Grenada is an interesting offshore tax haven – it’s certainly famous as one of the most corrupt international financial centres in the history of offshore – but now, because the economy requires something of a boost as the nation has had to rebuild after two devastating hurricanes, the authorities in Grenada are said to be restructuring and positioning legislation for the re-emergence of the nation’s offshore banking sector.
However, has enough time lapsed between the catastrophic collapse of licensed yet corrupt banks for would-be investors to have any faith in jurisdiction, is there truth in the rumours that the nation wants to become a reputable tax haven and is Grenada’s offshore banking industry really re-emerging?
Grenada’s fledgling offshore banking industry began emerging in 1997 when the nation issued its very first offshore bank license. Over the next six years a further forty banks were licensed and the nation enjoyed something of an economic boost from the funds that it was receiving and the extra levels of business that the island’s capital city of St. George’s was receiving from those using the island as a tax haven. However, something pretty catastrophic was wrong in the underlying policies protecting investors who placed assets on deposit with the banks in Grenada.
We certainly cannot say, (nor would we even allege), whether deliberate ‘mistakes’ were made, whether people in authority ‘chose’ to look the other way, whether there was out and out corruption at high levels of government on the island or whether the financial scandal that followed was purely down to a mixture of incompetence and the ‘evil’ aspirations of one or two men who established the First International Bank of Grenada and subsequently defrauded American and Canadian investors out of around USD 170 million. But we certainly can say that the Ponzi scheme scandal ruined the offshore banking industry in Grenada and totally smashed the reputation that the island was attempting to build for itself as an attractive and secure offshore centre.
Leading up to the scandal many of the forty banks licensed to operate in Grenada collapsed – suggesting that policies and legislation in place to regulate the banking industry were at best poor and at worst totally useless. Therefore, the fact that there is a great deal of talk in the offshore industry that Grenada’s offshore banking industry is re-emerging is very interesting and also a little worrying. Local policy makers say that everything is now in place for the jurisdiction to compete on an open stage with all reputable international financial centres – but then they would wouldn’t they! We’re going to reserve judgement and watch what the likes of the OECD and even the FBI make of things – in the meantime thank God for the Isle of Man!!!