The Isle of Man's money laundering procedures have just received a big boost. The Manx parliament, Tynwald, has announced that the island is to be incorporated on a list of countries approved by the US Internal Revenue Service under new Withholding Tax Legislation.
The legislation, due to take effect from 1 January 2001, demands that local financial institutions looking to invest in US securities must apply for Qualified Intermediary Status - those institutions that are classed as unqualified intermediaries will have great difficulty in claiming exemption from US withholding tax on behalf of their clients.
Before any financial institutions based in the Isle of Man could apply for Qualified Intermediary status, the island had to satisfy 18 "know your customer" principles, and as a result there has been close collaboration between the Manx Financial Supervision Commission and the Government Treasury.
In a press release, a Treasury spokesperson stated: 'this is excellent news for the island and is a vindication to the FSC's approach to anti-money laundering procedures. We are ... grateful to our consultants, KPMG, who have assisted us with the application.'
The IRS decision is certainly a major boost for the Isle of Man, particularly as it comes hot on the heels of a report, issued last month by the Offshore Group of Banking Supervisors and the Financial Action Task Force (FATF), in which the Manx authorities were highly praised for their successful endeavours in countering money laundering and related criminal activities with a 'robust arsenal' of pro-active initiatives.
Since June's OECD report on harmful tax regimes, the Isle of Man has announced a package of radical financial reforms focusing on the three crucial areas of taxation, e-commerce and banking, in an effort to maintain an attractive and competitive business environment. Among the proposed measures, the island aims to reduce corporation and income tax, moving to equality between non-residents and residents, with a new tax credit system for distributions (to ensure that tax neutrality is preserved for the investor). The modernised tax system will include an updated Double Taxation Agreement with the UK which will also be offered to any other jurisdiction wishing to enter into constructive discussion with the Manx authorities.
These major reforms of its tax and finance legislation are not the limit of the island's response to international pressure: next month it will host a major conference on money laundering and fraud. The conference, which will commence 9 November, will cover subjects including the latest trends in money laundering, particularly over the Internet; electronic fund transfers; forged documents; the identification of suspect individuals, companies, and jurisdictions; and computer forensic systems.
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