Financial Services Directors Hit Back At Blacklists

Lisa Ugur, Tax-news.com, London

30 June 2000

The last few days have seen the emergence of numerous reactions amongst offshore jurisdictions to the OECD and FATF reports on 'harmful tax practices' and money laundering, whether or not they made the now infamous lists. Financial services directors from several offshore financial centres are now hitting back on those who are seeking to vilify them, calling for the creation of legislation to facilitate co-operation between all offshore tax centres.

Whilst Jersey managed to escape the FATF list of those jurisdictions deemed to be unco-operative in tackling money laundering due to a lack of transparency and banking secrecy, it did not fare so well in the eyes of the OECD, which included the island on its blacklist of harmful tax regimes. Speaking at the fifth international financial fraud convention in London, Richard Pratt, director of the Jersey Financial Services Commission, was keen to put paid to the negative image which seems to plague offshore financial centres and, in particular, to dispel unfavourable attitudes towards Jersey. He said that in order to ensure the sharing of information at crucial moments of an investigation, new legislation had to be drafted.

Before the convention, the Jersey authorities had already condemned the OECD report as 'seriously flawed' and said that the organisation's demands could wreck the Jersey economy. Jersey said it had no problem with co-operation but accused the OECD of changing the goalposts and making little progress in reforming its own harmful tax practices.

Richard Pratt's demands were reinforced by Robert Mathavious, director of the British Virgin Islands financial services department, and John Shockey, former special adviser and US comptroller of the currency. Shockey said 'There is a need to validate the resistance to offshore financial centres. There is also a need for laws to permit co-operation. This is often overlooked by law enforcers.'

One of the conference speakers suggested the named and shamed offshore financial centres create their own list of countries they deem to have dubious tax practices. 'That way you can have a mutual slanging match', said Michael Levi, professor of criminology at the University of Wales.

Shockey was also outraged at the OECD blacklist, dismissing it as including 'traffic violators along with murderers', meaning it lumped all the jurisdictions in to one basket without taking time to investigate intimately the practices of each individual jurisdiction. The Cayman Islands are just one jurisdiction which has claimed that numerous invitations to visit the islands to carry out investigations were not taken up.

However, could Richard Pratt's suggestion that laws be created to facilitate co-operation between all jurisdictions really be workable? The Swiss are already digging their heels in over banking secrecy, resolutely saying that Switzerland's banking laws will not be changed on any account, so could easily stall at other suggestions. Offshore jurisdictions may have one universal tie - that they are all low tax regimes - but when it comes to a set of rules and regulations across the board, sticking points are inevitable.

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