pdfLecture chapter 7

PdfLecture chapter 7 - MODULE 7 Offshore Centers Introduction The history evolution and functions of offshore financial centers(OFCs will be

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MODULE 7 – Offshore Centers Introduction The history, evolution and functions of offshore financial centers (OFCs) will be discussed in this Module. In the process, we will discuss the significance of the cultural and demographic impact on establishing offshore centers in different geographic areas and regions. We will touch upon the regulation of offshore centers by domestic and international authorities. You will be introduced to the process of managing risks when operating OFCs. And finally, you will be introduced to several OFCs around the globe. Objectives Upon successful completion of this module, the student should be able to: • Articulate the operation of OFCs. • Examine the cultural and societal influences in the establishment of OFCs. • List the components of the risk management process in establishing and operating OFCs. • Examine the role of the regulators of OFCs. • Summarize the operations of some OFCs. I n the world of private banking, it is imperative that we mention the operations of financial centers whose operational design is strictly for the purpose of secrecy and confidentiality. They provide services to entities that wish to eliminate any form of transparency from their financial and economic activities. OFCs are usually located in a foreign land, either surrounded by water or landlocked, and the main objective of these centers is to hide financial information from regulators, and the court system. This financial information could be lawful or unlawful. For further information, please see Footnote #1 . The role of OFCs is to be the custodian of funds legally or illegally deposited into their care. Therefore, the more regulatory agencies know about an OFC’s activity, the quicker any risky transactions can be detected, which can help international monetary cooperation to be free of any illegal financial influences. Also, obtaining information concerning OFCs’ financial dealings can assist regulatory agencies in cooperatively improving the scrutiny, inspection and examination of OFCs’ financial transactions. OFCs are also used by developing nations with debt obligations, capital flight and currency fluctuations in order to reduce or conceal financial inadequacies. The operation of OFCs can negatively impact the international capital market if the secrecy and confidentiality veil financial information from capital market operatives. For further information, please see Footnote #2 . The function of an OFC is to provide financial privacy, limited regulation, a tax haven, unrestricted access to accounts, and protection from any changes in the political system. Historically, the first financial center to be considered “offshore” was located in the Channel Islands, which were a distance from Great Britain’s shores. A large percentage of OFCs are located in relatively small nations surrounded by water, although the most important OFCs are in landlocked countries such as Switzerland. Even though many OFCs’ financial activities are legal
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This note was uploaded on 11/06/2011 for the course FIN 4634 taught by Professor Badet during the Fall '09 term at FIU.

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PdfLecture chapter 7 - MODULE 7 Offshore Centers Introduction The history evolution and functions of offshore financial centers(OFCs will be

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