Offshore Banking Act, 2024 (Act No. 2 of 2024)

Bangladesh Bank (Central Bank of Bangladesh) Head Office Motijheel, Dhaka-1000 Bangladesh www.bb.org.bd

FE Circular Letter No. 01 Date: March 18, 2024 Managing Director/CEOs Head office of All Scheduled Banks in Bangladesh

Dear Sirs, Offshore Banking Act, 2024 (Act No. 2 of 2024) circulation Please be informed that the Offshore Banking Act, 2024 (Act No. 2 of 2024) [অফশোর ব্যাংকিং আইন, ২০২৪ (২০২৪ সনের ০২ নং আইন)] has been passed by the Bangladesh Parliament and duly published in Bangladesh Gazette on March 14, 2024. You are advised to bring the contents of the act (copy attached) to all concerned for necessary action. Yours faithfully, Md. Sarwar Hossain Director (FEPD) Phone: 9530123 Foreign Exchange Policy Department

— To maintain the pace of contemporary international or foreign financial regulations and to regulate and control offshore banking operations, it is deemed appropriate and necessary; therefore, this Act is enacted as follows:

1. Short title and commencement.—(1) This Act shall be called the Offshore Banking Act, 2024. (2) It shall come into force immediately.

2. Definitions.—Unless there is any repugnancy in subject or context, this Act shall,— (1) “Resident” or “Bangladeshi Resident” mean any person; (2) “Approved Foreign Currency” or “Approved Foreign Currency” under Article 18 of the Bangladesh Bank Order, 1972 (President’s Order No.127 of 1972) mean any foreign currency; (3) “Authorized Dealer” or “Authorized Dealer” under section 5 of the Government Authorized Dealers Act, 2010 (Act No. 42 of 2010) mean an authorized dealer; (4) “Offshore Banking” mean banking operations conducted by one hundred percent foreign-owned enterprises and branches established in foreign currency by Bangladesh Bank from approved sources under this Act, in accordance with directions issued from time to time by Bangladesh Bank, with residents or, if applicable, Bangladeshi residents; (5) “Offshore Banking Unit” or “Offshore Banking Unit” mean any separate commercial unit, branch, place, or office of a scheduled bank operating under a special license issued by Bangladesh Bank under this Act; (6) “Onshore Banking Unit” or “Onshore Banking Unit” mean any commercial unit of a scheduled bank conducting onshore banking operations; (7) “Scheduled Bank” or “Scheduled Bank” mean Scheduled Bank defined in clause (j) of Article 2 of the Bangladesh Bank Order, 1972 (President’s Order No.127 of 1972); (8) “Special Law” or “Special Law” mean the Tax Act, Investment Promotion Act, Private Sector Export Processing Zones Authority Act, High Tech Park Act, or any other law enacted by the Government from time to time; (9) “Foreign Source” or “Foreign Source” mean all sources outside the internal and geographical boundaries of Bangladesh which shall be considered as foreign sources, i.e., all such sources; (10) “Foreign Instruction” or “Foreign Instruction” mean instructions sent to an Offshore Banking Unit in foreign currency; (11) “Bangladeshi Resident Person” or “Bangladeshi Resident Person” mean Resident Person defined in clause (hhh) of section 2 of the Foreign Exchange Regulation Act, 1947 (Act No. VII of 1947); (12) “Bangladesh Bank” or “Bangladesh Bank” mean Bangladesh Bank defined in clause (c) of Article 2 of the Bangladesh Bank Order, 1972 (President’s Order No.127 of 1972); (13) “Private Sector Export Processing Zone Authority Act” or “Private Sector Export Processing Zone Authority Act” mean any law or ordinance notified under section 11 of the Bangladesh Private Sector Export Processing Zone Authority Act, 1996 (Act No. 20 of 1996); (14) “Foreign Currency” or “Foreign Currency” mean Foreign Currency defined in clause (d) of section 2 of the Foreign Exchange Regulation Act, 1947 (Act No. VII of 1947); (15) “Person” or “Person” mean Person defined in clause (hh) of section 2 of the Foreign Exchange Regulation Act, 1947 (Act No. VII of 1947); (16) “Bank” or “Bank” mean any Banker defined in clause (g) of section 5 of the Bank Companies Act, 1991 (Act No. 14 of 1991); (17) “Banking Company Person” or “Banking Company Person” mean Banking Company Person under section 26(g) of the Bank Companies Act, 1991 (Act No. 14 of 1991); (18) “Export Processing Zone Act” or “Export Processing Zone Act” mean any law or ordinance notified under section 10 of the Bangladesh Export Processing Zones Authority Act, 1980 (Act No. XXXVI of 1980); (19) “License” or “License” mean the license granted under section 4 for conducting offshore banking operations; (20) “High-Tech Park” or “High-Tech Park” mean any law defined under clause (6) of section 2 of the Bangladesh High-Tech Park Corporation Act, 2010 (Act No. 8 of 2010) enacted by the Government for the development of the Bangladesh IT sector; and (21) “Facilitator” or “Facilitator” mean anyone who operates an Offshore Banking Unit and Onshore Banking Unit according to the wishes and instructions of the customer.

3. Prohibition of Offshore Banking Business.—No person shall engage in offshore banking business without the permission of a scheduled bank operating in Bangladesh.

4. Application for License.—(1) Any scheduled bank wishing to engage in offshore banking business may apply to Bangladesh Bank for a license for an Offshore Banking Unit in accordance with directions issued from time to time by Bangladesh Bank. (2) Bangladesh Bank shall verify the identity of the applying scheduled bank and its capacity to conduct onshore and offshore banking operations before issuing the license. (3) The scheduled bank shall formally apply for the license to establish an Offshore Banking Unit. (4) An Offshore Banking Unit may be established in any branch of a scheduled bank within Bangladesh. (5) To conduct offshore banking operations, the applying scheduled bank must have correspondent banking relationships with any bank or institution outside Bangladesh.

5. Commencement and Cancellation of Offshore Banking Operations.—(1) Within six (6) months from the date of issuance of the license, or within the time limit prescribed by Bangladesh Bank, the Offshore Banking Unit shall commence its operations, otherwise its license shall be deemed cancelled. (2) The scheduled bank shall inform Bangladesh Bank seven (7) days prior to commencing the operations of its Offshore Banking Unit.

6. Prohibition on Use of Name by Offshore Banking Units.—No bank or institution, other than those licensed by Bangladesh Bank to operate Offshore Banking Units, shall use any name as part of its name that would lead to it being considered an Offshore Banking Unit.

7. Suspension, Cancellation, etc. of License.—(1) Bangladesh Bank may suspend or cancel the license of any Offshore Banking Unit for any reason specified, such as: (a) If the license holder fails to comply with the conditions mentioned in the license or any provision of this Act or any other currently in force law, or commits any offense; (b) If any fraud is committed against the public interest; (c) If any officer or employee of the unit or any person associated with it submits false information to Bangladesh Bank; and (d) If any condition imposed under section 11 is not complied with. (2) Under this section, Bangladesh Bank shall make the cancellation or suspension of the license effective from the date of informing the scheduled bank. (3) As a result of the cancellation or suspension of the license of any Offshore Banking Unit under this section, if any scheduled bank suffers loss, the said scheduled bank may request Bangladesh Bank to recover the loss within thirty (30) days of the date of informing it.

8. Surrender of License.—(1) In order to fully comply with the provisions of this section, the Offshore Banking Unit holding the license may surrender its license to Bangladesh Bank at its discretion. (2) If Bangladesh Bank is satisfied that the Offshore Banking Unit holding the license has maintained sufficient funds against all its liabilities, Bangladesh Bank shall accept the surrender of its license and subsequently fix a specific date for the surrender to take effect. (3) Regarding the liabilities of the defunct Offshore Banking Unit, Bangladesh Bank shall issue necessary instructions to the scheduled bank. (4) If Bangladesh Bank accepts the surrender of the license under sub-section (2), the Offshore Banking Unit shall publish a notice in at least one English and one Bengali national newspaper in a size prescribed by Bangladesh Bank, at least twenty-one (21) days before the date fixed under sub-section (2), and the same notice shall also be displayed on the website of the scheduled bank.

9. Effect of License.—Upon the grant, suspension, cancellation, or surrender of the license under sections 4, 7, or 8 respectively, all operations of the respective Offshore Banking Unit shall cease.

10. Re-application.—Two (2) years after the cancellation or surrender of the license under section 9, the bank whose Offshore Banking Unit license was cancelled or surrendered may re-apply for a license to conduct offshore banking business.

11. Acceptance of Deposits, Loans and Investments, etc. Operations.—(1) Along with accepting deposits from 100% foreign-owned enterprises under the Export Processing Zone Act, Private Sector Export Processing Zone Authority Act, Authorized Dealer Act, and High-Tech Parks, the Offshore Banking Unit may provide short-term and long-term loans and investments, issue bonds and debentures, discount bills, negotiate bills, and provide other foreign commercial facilities and foreign instructions to them: Provided that the granting of short-term and long-term loans and investments requires the prior approval of Bangladesh Bank, from time to time, issued through directions. (2) Subject to the directions issued by Bangladesh Bank, the bank may conduct operations related to accepting deposits from 100% foreign-owned enterprises and other enterprises, and providing loans and investments for their needs. (3) The activities of resident persons under the Offshore Banking operations under sub-section (2) require approval, and they may accept deposits from them. (4) The Offshore Banking Unit may accept deposits and loans from resident Bangladeshis, foreigners, and enterprises. (5) Without prejudice to the rights of bank account holders, the bank may provide facilities to resident Bangladeshis for importing goods and services (direct and deemed) through the use or draft of foreign exchange bills discounted or paid by the bank in its Offshore Banking operations. (6) Subject to the directions issued by Bangladesh Bank, the scheduled bank may provide medium and long-term loans and investments to resident Bangladeshis through its Offshore Banking operations. (7) For the purposes of this Act, Bangladesh Bank may expand the scope of Offshore Banking through directions issued from time to time.

12. Guidelines for Conducting Offshore Banking Operations.—(1) To conduct Offshore Banking operations, each scheduled bank shall have approved guidelines in consultation with Bangladesh Bank. (2) Separate accounts shall be maintained for the Offshore Banking operations of the scheduled bank, which shall be used for official and other operational verification. (3) Asset Liability Management (ALM) guidelines of the respective bank shall be applicable for Offshore Banking operations. (4) Transfers from Onshore Banking Units to Offshore Banking Units may be made with the special approval of Bangladesh Bank. (5) All limits for foreign and non-foreign currencies required by Bangladesh Bank shall be applicable for the offshore business of the scheduled bank. (6) All types of transaction records required by Bangladesh Bank shall be applicable for the offshore business of the scheduled bank.

13. Operation of International Banking Accounts.—(1) Along with resident Bangladeshis and enterprises operating under the Export Processing Zone Act, Private Sector Export Processing Zone Authority Act, Authorized Dealer Act, and High-Tech Parks, and other special laws, the Offshore Banking Unit may operate international banking accounts in foreign currency for any resident's benefit, and the facilitator of the international banking account holder shall be considered a resident facilitator. (2) The Offshore Banking Unit may operate these accounts in any approved foreign currency. (3) As an alternative to sub-section (1), deposits may be made through banking channels or directly into the account of the facilitator. (4) Bangladesh Bank may, from time to time, issue directions regarding the interest or profit to be paid against the accounts operated by the Offshore Banking Unit. (5) The following types of accounts may be used as deposit accounts: (a) For the transfer of funds from Onshore Banking Units for operational and investment purposes; and (b) For paying interest or profit, and for the direct purchase of foreign goods by the facilitator along with interest or profit.

14. Limitations on Operations.—(1) The Offshore Banking Unit shall not perform certain operations, such as: (a) Accepting any direct or indirect foreign or non-foreign banking instruction from persons other than those mentioned in sections 11 and 13; (b) Accepting deposits or loans under cheques, drafts, money orders, or other instruments issued by the depositor in the name of the Offshore Banking Unit; (c) Transferring funds from Onshore Banking Units to Bangladesh Bank's general or special approval. (2) Prior approval from Bangladesh Bank, from time to time, is required to provide loans to Banking Company Persons from the Offshore Banking Unit.

15. Exemption from Tax and Duty.—(1) The Offshore Banking Unit engaged in offshore banking business shall be exempt from withholding tax or income tax on interest or profit paid to depositors or foreign lenders. (2) There shall be no stamp duty or levy on the accounts of depositors or foreign lenders. (3) For the purposes of sub-sections (1) and (2), immediate application shall be made to the National Board of Revenue.

16. Maintenance and Audit of Records.—The Offshore Banking Unit shall maintain records and accounts of its operations in such a manner that all records and accounts can be easily audited and inspected for the purposes of this Act.

17. Appointment of Auditors.—(1) The auditor appointed by the scheduled bank shall also audit the records and accounts of the Offshore Banking Unit. (2) The Offshore Banking Unit shall submit its annual report to Bangladesh Bank periodically as directed by Bangladesh Bank. (3) If Bangladesh Bank considers the annual report submitted by the auditor appointed by the scheduled bank unsatisfactory, Bangladesh Bank may appoint another auditor at the expense of the scheduled bank.

18. Submission of Reports and Documents.—The Offshore Banking Unit shall submit all or specified reports and documents to Bangladesh Bank within the time limit and under the signature of Bangladesh Bank.

19. Inspection.—(1) Bangladesh Bank may, from time to time, regularly and specifically inspect the cash, instructions, documents, account books, business, and assets of the Offshore Banking Unit, wherever they are kept. (2) The inspector of Bangladesh Bank shall not disclose any inspection details, including cash, securities, or parts thereof, or any person or their deposits, to any scheduled bank unless ordered by a court or Bangladesh Bank under this section.

20. Penalty for Failure to Submit Annual Report to Bangladesh Bank.—If any Offshore Banking Unit fails to comply with the provisions of sub-section (2) of section 17, Bangladesh Bank may impose a fine of up to two thousand US dollars on the unit, and if the violation continues, an additional fine of up to one hundred US dollars per day may be imposed starting from the first day of the next month.

21. Submission of False or Misleading Reports.—If any director, officer, or employee of the Offshore Banking Unit submits a false or misleading report to Bangladesh Bank, Bangladesh Bank may impose a fine of up to five thousand US dollars on the director, officer, or employee.

22. Disobedience or Obstruction in Submission of Reports.—If any director, officer, employee, or facilitator of the Offshore Banking Unit refuses, disobeys, obstructs, or intentionally delays the submission of records, accounts, documents, assets, or reports required under this section, or intentionally hides, falsifies, or misrepresents them, Bangladesh Bank may impose a fine of up to two thousand US dollars on the director, officer, or employee.

23. Violation of Other Provisions of the Act, Orders, and Rules Thereunder.—If any person violates any provision of this Act other than sections 20, 21, and 22, or any order, direction, condition, or rule framed thereunder, Bangladesh Bank may impose a fine of up to five thousand US dollars on the violator, and if the violation continues, an additional fine of up to one hundred US dollars per day may be imposed starting from the next month.

24. Recovery of Fine.—If the Offshore Banking Unit and its directors, officers, employees, or facilitators fail to pay the imposed fine under sections 20, 21, 22, and 23 within the specified time, the amount of the fine shall be recovered from the relevant account of Bangladesh Bank, and the bank shall recover the fine amount from the person upon whom the fine was imposed.

25. Issuance of Directions, Giving Instructions, Formulation of Policies, etc.—(1) Bangladesh Bank may, from time to time, issue directions for the public interest or to protect the interests of depositors of Offshore Banking Units. (2) Bangladesh Bank may, from time to time, give instructions, issue circulars, or formulate policies for the purposes of this Act.

26. Power to Make Rules.—For the purposes of this Act, the Government may make rules through notification in the Official Gazette.

27. Power to Make Regulations.—For the purposes of this Act, Bangladesh Bank may make regulations through notification in the Official Gazette to harmonize with this Act or rules.

28. Validation of Actions.—If any authority is given to implement any provision of this Act, Bangladesh Bank may issue necessary orders to validate such actions in harmony with the provisions of this Act.

29. Savings.—(1) Notwithstanding that this Act has come into force, the offshore banking operations of all Offshore Banking Units approved by Bangladesh Bank shall continue, and no application for renewal shall be required for them, and all Offshore Banking Units approved by Bangladesh Bank shall fall under the purview of this Act with licenses. (2) Directions, circulars, and circulars issued by Bangladesh Bank regarding offshore banking operations shall remain in force until amended or repealed in a manner consistent with this Act.

30. Publication of Authentic English Text.—(1) After the enactment of this Act, the Government may publish one authentic English text of the Bengali text of this Act through notification in the Official Gazette. (2) In case of any discrepancy between the Bengali and English texts, the Bengali text shall prevail.

website: www.bgpress.gov.bd