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Overseas Territories Respond To UK Government's Report

Amanda Banks, Tax-news.com, London

13 February 2001


The Caribbean Overseas Territories and Bermuda have now formally responded to the recommendations made in a KPMG report commissioned by the British Government and published on 27 October last year.

The report, an in-depth review of financial regulation in the UK's Caribbean Overseas Territories and Bermuda, assessed the extent to which the jurisdictions comply with international standards and good practice in the way they regulate their financial services sectors. The report concluded with a series of recommendations relating to the introduction of independent and effective regulatory authorities to deal with the shortcomings revealed during the assessment. This included, states the UK government, the introduction of "compulsory powers" to provide overseas regulatory authorities with effective and timely investigative assistance, and the introduction of any necessary enhancements to the laws and systems which combat money laundering.

Economic Secretary to the UK Treasury, Melanie Johnson, stated: 'I have made it clear that the establishment of independent regulatory authorities, of effective powers to assist investigations by overseas authorities, and of any necessary enhancements to the laws and systems which combat money laundering are essential elements in establishing properly regulated financial centres in the Overseas Territories ... the UK fully supports a number of international initiatives which make it clear that counter measures will be taken against persistently non-compliant offshore financial centres.'

The Caribbean Overseas Territories comprise Anguilla, British Virgin Islands, Cayman Islands, Turks and Caicos and Montserrat. All the Overseas Territories have agreed to establish independent regulatory authorities with the necessary legislative power to investigate money-laundering activities. Bermuda, which already has an established independent regulatory authority, will establish a further authority for its insurance sector.

A statement released by the UK government states: 'Cayman has already introduced the necessary powers to assist overseas regulatory authorities. Montserrat and the British Virgin Islands have introduced legislation in this area, although this requires further amendment. The other Overseas Territories need to introduce the necessary powers within our agreed timescale. Amendments are also needed in some jurisdictions, including Cayman, to the powers available to assist overseas law enforcement authorities. All the Overseas Territories now have the main building blocks in place in order to tackle money laundering. All plan to introduce the further measures required in order to satisfy international standards in this area.'

Baroness Scotland, Parliamentary Under Secretary of State in the Foreign and Commonwealth Office responsible for the Overseas Territories, stated: 'I welcome the high level commitments from the Caribbean Overseas Territories and Bermuda to address the KPMG recommendations ... The Uk government will continue to provide advice and assistance to help the six Overseas Territories concerned to achieve full compliance with the principles and guidelines in the KPMG report.'

The government has given the jurisdictions a deadline of 30 September, 2001, by which date the agreed recommendations must be implemented. Until that time, Baroness Scotland confirmed that there will be a process of 'regular review and dialogue' to ensure the implementations are introduced with necessary effect.

The responses of the jurisdictions have been posted on the UK Treasury's site at http://www.hm-treasury.gov.uk/pdf/2001/AnguillaGovtResponse.pdf.

The UK Government's own response has also been published at http://www.hm-treasury.gov.uk/press/2001/p11_01.html and is given in full below.

REVIEW OF FINANCIAL REGULATION IN THE CARIBBEAN OVERSEAS TERRITORIES AND BERMUDA: IMPLEMENTING RECOMMENDATIONS

The Caribbean Overseas Territories and Bermuda have now each provided a formal response to the recommendations made in KPMG’s review of financial regulation, which was published on 27 October 2000.

Noting the responses of the Overseas Territories, the Economic Secretary to the Treasury, Melanie Johnson, said:

"The Overseas Territories have now explained how they plan to respond to KPMG’s recommendations. I have made it clear that the establishment of independent regulatory authorities, of effective powers to assist investigations by overseas authorities, and of any necessary enhancements to the laws and systems which combat money laundering are essential elements in establishing properly regulated financial centres in the Overseas Territories.

"These overdue measures need to be in place by the end of September 2001. The Overseas Territories themselves agreed when the review was published that these three priorities should substantively be in place by then, and I expect full delivery of their promises.

"I also expect to see KPMG’s other recommendations implemented by the end of 2001. This is essential if the Overseas Territories are to satisfy the international community and standard-setting bodies that they conduct their financial business according to international requirements. The UK fully supports a number of international initiatives which make it clear that counter measures will be taken against persistently non-compliant offshore financial centres."

Baroness Scotland, Parliamentary Under Secretary of State in the Foreign and Commonwealth Office responsible for the Overseas Territories, added:

"I welcome the high level commitments from the Caribbean Overseas Territories and Bermuda to address the KPMG recommendations. Financial services is a competitive sector, and the UK Government is keen that the Overseas Territories will attract quality business seeking a well-regulated environment, based on the prevailing rules, laws and good practice internationally.

"The UK Government will continue to provide advice and assistance to help the six Overseas Territories concerned to achieve full compliance with the principles and guidelines in the KPMG report. There will be a process of regular review and dialogue over the next twelve months to ensure the published implementation plans are substantially implemented by the end of 2001."

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