In July 2000, Barbados pledged to make changes to its financial supervisory regime in order to have its name removed from an OECD blacklist.

The government of Barbados is planning to establish a Financial Services Authority, with the aim of enhancing the supervision and regulation of the non-bank international business sector.

Senator Lynette Eastmond, Minister of Commerce, Consumer Affairs and Business Development, disclosed in February 2007 that the proposed authority would integrate regulators of the Co-operatives Department, the Securities Exchange Commission, the Business Development Unit of the Ministry of Economic Affairs and Development and the Office of the Supervisor of Insurance and Pensions.

The minister revealed that “a variety of resources would be at its (the Commission's) disposal to further facilitate the growth and development of the financial sector of Barbados."

In February, 2009, The International Monetary Fund published a report on the adherence of Barbados to the international standards governing the prevention of money laundering and terrorist financing.

The report stated that: "Barbados has criminalized money laundering (ML) broadly in compliance with international standards. However, while the definition of unlawful activity allows for a wide array of serious predicate offenses, human trafficking, corruption and bribery are not totally consistent with the requirements of the Palermo Convention."

However, it observed that: "While the Financial Intelligence Unit (FIU) carries out its functions competently, it is hampered by a lack of resources. The law enforcement authorities and the Office of Director of Public Prosecutions are under-resourced in relation to their functions. The competent authorities continue to engage in a wide array of joint law enforcement initiatives."

"Regulation and supervision of the financial sector is shared among four regulatory authorities with varying supervisory powers. Except for trust and company service providers who are licensees of the CBB, there are no measures to monitor and ensure compliance of DNFBPs with AML/CFT requirements. While the Registrar of Companies maintains a register with information on directors and registered offices of companies, there is no legislative requirement to disclose beneficial ownership information."

"While there are no secrecy laws inhibiting the implementation of the FATF Recommendations, certain regulatory authorities are limited in their ability to either share or access information. Recordkeeping requirements are extensive and generally observed. However, there is no requirement in law or regulation for account files and business correspondence to be retained for five years after termination of the business relationship or for financial institutions to ensure that records are available on a timely basis to competent authorities."

In November 2009, Minister of International Business and International Transport, George Hutson revealed that plans for the establishment of a Financial Services Commission (FSC) in Barbados were on track.

The FSC, will regulate the insurance subsector, the cooperative sector, the Stock Exchange, and all non-banking financial sectors in general.

"The careful and effective supervision and regulation of international business and financial services activity in Barbados constitutes a critical element of the government's policy for the development and expansion of this sector,” commented Hutson at the time.

"Consequently, ensuring the adequacy and soundness of its legal basis, either through the revision of existing legislation or the introduction of new ones, is fundamental to the achievement of that objective," he added.

The establishment of the FSC will help to regulate the sector, and "certainly increase Barbados' presence as a financial services domicile of good international repute,” he explained.

"Specific legislation will need to be enacted and the dynamics of the staffing and administrative matters determined. We project that the FSC will be established by the end of the second quarter of 2010," Hutson concluded.

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Barbados Trust Law

Trusts in Barbados are governed by English common law and by the Trustees Act Cap 250 as amended, which deals with the powers of trustees. Appeal is to the Privy Council. There is no registration requirement or stamp duty; trustees can be non-resident as long as one is resident. A resident corporation acting as trustee must be licensed under the Offshore Banking Act (see Offshore Legal and Tax Regimes). Exchange controls apply to local trusts.

The Hague Convention has not been implemented; the maximum perpetuity period is 100 years.

Local (domestic) trusts are taxed as separate entities (see Domestic Corporate Taxation).

The International Trusts Act 1995 introduced purpose trusts and asset protection trusts, as well as strengthened protection against forced heirship provisions, non-recognition of foreign judgements, and protection against creditors. Creditors have three years in which to set aside the terms of a trust, but can only do so if they can establish an intent to defraud. A successful creditor can only set aside the terms of the trust in so far as he is prejudiced - he can't overset the whole thing unless that is necessary to satisfy him.

The rule against perpetuities does not apply, and accumulation of income is permitted for up to 100 years.

International trusts have considerable tax advantages (see Offshore Legal and Tax Regimes) and are exempt from exchange control; the following conditions must be fulfilled:

• the settlor must be non-resident when the trust is created and at subsequent times when property is added to the trust;
• trust property must not include Barbadian real estate or an interest in it;
• no beneficiary other than a Barbadian offshore entity can be a resident of Barbados at the time of creation of the trust, or at the time of any subsequent addition of property to the trust;
• at least one of the trustees must be resident in Barbados.

Note that beneficiaries can include Barbadian offshore entities - this means an exempt insurance company, an offshore bank, and an international business company. The Act defines 'resident' to include: ordinarily resident individuals, bodies, whether incorporated or not, majority-owned by residents; and trust management companies.

The Act lays down specific confidentiality rules, protecting the identity of settlor and beneficiaries, the workings of the trustees, the reasons behind trustees' actions, accounting information, etc. Confidentiality can only be broken by the Court or at the request of a beneficiary.

Trust Management has been a considerable activity in Barbados for 30 years or more, much of it conducted by the trust departments of banks. The International Trusts Act 1995 gave Barbados a modern, comprehensive, business-oriented trust regime which has proven attractive, particularly to corporate users. This new, wider market-place for trusts is not necessarily interested so much just in tax avoidance, but also in the efficient management of wealth in a more general sense.

There is a sophisticated community of professional advisers on trust matters in Barbados. Individuals can provide trust services without registration, but companies offering trust services must be licensed by the Central Bank under the Offshore Banking Act 1979. Foreign or Barbados-resident companies may obtain licenses.

See Offshore Legal and Tax regimes for details of the taxation of trusts in Barbados. Very tax-efficient structures can be formed using offshore trusts in combination with International Business Companies for international securities management.

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Barbados Banking Law

• Receiving foreign funds through:
  
• Acceptance of foreign money deposits payable on demand, after a fixed period, or after notice;
• Sale or placement of foreign bonds, certificates, notes or other debt obligations, or other foreign securities;
• Any similar activity involving foreign money or foreign securities.
  
• Using the foreign funds mentioned above to finance:
  
  • Loans, advances and investments; or
  • Activities of the person carrying on the business.

Offshore/International Banking also includes the acceptance in trust of:

• Amounts of money in foreign currencies, foreign securities or both;
• Foreign personal or movable properties; and/or
• Real or immovable property outside Barbados from persons resident outside Barbados.

To qualify and obtain a license, an applicant must:

• Obtain the consent of the Minister to incorporate for the purpose of offshore banking. The government imposes a flat annual license fee of US $12,500.
• Show that it is an eligible company or a qualified foreign bank
• State the names and addresses of its director
• Submit a certified copy of its articles of incorporation;
• Give particulars of the proposed banking activity
• Submit the names of shareholders who are residents of Barbados and the number of shares held by them.
• Have at least one of the directors resident in Barbados.
• Minimum capital requirement for residents and non-residents of US $500,000 and US $125,000 respectively.

In February, 2009, Minister of Economic Affairs, Trade, Industry and Commerce, David Estwick said that proposals to introduce a central regulatory body for the banking sector had been given conditional approval from the cabinet and would now be subject to an evaluation, hinting that the regulatory board would be in place before the end of 2009.

Estwick said that a regulatory body would become increasingly necessary with the roll out of the CARICOM Single Market and Economy, observing that increased movement of capital across the region heightened the need for intensified regulation.

“Within CARICOM, there are provisions for cross-border trading and cross-border movement of capital as we give credence to the CSME, in particular, the rules of establishment that allow for the free movement of capital. So, therefore, this requires that we look very closely at the organisational structure that we have in place to ensure that we have a comprehensive, central, regulatory body.”

Pointing out that the financial sector is already subject to adequate regulation, Estwick noted that further regulation of the credit union movement would allow for greater protection of members’ deposits.

“We want to look at a central entity that will be able to deal with a lot of the non-traditional instruments involved in investment and trading that may have caused some of the problems that now exist within the United States,” he explained.

“Thus, we have to be very careful with the systems we put in place under our central financial structure, we must ensure the regulation will facilitate the new instruments of investment and capitalisation,” he concluded.

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