeks to explain this apparent paradox by arguing that (1) international initiatives were riddled with loopholes and exceptions that have been gleefully seized upon by the fertile minds of international tax planners (2) that powerful states and groups, most notably the international tax planning industry, successfully diluted the original proposals. Consequently OFCs have been able to garner the reputation benefits of being compliant with international standards without having to fundamentally alter the secrecy and regulatory provisions at the heart of their competitive advantage. Moreover, a similar story is being played out in the aftermath of the recent financial crisis. The original opponents of financial transparency have been bolstered by new players from the emerging economies. This coalition of forces is likely to blunt efforts by the G20 to “end the era” of banking secrecy.

Special Tax Zones and the WTO

Since the SCM agreement was enacted in 1995, the global leadership in the field of STZs has shifted from the OECD to the WTO. The WTO general agreement includes a broad set of policy goals that goes beyond trade relationships, but its legal framework has been systematically narrowed to the task of assuring market access, non-discrimination, and fairness in trade. Other relevant issues that has impacts on trade, such as for example harmful tax competition or tax base erosion, has not been sufficiently weighted and has been treated as secondary items. As of today, having passed more than 20 years since the enactment of the first WTO agreements, the WTO overall treatment of STZs appears to be inconsistent with the general policy goals of the organization. While service STZs generally remain free from challenge because there are no formal subsidy rules concerning services, manufacturing STZs with substantial activities have been significantly curtailed by the SCM Agreement. The disparity in the treatment of “goods” and “services” has produced a negative impact on developing countries, as they tend to rely more on manufacturing STZs to achieve economic growth, while benefitting developed countries, which to rely more on offshore banking, technology, and financial services STZs in order and attract investment. The fairness and distributional concerns raised by this disparity in treatment has also been placed in a secondary position, on the grounds that the objectives of the WTO are limited to market access, freedom, and non-discrimination in trade. This perspective, however, is not consistent with the rationale and general policy goals of the organization, as provided by the main WTO agreement.

Tax Evasion, Money Laundering and Tax Transparency in the EU Overseas Countries and Territories: Ex-Post Impact Assessment

This study aims to present the legal, political and institutional framework governing offshore practices in the Overseas Countries and Territories (OCTs) of the European Union, which fall under the sovereignty of four Member States: Denmark, France, the Netherlands and the United Kingdom. It contains an opening analysis that defines the key concepts, including tax evasion, money laundering and tax transparency; outlines the scope of the study (to differentiate the OCTs from other places often mentioned within the context of offshore financial services); and briefly describes the particular case of Greenland. In addition, a comparative analysis of the legal, political and institutional framework governing EU relations with and within the respective OCTs is complemented by an overview of the EU framework and opportunities for action. This aspect can be of significance, especially in view of the UK’s announced withdrawal from the European Union. The detailed annexed contributions covering the OCTs under French, Dutch and British rule, and which constitute a basis for this analysis, were written by external experts.

Evolutionary Economic Geography for OFCs: Do Political Ties to the Onshore Reduce Capital Inflow Volatility?

AbstractThis paper analyses the structural change in small‐island economies—sometimes labeled offshore financial centers (OFCs)—that have seen wealth‐generating activities through offshore financial services decrease in value since 2008. At the same time, OFCs have come under increasing scrutiny from supranational organizations such Organization for Economic Co‐operation and Development and European Union for perceived unfair tax practices and money laundering activities. Some OFCs have proactively adjusted to this sea change by broadening the economic base through development of new offshore business activities such as e‐gaming, film industry, and niche manufacturing. Most have increased co‐operation with onshore regulatory bodies to promote service and product legitimacy. Econometric analysis explores the assertion that OFCs that do not have a political link to the onshore may be exposed to greater capital inflows volatility than OFCs that have such a link. Case study analysis using the theoretical lens of evolutionary economic geography illustrates that a small OFC is creating spatialities of economic novelty by adapting economic development strategies deployed during the successful development of the center prior to the recent recession. Our findings reveal the importance of political links to the onshore to reduce capital inflow volatility and the importance of local public–private interaction to legitimize post‐recession development.

Bill Maurer

Professor Bill Maurer is a renowned cultural anthropologist who conducts research on law, property, money and finance, focusing on the technological infrastructures and social relations of exchange and payment. Professor Maurer graduated from Stanford University in 1994 with a PhD in Anthropology. He moved to UC Irvine in 1996 as Assistant Professor, going on to become Chair of UC Irvine’s Department of Anthropology (2005-2011) and Associate Dean for Research and Graduate Studies in the Social Sciences (2011-2013). In July 2013 he assumed his current role as Dean of UC Irvine’s School of Social Sciences. Professor Maurer has published on topics ranging from offshore financial services to mobile phone-enabled money transfers, Islamic finance, alternative currencies, and the future of money. He is founding director of the Institute for Money, Technology and Financial Inclusion, funded by the Bill and Melinda Gates Foundation, and was the founding co-director of the Intel Science and Technology Center in Social Computing. He is the editor of six collections, as well as the author of Recharting the Caribbean: Land, Law and Citizenship in the British Virgin Islands (1997), Pious Property: Islamic Mortgages in the United States (2006), and Mutual Life, Limited: Islamic Banking, Alternative Currencies, Lateral Reason (2005). The latter received the Victor Turner Prize in 2005. Professor Maurer visited the University of Warwick in September 2014 under the auspices of Warwick’s Global Governance GRP.

Foundations--a new vehicle for Jersey

The recent adoption of the ‘Foundations (Jersey) Law 200’—builds upon Jersey's ability to provide offshore financial services. Alongside existing vehicles, such as companies, trusts and limited partnerships, the new law will introduce the concept of foundations. Long a part of the civil law system, it is anticipated that foundations will particularly appeal to clients based in continental Europe and the Middle East. A foundation can be thought of as sharing some of the characteristics of both a company and a trust. Like a company, it will have a separate legal personality meaning that it will hold assets in its own name, will be able to enter directly into contracts and will be able to sue and be sued. This will have obvious benefits for any third parties wishing to contract with a foundation, since that third party will easily be able to ascertain the existence and status of the foundation...

Competitive or Coercive? The Experience of Caribbean Offshore Financial Centres with Global Governance

This article examines the readiness to be internationally competitive on the part of small vulnerable economies through a consideration of Caribbean offshore financial centres. More specifically, it analyses the space for decision making to enhance the competitiveness of financial service provision permitted by the increased institutionalization of global financial governance. The promulgation of international standards and best practices for the operation of financial services has moved beyond the concerns with global financial stability and supervision (a predominant concern in the late 1990s) to focus on measures against terrorist financing today as states seek to achieve a measure of security through financial surveillance and discipline. Collectively, increased governance produces increased costs for national financial supervisory authorities, which over-extends in particular the capacity and capability of small jurisdictions. To combine these regimes of governance with initiatives to establish an international ‘level playing field’ in financial services produces a competitive environment that privileges the larger developed economies. From this perspective, it is less a matter of competition and more a case of coercion, which then lessens the opportunity to structure an internationally competitive small economy using offshore financial services as one avenue towards economic development. At the same time, the nature of the states system continues to provide a space in which offshore financial centres may compete.

The Economics of Offshore Financial Services and the Choice of Tax, Currency, and Exchange-Rate Regimes

Open-economy macroeconomists regularly invoke the policy trilemma that states that governments cannot simultaneously maintain an open capital account, a fixed exchange rate, and a domestically-oriented monetary policy. My thesis is that jurisdictions with substantial offshore activities find these and other macroeconomic choices significantly affected by something else: Concern for the continued health and development of their international financial business. Monetary, exchange-rate, and tax policies and the choice of domestic currency all will be impacted by this concern. The different choices made by (1) Denmark and Malta in ERM II, (2) offshore financial centers in Europe, and (3) financial centers in East Asia are considered to develop some general conclusions.

Offshore Financial Services and the Internet: Creating Confidence in the Use of Cyberspace?

Abstract The use of the Internet and World Wide Web (WWW) as a distributive medium is seen by many businesses as a legitimate way to cut costs of operation. Confidence is growing in the use of this medium to transact business because of the increasing sophistication of firewalls, encryption software, and digital key technology. This paper presents empirical evidence from one offshore financial center where the process of legislative and regulatory reform put in place to establish confidence in the traditional provision of offshore financial services is now being used to regulate and legitimize the online distribution of such services. The results show that all firms surveyed for this study use the Internet for routine brochure‐ware purposes and the larger firms (particularly in the offshore life insurance sector) are developing more sophisticated customized transactional functions via extranet platforms. Tensions exist though with respect to “regulatory grasp” via the Internet, as offshore places are being put under increased pressure by supranational organizations such as the Organization for Economic Cooperation and Development (OECD) and Financial Action Task Force (FATF) to require greater transparency in offshore financial transactions.

At whose service? Caribbean state posture, merchant capital and the export services option

Elite planners in the Eastern Caribbean sub-region pin their hopes of economic viability on tourism, a vibrant offshore financial (and other) services sector and an increase in export activity from companies operating out of industrial parks. Framed against the perception of an inevitable globalisation process underway, with limitations posed to high-level or diversified manufacturing, power holders have sought to concentrate on the promotion of 'export services' as a viable cover against new competitive challenges. This article argues, however, that this state of affairs betrays a crisis-of-mission within the ruling class on how to reconstruct political economies marked by the hegemony of merchant capital. Rather than a move towards what are globally the most remunerative factors of production--high-level manufacturing and services--a rather curious consensus has emerged which proclaims a solid future for export services without roots and/or ganglia to local manufacturing. The success of such an 'export services' model anywhere in the Eastern Caribbean will not turn as much on the quality of human resources as it will on overcoming the short-term horizon of local politicians, and the low-risk predilections of the wealthy planter-merchant elite. The latter's conscious 'opt out' strategy on the question of manufacturing diversity has made for a strikingly conservative enterprise culture. More specifically, merchant capitalist societies like those in the Eastern Caribbean insufficiently display the sociocultural attributes required for the creation of high-level services: innovation-mediated risk, research and development competence, and affinities to industrial processes and networks.

St. Vincent and the Grenadines: 2001 Article IV Consultation--Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for St. Vincent and the Grenadines

This 2001 Article IV Consultation highlights that in recent years, economy of St. Vincent and the Grenadines has diversified from bananas into services, mainly tourism, telephone and Internet-based marketing, and offshore financial services. However, the rate of economic growth declined sharply to 2 percent in 2000. The external current account deficit is estimated to have doubled to about 16½ percent of GDP in 2001 largely owing to a decline in banana export volumes, higher imports, and a slowdown in tourism receipts and remittances.

Globalization in a small island context: creating and marketing competitive advantage for offshore financial services

(2001). Globalization in a small island context: creating and marketing competitive advantage for offshore financial services. Geografiska Annaler: Series B, Human Geography: Vol. 83, No. 4, pp. 161-174.

Engineering an Islamic future

Anthropology TodayVolume 17, Issue 1 p. 8-11 Engineering an Islamic future Speculations on Islamic financial alternatives Bill Maurer, Bill Maurer Associate Professor, Department of Anthropology, University of CaliforniaSearch for more papers by this author Bill Maurer, Bill Maurer Associate Professor, Department of Anthropology, University of CaliforniaSearch for more papers by this author First published: 20 December 2002 https://doi.org/10.1111/1467-8322.t01-1-00040Citations: 25AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Citing Literature Volume17, Issue1February 2001Pages 8-11 RelatedInformation

The Role of Corporate, Professional, and Personal Networks in the Provision of Offshore Financial Services

In a small island offshore financial center (OFC), different kinds of networks influence the provision of financial services. In this paper I will analyze the roles played by corporate, professional, and personal networks in the creation of a superior reputation among competing OFCs. Empirical evidence has shown that the success of an OFC is driven by appropriate financial regulation and supervision addressing the critical precepts of reputation and trust. Such spatially focused regulation can be created by networks of professional associations such as banking or insurance associations interacting with public sector officials on a regular basis. Continued growth of an OFC occurs through marketing efforts of both corporate and personal networks. The dynamic nature of these networks and their social structure encompassing power and gender relations will be explored.

Book Review

Journal Article Book Review Get access OFFSHORE FINANCIAL SERVICES HANDBOOK Second Edition by Bill Penman Brown, Price: £80.0 (US$145.00 + p&p) Published by: Gresham Books (Woodhead Publishing Ltd), Cambridge, UKISBN: 1 85573 413 3 John Goldsworth John Goldsworth Search for other works by this author on: Oxford Academic Google Scholar Trusts & Trustees, Volume 5, Issue 5, April 1999, Pages 23–32, https://doi.org/10.1093/tandt/5.5.23 Published: 01 April 1999

Sex, AIDS, migration, and prostitution : human trafficking in the Caribbean

Study of sexual tourism in Saint Martin/Sint Maarten, where prostitution is a widespread reality. Author argues that on this island where rapid economic development is based on the tourist industry and on offshore financial services, sexual relationships are determined by geopolitical and financial (neoliberal) interests that go beyond sexuality per se. She focuses on the precarious situation of the foreign prostitutes who have no working papers.