Offshore rankings

The Financial Stability Forum, which comprises financial regulators, central banks and finance ministries, has graded a host of offshore financial centres (OFCs) according to their “perceived quality of supervision and perceived degree of co-operation”, not least in the areas of tax evasion and money laundering. The categorisation into three classes was based on a survey of OFC supervisors and the views of a wide range of onshore supervisors. Group I comprises those jurisdictions which pose no threat to global financial integrity due to their adequate legal infrastructure, supervision and co-operation. It includes Hong Kong, Luxembourg, Singapore and Switzerland. Dublin, Guernsey, Isle of Man and Jersey are also included in the top group but the FSF says that they should be encouraged in their efforts to strengthen their transparency and liaison with overseas authorities. Group II contains those states which need to take further action to improve their legal and supervisory frameworks. They are Andorra, Bahrain, Barbados, Bermuda, Gibraltar, Labuan (Malaysia), Macau, Malta and Monaco. At the bottom of the league, in Group III, are those states that fall below expected standards of robust regulation and response to overseas requests for information. They are Anguilla, Antigua and Barbuda, Aruba, Belize, British Virgin Islands, Cayman Islands, Cook Islands, Costa Rica, Cyprus, Lebanon, Liechtenstein, Marshall Islands, Mauritius, Nauru, Netherlands Antilles, Niue, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Samoa, Seychelles, The Bahamas, Turks and Caicos, and Vanuatu. If these states do not improve their regimes they could face sanctions and may, in the final reckoning, be unable to transact business with the mainstream financial centres. The FSF report was released in advance of the delayed identification by the Organisation for Economic Co-operation and Development of those centres which lack transparency and co-operation in the field of tax evasion. The 35 jurisdictions that feature on the OECD list include Guernsey, Jersey, the Isle of Man, Gibraltar, Monaco, Liechtenstein, the Netherlands Antilles, and the British Virgin Islands. They have been give a year in which to reform their regimes or face what the report calls “defensive measures” by OECD members which could include the repudiation of tax treaties that allow companies to write off tax paid in the offshore jurisdictions. Six states – Bermuda, Cayman Islands, Cyprus, Malta, Mauritius and San Marino – escaped censure by agreeing to reform ahead of publication. Days earlier Jersey, Guernsey and the Isle of Man had won plaudits from the Financial Action Task Force for their efforts to combat money laundering. One commentator observed drily that the OECD’s use of an undifferentiated list was the equivalent of lumping together murderers and those guilty of parking offences. Regulators in the Channel Islands have offered a robust rebuttal to the findings. Speaking at the recent Fraud 5 convention in London, Richard Pratt, Director General of the Jersey Financial Services Commission, said that the OECD had given no indication of the criteria it had used and provided no opportunity to discuss the conclusions. He also called on the OECD to subject its own members to the same rigorous scrutiny that it had applied to the OFCs.