Conduits of Capital

and in fact in some instances have brought about innovation
in regulatory practices more generally. 1
To the extent that establishing or developing a FC is part of a
conscious development strategy, the objectives are usually
related to economic diversification, with the objectives of
generating economic activity (output), employment, fiscal
revenues or export earnings.
They may also have secondary
objectives of providing additional
opportunities for domestic
investors (e.g., institutions)
or attracting inflows of capital
into the domestic economy.
The relative magnitudes of
domestic and international
inflows and outflows in Figure
2 will vary considerably across
FCs. The flows in a classic
offshore financial centre would
be mainly A-C.
Overall, there are many
dimensions to a Financial
Centre: the size of its
international business relative
to domestic business, with
regard to both sources of
investment funds and the destination of investments;
the source and destination of the international business
(regional, global); the nature of the business undertaken,
whether balance sheet-based or fee-based; whether
primarily administrative or including substantive
management activities; and the extent of compliance with
international requirements and best practice regarding legal
structures, transparency and disclosure. This complexity
does not really facilitate a simple distinction between
offshore and onshore financial centres.
2. CLASSIFICATION OF
FINANCIAL CENTRES
Depending on the basis of classification, around 100
jurisdictions may be identified as financial centres globally.
The most direct classifications are the IMF’s listing of
Offshore Financial Centres (OFCs), and the Global
Financial Centre Index (GFCI). 2
Indirect listings include the
OECD listing of jurisdictions
that have been reviewed for the
Global Forum on Transparency
and Exchange of Information
for Tax Purposes, 3 and the
Tax Justice Network’s listing of
jurisdictions from a “financial
secrecy” perspective (focussed
on what are more commonly
known as “tax havens”). 4
The IMF’s listing of Offshore
Financial Centres relates to
its programme of specific
assessment of OFCs as a
result of concerns about
weaknesses in financial
supervision in OFCs and a lack
of information regarding their
activities. This programme ran from 2000 to 2008, when
OFC surveillance was integrated with the broader Financial
Sector Assessment Programme (FSAP). Between 2000
and 2008, 53 OFC jurisdictions were identified for inclusion
in the programme. However, the IMF has not used the OFC
classification since 2008.
The GFCI (2014) rates 83 cities across a range of criteria
and provides an overall ranking of GFCs. The GFCI ranks
cities rather than countries. After including financial centres
that are awaiting inclusion in the GFCI, there is a total of 96
cities in 69 countries. Of this total, 11 locations are identified
specifically as offshore financial centres.
1
Morriss, A and Henson, C. (2012) Regulatory Effectiveness in Onshore and Offshore Financial Centers, University of Alabama School of Law
Working Paper.
2
IMF (2008) Offshore Financial Centers: A Report on the Assessment Program and Proposal for Integration with the Financial Sector Assessment
Program; Z/Yen Group (2014) Global Financial Centres Index 16.
3
OECD / Global Forum on Transparency and Exchange of Information for Tax Purposes (2014) Tax Transparency – Report on Progress 2014 (OECD).
4
See: http://www.financialsecrecyindex.com/.
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