SPECIAL REPORT
UK lauds OverseasTerritories' approach to international financial compliance
British Parliamentary Under Secretary ofState in the Foreign and Commonwealth Office, Baroness PatriciaScotland, has described the recently-published KPMG report asbeing reflective of the resolve with which the Overseas Territorieshave approached the whole issue of meeting international financialregulations.
"The review has underlined the Overseas Territories' commitmentto adhering to international standards of financial regulation,and their willingness to co-operate internationally to help ensurea sound international financial system," she is quoted assaying on Friday October 26 when the report was officially publishedin Britain.
Baroness Scotland, who also has portfolio responsibility for theOverseas Territories, recalled its being mentioned in the `WhitePaper' - 'Partnership and Prosperity', a document that is oft-criticisedlocally, that "... the Overseas Territories' success in attractingfinancial services has been built upon, amongst other things,their reputation for sound administration, effective legal systems,and political stability."
Noting the importance in an increasingly competitive global economyof maintaining a reputation for seeking to attract only cleanand well-regulated business, Baroness Scotland said: "I welcomethe Overseas Territories' full participation in the review exercise.It has been a complex process, but one which we believe will deliverreal benefits to the Overseas Territories' financial sectors."
Economic Secretary to the Treasury, Ms Melanie Johnson, on theother hand, noted that not only does the report provide a rigorousand comprehensive evaluation of how far the Overseas Territoriesalready match international standards and good practice, but alsomakes recommendations for action to improve and strengthen theirfinancial services regulation.
As such, Ms Johnson said: "I look forward to seeing theirplans for implementation linked to a specific timetable whicheach Overseas Territory has committed to publishing by 15 January,2001."
She observed that while it was evident that some Overseas Territorieshave more to do than others before they can fully deliver whatis necessary, it was equally apparent that not everything canbe done immediately.
She noted that it has been mutually agreed that the Overseas Territories,where applicable, will give priority to three particular recommendationsmade in the KPMG report, these being:
* legislation for the establishment of independent regulatoryauthorities;
* any necessary enhancements to their laws and systems to combatmoney laundering; and
* introducing legal powers that would allow regulatory authoritiesto obtain key information, and share this with overseas regulatorsin order to assist their investigations.
Noting that the British government will be working closely witheach Overseas Territory at implementing suitable measures, shesaid it was anticipated that the necessary steps substantivelywill have been in place by 30 September 2001.
"Prompt and firm action in this regard will demonstrate tothe global financial community the strength of the Overseas Territories'commitment to international standards," the minister saidin closing.
The KPMG report came about as a result of recommendations madeby the White Paper that an in-depth, independent review of theOverseas Territories' financial centres should be done by a regulatorybody.
Following a lengthy tendering process, it is said, KPMG was thefirm chosen last December to conduct the audit, which looked specificallyat the extent to which the Overseas Territories comply with internationalstandards and good practice by the way in which they regulatetheir international financial sectors.
The thrust was to analyse the position of each territory individually,in terms of the extent and range of financial business conductedand the strength and effectiveness of their regulatory regimes.
It was also felt that such an audit should be exception-basedand primarily concentrate on those areas of financial regulationwhere action is considered necessary as to fully comply with internationalstandards.
The actual process entailed examining practices and legislationcovering the banking, insurance and securities sectors, as wellas companies and trusts, independence of regulatory authoritiesand arrangements for co-operating with overseas and Law-enforcementauthorities and developments in tackling moneylaundering.
The resultant report is said to comprise individual publicationson each Overseas Territory, each containing the Terms of Referencefor conducting the review and Guidance Notes produced by the clients- being Britain, the Caribbean Overseas Territories and Bermuda- thereby setting out the standards/practices against which theOTs should be assessed.
Following its publication, the Government of the Cayman Islandsissued the following statement:
"We welcome the independent report of KPMG, which confirmsthe commitment of the Cayman Islands to operating a well-regulatedfinancial centre which meets international standards. The reportidentifies a number of areas that we will be addressing to ensurethat Cayman's regulatory framework is further strengthened. TheCayman Islands will continue to play its part in ensuring thatits international financial sector is able to meet new internationalstandards as they evolve."
Anguilla's Finance Minister, the Hon. Victor Banks, said:
"The Government of Anguilla welcomes the KPMG Report andrecognises the hard work that has gone into its completion. TheReport highlights the extent to which Anguilla already meets internationalstandards and practices and serves as an excellent springboardfor the continuing solid development of Anguilla's financial servicessector. The comments in the Report on the sound regulatory aspectsof Anguilla's electronic Companies Registry, ACORN, are particularlywelcome. The Report should also assist the Government of Anguillain dealing with a number of international initiatives currentlyunderway.
On behalf of the Government of Bermuda, Finance Minister, theHon. C. Eugene Cox said: "Bermuda is pleased that in thevast majority of areas, the report confirms that Bermuda's regulationof financial services conforms to international standards andgood practice."
"We are particularly pleased," he said, "that inareas such as company formation the report recognises that Bermudasubstantially exceeds minimum requirements. We also recognise,as the report does, that some enhancements are always possible.Bermuda remains firmly wedded to meeting and maintaining internationalstandards. As such we generally support and welcome the recommendationsfor improvement of certain of the present provisions that havebeen made by KPMG."
The Chief Minister of the British Virgin Islands, the Hon. RalphO'Neal said:
"The Government of the British Virgin Islands welcomes thiscomprehensive report, which we view most positively. KPMG mustbe commended on producing such a thorough and useful review. Wealso commend the approach taken by the British Government in producingthe report, which offers an ideal example of how Britain and herOverseas Territories can work together constructively to resolveissues affecting us all.
"The report has a double value to the BVI in highlightingthe strengths of our existing regulatory regime while helpingus prioritise the weaknesses that still exist. Implementing therecommendations is integral to the BVI's commitment to being inthe top echelon of offshore financial service centres."
He promised to table it that very day before the BVI legislatureand to circulate it widely within the island for public comment.He closed by saying that the BVI government looked forward tocontinuing to work closely with the British Government as togetherall parties involved take the report forward.
The Government of Montserrat was quoted as saying:
"Montserrat understands its responsibilities as a providerof Financial Services in the international market. We thereforewelcome the KPMG report since its recommendations provide a basisfor action geared to achieving internationally agreed standardsof financial regulation."
And, the Chief Minister of the Turks and Caicos Islands, Mr. DerekTaylor said:
"We welcome publication of the report. The next step is forus all to consult within our respective jurisdictions. We lookforward to giving careful and constructive scrutiny to the report"
The foregoing comments reportedly followed a recent meeting inLondon attended by Ministers, senior officials and regulatorsfrom the Overseas Territories and the UK. At the meeting, it issaid, it was agreed that:
* Each Overseas Territory would publish, by 15 January, 2001,a response to the recommendations addressed to it, together witha timetable for implementation.
* Following appropriate consultation and parliamentary approvalwithin each Overseas Territory, the core recommendations relatingto independent regulatory authorities, anti-money laundering regimesand exchange of information would be substantially implementedby 30 September 2001.
* The UK is willing to provide appropriate assistance to OverseasTerritories in their bilateral and/or multilateral negotiationswith other entities in matters relating to regulation and exchangeof information.