Offshore Financial Centers


Puerto Rico (one of offshore jurisdiction)
Puerto Rico (one of offshore jurisdiction)

Offshore financial centers (OFCs) are usually referred to as:

  • Jurisdictions that have relatively large numbers of financial institutions engaged primarily in business with non-residents;
  • Financial systems with external assets and liabilities out of proportion to domestic financial intermediation designed to finance domestic economies; and
  • More popularly, centers that provide some or all of the following services: low or zero taxation, moderate or light financial regulation, banking secrecy, and anonymity

However, the definition is by no means clear-cut. OFCs range from centers such as Hong Kong and Singapore with well-developed financial markets and infrastructure, and where a considerable amount of value is added to transactions undertaken for non-residents, to centers with smaller populations, such as some of the Caribbean and European centers, where the added value is limited to the provision of professional infrastructure.


Many jurisdictions around the world have been recognized as OFCs. The International Monetary Fund (IMF) has listed more than 60 jurisdictions according to its definition, but the better known ones are the British Virgin Islands (BVI), the Bahamas, the Cayman Islands, Hong Kong, and Panama.

Offshore havens
Offshore havens

The potential of offshore financial centers is growing each day with more and more funding flowing into these jurisdictions from both private individuals and institutions. The stock exchanges of the Bahamas, Bermuda, the Cayman Islands, Luxembourg, Hong Kong, Panama, Singapore, and other offshore jurisdictions have seen tremendous growth in the past decade and this trend shows no signs of abating.

Many onshore and offshore companies are actively raising venture capital in OFCs to enlarge their share capital and business operations before they undertake an IPO. The current global trends basically involve investing in China, India, and offshore financial instruments.

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