In the 21st century, regulation of Offshore banking has increased exponentially but not evenly, although critics usually focus on the wrong areas. Regulation of international banks. The quality of the regulation is monitored by supra-national bodies such as the International Monetary Fund (IMF). Banks are generally required to maintain capital adequacy in accordance with international standards. They must report at least quarterly to the regulator on the current state of the business.
Since the late 1990s, especially following September 11, 2001, there have been a number of initiatives to increase the transparency of Offshore Banking, although critics such as the Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC) non-governmental organization (NGO) maintain that they have been insufficient. A few examples of these are:
- The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers and other service providers are required by law to report suspicion of money laundering to the local police authority, regardless of banking secrecy rules. There is more international co-operation between police authorities.
- In the US the Internal Revenue Service (IRS) introduced Qualifying Intermediary requirements, which mean that the names of the recipients of US-source investment income are passed to the IRS.
- Following 9/11 the US introduced the USA PATRIOT Act, which authorizes the US authorities to seize the assets of a bank, where it is believed that the bank holds assets for a suspected criminal. Similar measures have been introduced in some other countries.
- The European Union has introduced sharing of information between certain jurisdictions, and enforced this in respect of certain controlled centers, such as the UK Offshore Islands, so that tax information is able to be shared in respect of interest.
- The Bank Secrecy Act requires that Taxpayers file an FBAR for accounts outside of the United States that have balances in excess of $10,000
- FATCA (the Foreign Account Tax Compliance Act) became law in 2010 and “targets tax non-compliance by US taxpayers with foreign accounts [and] focuses on reporting by US taxpayers about certain foreign financial accounts and offshore assets [and] foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest.”
Joseph Stiglitz, 2001 Nobel laureate for economics and former World Bank Chief Economist, told to reporter Lucy Komisar, investigating on the Clearstream scandal:
“You ask why, if there’s an important role for a regulated banking system, do you allow a non-regulated banking system to continue? It’s in the interest of some of the moneyed interests to allow this to occur. It’s not an accident; it could have been shut down at any time. If you said the US, the UK, the major G7 banks will not deal with offshore bank centers that don’t comply with G7 banks regulations, these banks could not exist. They only exist because they engage in transactions with standard banks.”
This viewpoint did not age well in the wake of scandals at Goldman Sachs, Wells Fargo, Barclays, HSBC, and others.
It is possible to own your own personal offshore bank which are in a different regulatory class to those that may offer services to the public, so they are really only used by medium to large multinational corporations or large family offices.
