Question

Know what an offshore financial center means and be able to differentiate between an operational center and booking center

Answer 1

Answer: Offshore financial center- They have little or no intervention of Government in business and financial activities. The level of regulatory policies and transparency differ from country to country. Offshore refers to the foreign based entities. Offshore refers to the financial entities such as; investment banks, foreign banks and corporations. Critics says that Offshore financial institutions are for the purpose of tax evasion, tax avoidance and money laundering.

These centers are politically and economically stable and also provides access to capital markets.

Many countries have offshore financial centers such as Switzerland, Bermuda, Berlin, Panama, Singapore etc.

Offshore financial centers are of two types: Operational and booking centers.

Difference between an operational center and booking center- Are as following:

Operational centers- A great financial deal can be seen in such centers. Many financial activities take place here. Here is more flow of funds.

Example: London deals very well in currency trading

Booking centers- These are located in small islands or territories with favorable taxes and laws. Here little financial activities take place. These centers are for book keeping and recording of tax and currency exchange information.

Example: Cayman Island, Bahamas in the Caribbean.