St Vincent and the Grenadines has built a foundation for the rapid growth and development of its int...
St Vincent and the Grenadines has built a foundation for the rapid growth and development of its international financial services sector. The government enacted legislation intended to burnish the country's reputation and image as a safe, reliable and transparent destination for international companies, financiers, bankers and developers.
Among the laws passed in the last five years are the Proceeds of Crime and Money Laundering Prevention Act (2001), with amendments in 2002 and 2005, United Nations Anti Terrorism Act (2002), International Trust Amendment Act (2002), International Business Companies Act Amendment Act (2002), and most recently the International Banks Act (2004). In addition, the local authorities created a national framework for dialogue and coordination with the formation of the National Anti- Money Laundering Committee.
The country's prime minister Ralph Gonsalves, who also holds responsibility for finance and legal affairs, said the new laws and regulations were intended to "strengthen the regulatory framework and to ensure that the country was removed from the Financial Action Task Force (FATF) black list." St Vincent and the Grenadines developed a robust and successful offshore financial sector during the 1990s only to face blacklisting at the turn of the century.
The government's legislative and juridical manoeuvres and the efforts of Louise Mitchell, the executive director of the International Financial Services Authority were responsible for the removal of the country from the blacklist in 2003. Mitchell said the institutional framework of the local authority was strengthened and more attention was paid to employing a competent and efficient staff. "With these changes, we proved to ourselves and demonstrated to the world that we could deal with our problems and compete."
Mitchell said the offshore world of international finance is very competitive. This sector cannot exist unless it is well regulated and well regarded. She is convinced that St Vincent and the Grenadines has turned the corner and is on its way to even more successes.
The numbers seem to validate her confidence. Between 1999 and 2002, the sector grossed over $3m. With blacklisting returns fell to $2.3m in 2003. Mitchell believes that the fall off came about because the news of St Vincent and the grenadines removal from the blacklist "never got out." In 2004 returns increased by 20% to $2.9m. Last year, the country grossed $3.2m to take it pass the pre-blacklisting level. Mitchell predicts that the trend towards further consolidation and greater financial rewards for the country will continue well into the future.
Before 2001 the Offshore Financial Authority was responsible for both the promotion and regulation of all international business and finance coming into the country. On reflection, the authorities thought this was problematic. The marriage of the functions was seen as a potential conflict of interest. Laws and regulations were enacted to clarify and decouple the functions.
Today the International Financial Services Authority retains responsibility for the regulation of the sector while National Investment Promotions Inc (NIPI) markets the country's potential and resources to the rest of the world. Mitchell said this division of duties and responsibilities contributes positively to the investment climate. The country is now more visible overseas. This higher profile is responsible for the spate of new investments in tourism, airport and other infrastructural development.
Another critical issue that has helped the country's resurgence as an important international financial destination is "a change in the dialogue with the Organization for Economic Co-operation and Development (OECD)," opines Mitchell. This change in dialogue with the developed countries has resulted in a new understanding and agreement. All of the parties now agree that tax competition, which many poorer countries have embraced as a way to increase their finances, is not intended to create a safe haven for unethical, unscrupulous and illicit activities.
There is a new understanding that countries cannot be required to automatically share tax information in the absence of a level-playing field. New benchmarks have been agreed on that monitors progress. A consequence of this new spirit of co-operation is an agreement by OECD countries to shelve the dead for movement and progress on infrastructural, legislative and regulatory changes they had formerly insisted on.
According to Mitchell, there are even more changes on the horizon intended to strengthen the country's position in the rapidly changing sector. There is a plan to introduce a new International Business Companies Act. Now in the draft stages the proposal is to offer a new hybrid business entity allowing for both shareholders and guaranteed members. This act will also strengthen the authority's hand by enhancing its enforcement powers.
Plans are also afoot to pass a Limited Liability Company Act. Such a company will be able to function without bylaws and have operating agreements like a contract. Among the benefits to this type of company is that it offers more flexibility. It is given the tax treatment as if it was a partnership and is not taxed as a company.
International businesses respond to business environments that have low transactional cost and strong asset protection laws. Over 7,000 international business companies (IBC's), hundreds of trusts 35 mutual fund entities, 17 insurance companies call St Vincent and the Grenadines home. Work done in the recent past demonstrates that the country is open for business. St Vincent and the Grenadines is as reliable, efficient, accountable and transparent as any other destination on earth. Don't commit blindly. Come take a look and see why thousands of your business colleagues selected this island paradise as the natural place from which to do business.
Written in cooperation with J. Thomas.
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