Offshore Banking Act-2024 in the offing
Al Amin :
With a view to increasing the flow of foreign currencies in the country, Offshore Banking Act-2024, aligned with international financial management practices, is likely to be placed in the cabinet for approval soon.
Following this, the Economic Institutions Division of the Ministry of Finance has made a draft of the proposed law and sought public opinions to finalize it, the finance ministry sources said.
In the draft, prior approval from the Bangladesh Bank has been made mandatory to transfer funds between units of offshore banks or relocate from an offshore bank unit to an onshore bank unit.
Besides, no income tax or any other direct or indirect tax will be imposed on profits or interest earned in offshore bank units and in the case of any violation of the law, a maximum penalty of $5,000 or an equivalent amount in local currency will be imposed, the draft showed.
The proposed law also specified that if any offshore banking unit violates any provision, it will be fined a maximum of $2,000 or an equivalent amount of local currency.
In case of continuous violation, starting from the second day after the initial violation, a daily penalty of $100 or an equivalent amount will be imposed.
Moreover, if any director, officer, employee, or staff associated with the offshore banking unit provides false or misleading information to the Bangladesh Bank, they will be subject to a maximum penalty of $5,000 or an equivalent.
In the case of intentional delays in providing information, the respective officer or employee will be fined a maximum of $2,000, draft law showed.
The ministry officials said after receiving feedback, the draft will be presented in the cabinet for final approval and then in the parliament.
Offshore banking refers to a separate banking service within a bank, offering distinct financial services.
It provides opportunities for foreign companies to receive loans and collect deposits from foreign sources.
In offshore banking, accounts are maintained in foreign currencies instead of local currencies, and the standard rules and policies of regular banking do not apply.
Only the bank’s core profits, such as interest and fees, are accounted for in offshore banking.
It is known that in 2019, the Central Bank issued offshore banking guidelines.
These guidelines govern the operations of offshore bank units in various banks.
However, the enforcement and penalty provisions of those guidelines were weak.
Efforts are now being made to enact comprehensive legislation to regulate offshore banking more effectively.
Under the current policy, businesses with entirely foreign ownership can engage in banking activities in various economic sectors in the country.
They can disburse loans and collect deposits.
However, in the case of joint ventures with foreign ownership, prior approval from the Bangladesh Bank is required.
In 1985, the establishment of offshore banking units was permitted through a directive.
Due to the absence of specific guidelines, some banks have operated offshore banking at their discretion.
As per the provisions of the proposed law, individuals, excluding Details Bank, will not be permitted to engage in offshore banking business.
Commencement of offshore banking operations must occur within six months of obtaining the license.
Failure to do so will result in the cancellation of the license, and after cancellation or suspension, the operations will cease, the proposed law said.
