Antigua, established as a premier Caribbean destination for the more discriminating visitor, is also recognized as a stable international financial centre. It is equally attractive to investors seeking a safe haven in a well-regulated and fully independent jurisdiction that will protect their assets against the uncertainties of world economic affairs, and support wealth management and inheritance planning.
Since the enactment of relevant legislation in 1982, there has been solid growth in such services as the formation of international business corporations. banks, insurance and trust companies. As We approach the millennium, Antigua has placed emphasis on ensuring that the reputation of its centre and the quality of its regulation meet the highest international standards. The government, with the support of its private sector, continues to introduce regulations which place the jurisdiction in the vanguard of the fight against inter national money laundering and other misuses of financial centres.
Fiscal Rectitude
In 1995, Antigua was among the first countries in the Caribbean region to sign a maritime law enforcement counter-drug agreement and an updated extradition treaty with the United States, which provides for extradition in eases of dual criminality.
Mutual Legal Assistance Treaties were signed with both the United States and United Kingdom in 1996, which provides for assistance in criminal matters but excludes pure tax information.
A Money Laundering (Prevention) Act was also passed in 1996, which established customer guidelines for banks and supports the Financial Action Task Farce's Anti-Money Laundering recommendations.
Offshore Financial Sector Planning CommitteeTo improve the legislative and regulative environment, the Government chartered the Offshore Financial Sector Planning Committee (OFSPC) in June 1997, to advise and make recommendations in the sector This has had a positive impact on strengthening the Office of International Business Corporations and, in particular, its supervision of offshore banks
A comprehensive oversight program was conducted, which addressed the institutional ownership, management and operation of registered banks.
In the 1998 Budget, annual license fees for banks were increased from US$15,000 to $30,000 for banks that employ five or more persons in a local office, and to $45.000 for banks that do not maintain an office in Antigua. Banks will also be required to maintain US$1.5 million of their US$5 million minimum capital requirement with the Government.
International Business Corporations Authority Established
The OFSPC has submitted substantial recommendations to Government that will introduce stronger "know your bank" and "know your customers" policies and assisted the Ministry of Legal Affairs in the drafting of amendments to significantly improve the International Business Corporations Act (1982) in its regulatory controls and to strengthen the Money Laundering Prevention Act (1996).
In October 1998, Antigua and Barbuda's parliament passed amendments to the IBC Act which included the establishment of an International Financial Sector Authority, to monitor the offshore financial community from a compliance perspective, to develop and promote the industry and provide an effective enforcement interface with external regulatory agencies. The Authority, through its Director, will also give direct supervision to trust and insurance companies and regulate all offshore service providers. In addition to improving the regulatory environment, the Authority will be responsible for a fundamental review of the governing IBC Act, regarding its effectiveness in providing the offshore products and services needed to maintain Antigua's position as a world-class jurisdiction. This will lead to the introduction of further legislation providing Limited Life Companies, Limited Liability Partnerships, Segregated Portfolio Companies, an International Trust Act, Mutual Fund Legislation and Captive Insurance Legislation. The principal features of the new legislation include:
- Requires all banking, trust and insurance corporations to have natural persons as directors, and at least one director must be a citizen and resident of Antigua
- Clarifies the criteria for licensing and supervising banking institution, trust and insurance companies.
- It empowers the Authority to set minimum capitalization requirements for licensed IBC's, providing the Authority with the flexibility to grow the industry
- It requires the submission and publication of annual audited financial statements by financial institutions, in addition to quarterly management reports. It empowers the Authority to order an examination of licensed IBC's upon reasonable grounds that it is not in a sound financial condition or operating in a reasonable manner and requires annual examinations of banks and authorizes inspections at least once a year.
It permits the authorized examiner to review bank records with the restriction that an examiner may not copy or otherwise record information relative to the name or the account of any depositor or the name of any settlor or beneficiary of a trust, if the deposit agreement or instrument establishing an account or trust, as the case may be, directs that it be kept secret, However, if the examiner is not granted access to all records, application can be made to the Court in Antigua for an order to produce the information necessary for a successful examination. If the Court is satisfied that the information is required by the examiner to properly conduct his duties, it will grant the order. Failure of a corporation to comply with the order of the Court shall be grounds for the immediate revocation of its license by the Authority.
- When a corporation is struck off the Register, all licenses issued to that corporation to engage in international banking, trust or insurance businesses are simultaneously rendered null and void.
- It is a condition of a license given to a corporation that it will not establish any subsidiary without the approval of Authority
- It is also a condition of a licensed corporation that it will not offer or provide any services on the Internet without approval of the Authority
The amendments to the IBC Act strongly relate its regulations to the operation of the Money Laundering Prevention Act (1996), which has also received amendments passed by Parliament in October 1998. The amendments generally emphasize the position that Antigua will not allow its jurisdiction to be used for money laundering of funds derived from criminal sources In this regard, a landmark decision was made to regulate that its financial institutions are prohibited from accepting any cash deposits, thus rooting out the initial source of money laundering The jurisdiction has also made it clear that it will not perform duties as a tax collector for other jurisdictions and it strengthens provisions to ensure that only activity deemed criminal by the competent Court in Antigua could obtain an order for disclosure of information.
E-Commerce
Supporting the IBC infrastructure is an ultra-modern telecommunications infrastructure, which positions Antigua on the cutting edge of technology of Internet access and, more significantly, electronic commerce. Antigua has become a competitive location far the establishment of Internet-driven businesses. With trade barriers and communication costs falling, businesses that can operate through electronic commerce are seeking geographical freedom.
The volume of business conducted on the Internet is forecast to mushroom by the year 2000, accounting far more than US$5 billion or more in transactions by e-commerce. As the face of international business changes, operators can make choices with respect to the level of taxation for their businesses and they will become attracted to such zero tax jurisdiction as Antigua.
Free Trade Zone
Business opportunities to develop e-commerce companies in Antigua are enhanced by its Free Trade Zone, which may license an IBC to do business in this zone and allow it to enjoy full tax holidays.
Cyber Tax Challenge
Once the entity can meet the application criteria and ensure that the mind, management and control of the business, and its web server exists fully in Antigua then it becomes only subject to the tax environment of the jurisdiction.
Clearly this may become a cyber tax challenge for major markets, as there are no significant international agreements or understanding about electronic commerce. Antigua is well positioned to offer the advantages of its jurisdiction to the ever-expanding industries on the Internet.
As Antigua gears its market to meet the millennium, both the government and service providers are committed to having the growth of the offshore sector be based on the standards and supervision of a modern jurisdiction, including making it a domicile of choice for certain electronic commerce applications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to iofch@mondaq.com