Belize: Role Model of a Regulated Jurisdiction

By Gian C. Gandhi, S.C., Barrister-at-Law, Director General of the International Financial Services Commission of Belize (04/02/2010)

The year 2009 witnessed a flurry of activity on the international scene aimed at exerting increased pressure on ‘offshore tax havens’ to bring about transparency and to encourage exchange of information in tax matters.

At the 5th Meeting of the Organisation for Economic Cooperation and Development’s (OECDs) Global Forum on Transparency and Exchange of Information, held in Mexico on 1-2 September 2009, agreement was reached on a restructured and strengthened Global Forum with new governance, a new financial structure and the establishment of a peer review group which would be responsible for the  “universal, robust and transparent monitoring and peer review process”.

This was quickly followed by the G20 Finance Ministers’ meeting in London on 4-5 September, and the G20 Summit in Pittsburgh on 24-25 September 2009. The jurisdictions that are still on the OECDs  ‘grey list’ have been given until March 2010 to comply with internationally agreed tax standards, failing which they may face sanctions. In fact, the French President, Nicolas Sarkozy (who is reported to have said at the Pittsburgh Summit: “Tax havens, banking secrecy — all that is finished”), has already announced that from March 2010, French banks will close all their branches and outlets in jurisdictions considered to be tax havens.  This has caused a stampede among ‘grey-listed’ countries to sign the requisite number (12) of Tax Information Exchange Agreements (TIEAs), based on the OECD Model, to meet the deadline.

In anticipation of these rather ominous developments, Belize has already put in place appropriate legislative and regulatory frameworks to ensure full compliance with the OECD’s demands.

Income and Business Tax (Amendment) Act 2009

This Act, which came into force on 1 August 2009, empowered the Minister of Finance to enter into TIEAs with other countries with a view to applying international standards on transparency and effective exchange of information relating to tax matters. The Act provides that every such agreement shall be incorporated in an Order which shall be published in the Gazette as a statutory instrument and upon such publication the Order shall have the force of law in Belize notwithstanding anything to the contrary in any other law. The restrictions contained in Section 4 of the Act on the disclosure of tax information shall not apply with respect to a request for information made pursuant to such agreement.

The Act will greatly facilitate the incorporation of TIEAs into municipal law and thus assist in their speedy implementation.

Negotiations on Tax Information Exchange Agreements

Belize has negotiated a TIEA with Belgium and is in the process of signing it. Belize has also approached several other countries offering to conclude such agreements based on the OECD Model. More recently, the OECD has offered to assist Belize to negotiate TIEAs on a multilateral basis so as to expedite the process of negotiations. It is expected that Belize will reach the threshold of 12 TIEAs set by the OECD well before the deadline of March 2010.


Money Laundering and Terrorism (Prevention) Act 2008

Apart from the TIEA legislation, Belize has enacted a new and powerful Money Laundering and Terrorism (Prevention) Act, which came into force on 12 January 2009. This Act repealed the old Money Laundering (Prevention) Act which had been found to be deficient in several respects.

The key features of this new law are:

·         it covers both anti-money laundering (AML) as well as terrorism and combatting the financing of terrorism (CFT);

·         a revised and expanded definition of money laundering adopting the “threshold” approach, i.e., by defining it with reference to the penalty attached to the offence. The threshold penalty is imprisonment exceeding 24 months;

·         a substantial increase in the penalty for a money laundering offence. In the case of a natural person, there will be a mandatory minimum fine of BZD50,000.00 which may extend to BZD250,000.00, or a minimum term of five years’ imprisonment which may extend to 10 years, or to both such fines and terms of imprisonment. In the case of a legal person or other such entity, there will be a minimum fine of BZD100,000.00 which may extend to BZD500,000.00;

·         the penalty for terrorism offences is much stiffer — in the case of a natural person, a mandatory minimum of 10 years’ imprisonment which may extend to imprisonment for life; and in the case of a legal person or other such entity, a minimum fine of BZD500,000.00 which may extend to one million Belize dollars. The penalty for the offence of financing of terrorism is the same as for terrorism itself; 

·         the Act retains the extra-territorial jurisdiction of the courts of Belize to try and punish money laundering and terrorism offences regardless of whether the offences were committed in Belize or elsewhere;

·         the powers and responsibilities of the Financial Intelligence Unit (FIU) as the Supervisory Authority for money laundering and financing of terrorism have been redefined and enhanced;

·         all reporting entities, such as banks and other financial institutions, are now required to verify the identity of their customers before transacting business with them. The reporting entities must also establish and maintain records of all transactions;

·         detailed provisions have been made for the reporting of suspicious transactions by banks and other financial institutions to the FIU. In particular, the Act provides for administrative penalties by the FIU for violations of the requirements of this provision;

·         a requirement for all banks, financial institutions and other money transmission service providers to keep accurate and meaningful originator information on the transfer of funds,  including electronic transfers;

·         detailed provisions to enable the police and the FIU to obtain orders for the production of documents, search warrants, monitoring orders, orders for interception of communications, and mandatory injunctions to enforce compliance; 

·         provision for the freezing and forfeiture of assets in relation to money laundering and terrorist financing;

·         detailed provisions for international cooperation in the investigation and prosecution of money laundering and terrorist financing offences and other serious crimes. Provision is also made for giving immediate effect to a resolution of the United Nations (UN) Security Council adopted under Chapter VII of the UN Charter, i.e., enforcement provisions; and

·         the establishment of a Confiscated and Forfeited Assets Fund and the receipts and disbursements in relation to such Fund.

On the whole, the Act is designed to ensure that Belize remains fully compliant with accepted international standards regarding anti-money laundering and combatting the financing of terrorism.



International Foundations Bill 2009

To give investors a choice of vehicle for asset protection purposes, Belize has finalised an International Foundations Bill which is due to be tabled in Parliament shortly. The Bill is designed to meet the demands of civil law countries as well as those of common law jurisdictions.

Some of the salient features of this Bill are:

·         it seeks to make foundations more user-friendly by cutting out bureaucratic red tape and by inserting provisions to facilitate and enhance efficient but discrete registration, renewal, striking off, restoration, dissolution, continuance and discontinuance of foundations;

·         every foundation shall have a registered agent who must be a licensed trust agent or trustee until the International Financial Services Commission establishes a specific licence for foundations;

·         an international foundation will be invalid and unenforceable if not registered under the Act;

·         registration does not require the foundation charter to be registered – only particulars thereof need to be  provided;

·         provision for exchange control and tax exemptions to international foundations duly registered under the Act;

·         special provisions for purposes of civil asset protection eg, the non-recognition of foreign judgments and anti-alienation of the foundation endowment as well as the reduction of the limitation period for actions against foundations;

·         provision is made for substantial security for costs in respect of claims brought against international foundations in order to avoid frivolous litigation;

·         asset protection provisions are expressly limited to civil proceedings and do not in any way affect criminal proceedings; 

·         adequate provisions, clarifications and limitations in respect of the founder, the foundation endowment, the charitable foundation and other matters affecting the foundation; 

·         specific provisions for disclosure of information relating to a foundation in pursuance of mutual legal assistance treaties, TIEAs or for the investigation of money laundering and terrorism-related offences.

The Bill draws upon the experience of other jurisdictions in the field of foundations, particularly, Antigua, the Bahamas, Isle of Man and Anguilla.

Mutual Funds (Fees) Regulations 2009

These Regulations, which came into force on 1 August 2009, provide for a revised fee structure for mutual funds and associated services. The new annual licence fees are as follows:

a)     USD3,500.00 for a registered public fund;

b)     USD2,500.00 for a recognised private or professional fund;

c)      USD2,000.00 for a person licensed as manager or administrator; and

d)     USD3,000.00 for a person licensed as both manager and administrator.

In addition, there is a one-time application fee of USD500.00

Open Ships Registry

Belize’s open ships registry – the International Merchant Marine Registry of Belize (IMMARBE) – made rapid progress during the year under report. A new Director General of IMMARBE, in the person of Captain Encarnacion Samaniego of Panama, was appointed early in 2009 and he moved quickly to expand the network of IMMARBE offices around the world. As many as 23 new Deputy Registrars of IMMARBE were appointed in 2009 alone, making a total of 56 Deputy Registrars strategically located in different countries. There are at present 808 ships flying the Belize flag with a gross tonnage of 1,653,894.80.

The Director General of Belize’s International Financial Services Commission, who is also the Registrar of Merchant Shipping, oversees the functioning of IMMARBE.

Looking ahead

Belize intends to diversify its offshore finance sector by offering new products, such as family foundations and limited liability companies. In view of Belize’s commitment to transparency and exchange of information, it has shifted its focus from confidentiality to the strengthening of asset protection laws as the primary attraction of the country’s investment vehicles. This will be partly achieved by the enactment of the International Foundations Act, which is targeted to become law before the close of 2009.

The Prime Minister and Minister of Finance of Belize, Hon Dean Barrow, who is also the Minister responsible for international financial services, has assured the Belize Offshore Practitioners Association (BOPA) that he remains committed to the continued development of this vital industry, and has pledged his full support to all initiatives to promote its growth and sustainability.