Turks and Caicos
Banking
In recent years in line with international banking guidelines the Turks and Caicos Islands have adopted a policy of accepting only established banks or the treasury operations of listed corporations. In 1998 Belize Bank selected the Turks and Caicos Islands as the venue for its first venture outside Belize making Belize Bank only the 4th bank ever to be licensed in the Turks and Caicos Island for domestic purposes. The recent introduction of mutual funds legislation is expected to attract further applications for banking licences. As of 2004 there were six licensed banks in the jurisdiction.
Two types of banking licence can be granted:
- National Banking Licence: This licence is granted for banking activities to be carried out locally with islanders and other residents and will only be granted to the branches or subsidiaries of banks which have an established track record and which are subject to effective consolidated supervision by their home supervisory authority.
- Exceptionally a national banking licence may also be granted where the bank is predominantly locally owned.
- Overseas Banking Licence: This licence is granted for banking activities which are to be carried on outside the Turks and Caicos Islands. The holder of such a licence cannot accept deposits from or lend to residents of the Islands. An application for such a licence will only be considered from:
- The branches or subsidiaries of banks with an established track record and which are subject to effective consolidated supervision by the overseas banks home supervisory authority
- Banks which although not subsidiaries are closely associated with an overseas bank and which by agreement will be included within the consolidated supervision exercised over the overseas bank by the overseas banks home supervisory authority
- Wholly owned subsidiaries of major corporations where the objective of the subsidiary is to undertake in house treasury operations which are fully consolidated within the published financial statements of the parent company.
Insurance
The Turks and Caicos Islands is a significant centre for offshore insurance services. By 2004 more than 2,800 licences had been issued to Insurance companies and intermediaries under the Insurance Ordinance 1989. The insurance legislation in the Islands has been described as both flexible enough to accommodate the needs of the client and to keep operating costs low but yet backed up by a regulatory regime which is strictly enforced.
The Islands are said to be a domicile of choice for captive and restricted licence insurers.
95 captive insurers have been set up, but the Turks and Caicos' main insurance success story is the 'credit life' reinsurance companies many of which are owned by US automobile dealers who reinsure credit related risks arising from their dealerships which have been placed initially with rated primary insurers. More than 2,000 such companies have been set up. Credit life reinsurance companies are known as section 7(11) companies. They are restricted to offering reinsurance only to named and acceptable insurance carriers already regulated in an approved jurisdiction and are exempted from certain reporting requirements and licensing fees.
There has also been burgeoning interest in the formation of mortgage guarantee reinsurance companies.
The insurance industry is governed by the Insurance Ordinance 1989 and the Insurance Regulations 1990. These Ordinances together with the 1995 Guidelines on the Issuance of Insurance Licences establish the licensing process: see Law of Offshore for further details of the licensing and supervisory regimes.
Investment Fund Management
Collective investment schemes may be created either by incorporating a mutual fund company or by establishing a unit trust. Although historically mutual funds and open ended investment companies have been governed by the Companies Ordinance 1981, in December 1998 new Mutual Funds legislation was approved and implemented.
Application for registration must be made to the Financial Services Commission. Unless the fund falls within an exempted category it must be licensed and registered. In granting a licence emphasis is placed on the credentials of the promoters and their expertise in the proposed investment area. All funds are subject to ongoing monitoring of their activities. The new legislation provides for the appointment of licensed administrators who will oversee the conduct of the fund in the interests of the investors.
The Islands' mutual funds regime provides for four types of fund:
- Registered mutual funds constituted under TCI law which are authorized to issue equity interests only to investors who meet prescribed qualifications or in which equity interests are listed on a stock exchange recognized by the TCI authorities for this purpose.
- Recognized mutual funds constituted outside the TCI whose equity interest are listed on an approved exchange.
- Licensed mutual funds, a category for funds which fall outside the registered and recognized headings, but are otherwise approved.
- Exempt mutual funds in which the equity interests are held by not more than fifteen investors the majority of whom are capable of appointing or removing the operator of the fund, or funds that are authorized to issue equity interests only to professional investors (as defined).
The Investment Dealers Licensing Ordinance came into effect in 2003 and provides for the regulation, licensing and supervision of securities brokers, asset managers and investment advisors. It includes a requirement that a licensee must maintain minimum capital in liquid assets within the TCI amounting to the higher of $250,000 or 2.5% of funds under management.