THE FEATURES OF THE BANKING OFFSHORES ACTIVITY: A CASE STUDY OF LUXEMBOURG

Abstract

The article is devoted to the features of the banking offshores activity: tax benefits, absence of capital movement regulation, international basis of agreements, effective infrastructure, well-functioning banking system, use of English, highqualified staff. The author shows the main reasons for establishing business entities in offshore financial centers: the loyalty of government regulation, high banking and commercial secrecy and anonymity of beneficial owners of the companies, easy access to the foreign financial system. There are two categories of the offshore jurisdictions: countries that allow legal investigation as appropriate and countries that refuse to weaken its secrecy. It is indicated that the main motive of the establishment of banks in offshore areas is to open and maintain bank accounts for investors from countries with high taxes and strict currency controls and for transactions in Eurocurrency market. Luxembourg is characterized as one of the world’s major offshore banking centers accounting for 6.8 % of global offshore capital. There are all main European and international financial institutions In Luxembourg, only 5 are Luxembourg origin among 147 commercial banks registered in Luxembourg. Creation branches of European banks is encouraged by the elimination of all kinds of coercion in relation to cash flow, such as No minimum reserves, excluding any regulation with respect to interest rates or capital movements and the unconditional observance of banking secrecy, combined with a flexible and rigorous bank control and under the same favorable tax rate of all customers.