INTERNATIONAL BANKING ACT 2005
The Act which repeals and replaces the Offshore Banking Act 1987, governs the licensing of international and foreign companies registered under the International Companies Act 1987 and other overseas companies who wish to carry on international banking business from within Samoa. The Inspector of International Banks is appointed by the Minister to be responsible for the regulation and supervision of licensees. The licensing and disciplinary powers reside with the Minister.
Every licensee must use as part of its description or title the words “bank or international bank” or one or more of its derivatives in any language.
Application is made through the Inspector of International Banks to the Minister of Finance who inter alia shall require from the applicant particulars of its financial standing a business plan, its ultimate beneficial ownership (together with references, financial reports), and verification that every director, controller or manager is a “fit and proper” person in terms of integrity, competence and financial soundness.
General restrictions applicable to all licensees include the following:
- it must not transact any banking business other than in accordance with its licence and the Act.
- it must not transact any banking business with any residents unless it obtains permission to transact domestic banking business by, for and in respect of residents in Samoa.
- it must not use or trade under any name other than the name under which it is licensed.
- it must not operate or use a name whether in Samoa or elsewhere which closely resembles or identical to the name of any company, firm or business as is likely to mislead, or falsely suggest patronage or connection with some person or authority. It must not use a name calculated to falsely suggest a special status to the Government of Samoa etc.
All licensees are required as a condition of their licence to establish and maintain a physical presence in Samoa.
Physical presence is defined as a place of business maintained by the international bank and located at a fixed address, other than a post office box or electronic address in Samoa and at which location the bank:
- employs at least one (1) individual full time, and
- maintains operations and banking related records, and
- has two directors who are natural persons, one of which must be a resident director.
Classes of Licence and Capital Required
- “A” class licence, granted only to companies with an aggregate of capital issued and paid up in cash and unimpaired reserves of at least US$10million.The holder of such licence shall transact international banking business through its business office in Samoa.
- ”B” class licence (B1), granted to companies with an aggregate of capital issued and paid up in cash and unimpaired reserves of at least US$2million.The holder can transact only such international banking business as may be specified in the licence through its business office in Samoa and only in the currencies specified therein.
- “B” class licence (“B2”) granted to companies which have an aggregate of capital issued and paid up in cash or unimpaired reserves of at least US$250,000. The holder can transact international banking business as may be specified in the licence through its business office in Samoa and only in the currency or currencies specified therein. It can only accept deposits from those persons or entities whose names are listed in the undertaking accompanying the licence application. It cannot solicit or accept deposits from the public nor can it allow any chequeing facilities.
Prohibited Activities of “A” and “B(1)” international banking license include:
- granting any advance or credit facility against the security of its own shares.
- granting or permitting to be outstanding unsecured advances totalling more than USD$5,000 or 1% of its paid up capital and unimpaired reserves (whichever is greater) to related parties which include directors, shareholders and their families.
- acquiring or holding in any company any financial interest exceeding in total 60% of the paid up share capital and reserves of the licensee or;
- acquiring or holding any interest in any property, chattels or real estate for any purpose other than the conduct of its banking business.
All renewal applications are required to be filed together with the prescribed fees two (2) months prior to expiry. An “A” class licence is subject to an annual renewal fee and remains valid until cancelled or surrendered. Both types of “B” class licenses are renewable annually. A licensee has no right of renewal of his licence but refusal to renew will be extremely exceptional if a licensee has complied with his obligations under the Act and there have been no material changes in the particulars submitted to the Inspector since the grant of the licence or in the nature of the licensee’s business.
Accounts and Audit
Every licensee is required under the provisions of the International Banking Act 2005 to keep in Samoa its accounting records.
Every licensee is required to appoint an auditor to be approved by the Inspector and to submit audited accounts within 6 months of the end of its financial year and an annual return in the prescribed form in every year. The “A” class and “B1” class banking licensees must also file quarterly financial returns and “B2” class banking licensees to file half-yearly financial returns with the Inspector in the prescribed form.
An audit of an international bank must be prepared in accordance with internationally accepted accounting standards.
In making his report the Auditor is required to state in his opinion whether:
- the licensee is carrying on business in accordance with the terms of licence; and
- the quarterly or half yearly returns filed by the licensee were correctly completed.
In addition the Auditor is required to report immediately to the Inspector information about the licensees affairs if amongst other things he is of the opinion:
- the licensee is insolvent or likely to become insolvent or;
- a criminal offence involving fraud or dishonesty has been committed or;
- he is unable to confirm claims of creditors are covered by the licensees assets.
An approved auditor for the purposes of the Act is either a local auditor registered under the Public Accountants Act 1984 or one of the Big Five international accounting firms both of whom must be registered under the International Companies Act 1987. A list of local accounting firms is included as Appendix 2.
The Act allows the Minister of Finance to take appropriate measures against the licensee in the following circumstances:-
- where the licensee is carrying on business in a manner detrimental to the public interest or interest of the depositor or creditors
- where the licensee is unable to meet its obligations as they fall due
- where the licensee has failed to comply with the Act or any directive of the Minister.
Such measures include imposing conditions on a licensee, removal or replacement of any director of officer and appointment of a receiver or manager to assume control of the licensees business.
The Act further allows the Minister to appoint one or more qualified persons to carry out an official examination under conditions of confidentiality, the books and accounting and other records of a licensee where there is reason to believe that the international banking business is being carried on in a manner detrimental to depositors or creditors or it has insufficient assets to cover its liabilities or it is contravening the provisions of the Act.
The Minister or Inspector may require a licensee to affect an insurance indemnity policy against certain risks, including the dishonesty of employees, and loss of documents.
Central Bank Controls
A licensee in regard to only its international banking operations is exempted from currency and exchange control restrictions and regulations and stamp duties. Its profits and dividends are also exempt from any form of local taxation.
A licensee or its auditor must furnish to the Central Bank such information regarding its domestic banking business as the Central Bank may direct from time to time.