By Bill Davis
Asset Management, Inc.
The development of offshore financial services as we know them today dates back to the formation of the first offshore trust company known as The Bahamas General Trust Company in 1936. This Company was established to provide investment management services to high net worth individuals. Through the years these services have become what we now know as Private Banking. As high taxes, liability litigation and even political unrest became the norm in European and North American countries; offshore private banking became more and more directed toward providing a safe haven for capital and assets of high net worth individuals. Private Banking has evolved to include but is not limited to the following three main segments.
- 1) Private Investment ﾖ the management of investment operations from an international jurisdiction to minimize potential tax liabilities and maximize individual confidentiality provision.
- 2) Asset Protection ﾖ the protection of assets from political, fiscal and legal resides through the use of international or foreign jurisdictions which are separate and different from the individualﾒs residence or domicile.
- 3) Estate Planning ﾖ the distribution of assets before and after the death of an individual taking advantage of the most favorable legal and fiscal jurisdiction.
The second thread in the development of the offshore financial services sector was the emergence of the Euro-currency markets in the 1960ﾒs. Eurocurrency banking was truly an international movement to include the deposit and lending of funds in all the major currencies. The original practice of such banks, as in the Communist block countries, depositing their U.S. dollar denominated foreign currency reserves in New York banks, left them very vulnerable to having their assets frozen during political divergences. The movement of these banks to deposit their U. S. dollar currencies into their European accounts, lead to what is now referred to as the Eurodollar. Your modern offshore financial service center can function as a Private Banking facility or an Eurocurrency Banking facility. The 60ﾒs saw the number of U.S. financial institutions with overseas officies increase over 400%
In 1961, the Organization for Economic Cooperation and Development was formed to help build strong economies in its member countries by expanding free trade. The OECD has at lease thirty member group countries and an active relationship with some seventy or more other countries. They produce international guidelines to promote and provide rules where multilateral agreements are necessary for individual countries to progress in a globalized economy. The OECD Council is made up of representatives of member countries. Peer and political pressure is a day-to-day problem at the very heart of the OECD. Only time will tell if the OCED will help with the guidance for economic globalization or externalize each countryﾒs own protective instinct.
Much of this information was made available by J. Kevin Higgins in his book, ﾓOffshore Financial Servicesﾔ.
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