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GENERAL GUIDELINES IN RELATION TO
OFFSHORE TRUST COMPANY LICENCES IN THE CARIBBEAN

 

A proposed trust company’s activities must be confined to those set out in the Business Plan which will have been submitted to the authorities for approval at the time an application for a licence is made. The Business Plan must set out, inter alia:

 

  1. The proposed products and activities.
  2. The business objectives as well as the type and source of business contemplated.
  3. The applicant’s proposed initial assets and its anticipated assets and liabilities and income usually over a projected period of two years.
  4. The applicant’s operating policies and the system of control.
  5. Details (including qualifications and experience) of the proposed management and senior personnel.
  6. The reasons for choosing the jurisdiction as an operating base.
  7. The anticipated client base (which may be restricted to a specific class if the trust company is to be a captive).

At the time an application is made, the applicant will be asked to explain policies and procedures as they relate to internal controls, investments, operations and internal audits. Applications on behalf of an existing overseas trust company will require the written approval of its board of directors.

Two types of license are usually available, namely, a General or a Restricted licence. One licence (General) allows activities within and without the jurisdiction and the other (Restricted) only permits trust activities outside the jurisdiction. In either case, the trust company must have a physical or representative presence in the jurisdiction.

The various licence fees are, approximately, $5,000 (initial) and up to $20,000 (annual) depending upon the jurisdiction and the type of licence required.

The management of a proposed trust company will be required to display a sound knowledge of trust operations with evidence of ability and experience.

Those trust companies wishing to deal with the general public, without restriction, will be required to have adequate capital resources. In assessing capital adequacy, the following criteria will be applied:

  1. Quality of assets and its distribution. Those trust companies with superior quality assets will be able to operate with a lower capital base. The lower the level of liquidity, the higher the capital base will need to be.
  2. The policy towards dividends, provisions for losses and capital reserves derived from retained earnings.
  3. Competency of management in general, but particularly in relation to financial control.
  4. The operating environment of the trust company.
  5. The volume and nature of the business conducted.
  6. Composition of liabilities. It is possible that a bond covering fiduciary operations will be required.

Although captive trust companies will have less of a risk exposure in relation to clients, all of whom will be expected to be sophisticated in financial affairs, trust company regulators will place great importance on the competency of a trust company’s auditors. The auditors are expected to have a specialised knowledge in the field of trusts in terms of training and experience; normally, they do not have to maintain a practice in the jurisdiction.

All licensees should conduct their trust business in a prudent manner. Licensees are expected to ensure that capital resources, liquidity and provisions for bad and doubtful debts are adequate.

In summary, the commissioner will need to be satisfied that a trust company’s administration, management, control and accounting systems and procedures are satisfactory for the type and scale of business being undertaken.