OFFSHORE FINANCIAL TRANSACTIONS

In popular use, "offshore banking" is often taken to mean nothing more than persons resident in one legal jurisdiction holding assets in financial institutions incorporated in another jurisdiction. Offshore financial transactions have a precise meaning. Banks or other financial institutions operating "offshore" are exempt from a wide range of regulations normally imposed on "onshore" institutions. Their transactions are tax-exempt, not encumbered by reserve requirements, free of interest-rate restrictions and often, though not always, exempt from regulatory scrutiny with respect to liquidity or capital adequacy. Over the last 50 years, all of the world's major banks have opened branches in offshore financial centres. A number of jurisdictions have been willing to "charter" banks upon presentation of the required fees. As long as they do not do banking business with the local population, their books are unexamined and their practices are uncontrolled.