Offshore jurisdictions have been particularly hurt by the focus on securing and regulating international payments, since they were already in the public eye as a result of the work of the FATF and the OECD. Only the most advanced and respectable jurisdictions, such as the Isle of Man or Bermuda, have been able to welcome e-commerce business with any confidence that adequate payment mechanisms can be put into place.

The lack of adequate banking support for offshore e-commerce has been to some extent compensated by the emergence of third-party payment gateways, the best-known of which is Pay-Pal; but even these services are now being threatened by legislative attacks from tax authorities and law enforcement agencies. It is of course the US authorities who are the most feared and the most effective in terms of regulating, and, some would say, impeding the growth of offshore e-commerce payment systems.

The two main US threats to the workings of the international payments system at the retail level are the Internal Revenue Service and the Patriot Act. The IRS is progressively expanding a campaign to track down the use of credit cards by its citizens internationally, with a view to uncovering the existence of undisclosed (= untaxed) pots of money in offshore (or indeed onshore) bank accounts. This might seem reasonable enough, if the result were simply to prevent blatant tax fraud - but in the process the IRS is ripping apart the confidentiality and integrity of the credit card payment structure itself, which can only have a bad effect on international retail e-commerce. No doubt that pleases many people.

Potentially worse than the IRS is the Patriot Act, which offers the US law enforcement authorities plenty of opportunity to prevent financial institutions from offering or participating in international payment systems - and since US institutions are all-pervasive in international payments, that means a major impact for offshore jurisdictions which are hoping to host tax-efficient retail e-commerce activity.

Under the Patriot Act, the Treasury Department introduced a new set of rules last April that extended its provisions for banks and securities firms to credit-card companies, mutual funds and wire-transfer firms. The regulations required the firms to implement comprehensive money-laundering compliance programs. Among the provisions, companies were required to designate a special compliance officer, train employees to detect money laundering, commission independent audits, and establish policies and procedures to identify risks and minimize opportunities for abuse. The act also requires companies to file copies of their plans with the Treasury Department.

PayPal bravely says that its sophisticated proprietary fraud-detection software programs can easily comply with the act's requirements because it keeps records of every transaction that occurs across its network and closely monitors the activities of its users. But the company's IPO filing this year said: "Complying with such regulation could be expensive or require us to change the way we operate our business."

Patriot Act requirements are tough enough for domestic transactions, but are potentially much worse for overseas transactions. PayPal is expecting to be subject to much more stringent rules in future, and a spokesman told the Wall Street Journal: "Anytime the government is in a position to add new requirements to businesses, it's a concern. The challenge is to make sure that the goal of the law and the regulations are met while still allowing individuals and entities to engage in lawful activity."

The experience of Pay-Pal will probably prove central to the future of third-party international payment systems, and its recent decision (forced on it by eBay) to retreat from participation in betting and gaming, much of which is offshore based, is a bad sign of what may be to come. PayPal had agreed with New York prosecutors to prevent local residents from making use of its system for betting and gaming transactions, and has supported Jim Leach's anti-Internet-gaming legislation, although that has now failed to become law in the current Congress. The company says that it will lose about 8% of its turnover when it ceases to process betting and gaming transactions in order to comply with eBay's sensitivities. But most of this turnover was probably legal.

"When something is of murky legality a company is stuck between customer desire to do what they think is legal and the law-enforcement folks who may have a different view," said the company plaintively to the Wall Street Journal. "When something is clearly illegal it makes it easier for the company to ban something without drawing the ire of our own customers. We just need to know what we're expected to do."