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Offshore Financial Centres in the Caribbean: Prospects in a New Environment

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  • Oral H. Williams
  • Esther C. Suss
  • Chandima Mendis

Abstract

This paper reviews the development of offshore financial activities in the English‐speaking Caribbean islands and takes stock of the size of these sectors today, and analyses the future prospects. A number of Caribbean jurisdictions are market leaders in the offshore products they offer and have identified the growth of this sector as a development strategy. Established centres in the Bahamas, Barbados and Cayman Islands have managed to become global players and have generated sizeable gains in employment and income. However, in view of the heightened concerns by the international community about money laundering and more recently, terrorist financing, the costs of compliance and risks to countries of having or establishing offshore sectors have risen considerably. This is particularly relevant to the newer entrants, with significant regulatory differences from international standards. The paper assesses the risks, benefits and costs of compliance with international best practices for established and newer offshore jurisdictions. The paper asks the questions whether offshore jurisdictions constitute a sustainable development strategy and concludes that for nascent jurisdictions, the gains are very small.

Suggested Citation

  • Oral H. Williams & Esther C. Suss & Chandima Mendis, 2005. "Offshore Financial Centres in the Caribbean: Prospects in a New Environment," The World Economy, Wiley Blackwell, vol. 28(8), pages 1173-1188, August.
    • Handle: RePEc:bla:worlde:v:28:y:2005:i:8:p:1173-1188
    DOI: 10.1111/j.1467-9701.2005.00686.x
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    Cited by:

    1. Picard, Pierre M. & Pieretti, Patrice, 2011. "Bank secrecy, illicit money and offshore financial centers," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 942-955, August.
    2. Gordon, Leo-Rey, 2009. "Local Banking Competition and Efficiency in the Presence of Offshore Financial Institutions: Evidence from the Caribbean," MPRA Paper 49618, University Library of Munich, Germany.
    3. Bank for International Settlements, 2007. "Evolving banking systems in Latin America and the Caribbean: challenges and implications for monetary policy and financial stability," BIS Papers, Bank for International Settlements, number 33, October –.
    4. William Vlcek, 2010. "Byways and Highways of Direct Investment: China and the Offshore World," Journal of Current Chinese Affairs - China aktuell, Institute of Asian Studies, GIGA German Institute of Global and Area Studies, Hamburg, vol. 39(4), pages 111-142.
    5. Butkiewicz, James L. & Gordon, Leo-Rey C., 2013. "The Economic Growth Effect of Offshore Banking in Host Territories: Evidence from the Caribbean," World Development, Elsevier, vol. 44(C), pages 165-179.
    6. Schwarz, Peter, 2009. "Why are countries reluctant to exchange information on interest income? Participation in and effectiveness of the EU Savings Tax Directive," International Review of Law and Economics, Elsevier, vol. 29(2), pages 97-105, June.

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