Select Committee on Treasury Minutes of Evidence


Memorandum submitted by HM Treasury

FINANCIAL REGULATION IN THE CROWN DEPENDENCIES AND CARIBBEAN OVERSEAS TERRITORIES

  The Government's assessment of the standards of regulation in the Crown Dependencies and the Caribbean Overseas Territories and Bermuda is based on two independent external reviews: the Review of Financial Regulation in the Crown Dependencies (the Edwards Report); and the Review of the Caribbean Overseas Territories (by KPMG). The Government's policy is to encourage all its Crown Dependencies and Overseas Territories to meet the highest international standards of regulatory supervision.

REVIEW OF FINANCIAL REGULATION IN THE CROWN DEPENDENCIES

  The Home Secretary commissioned this review in January 1998, with the Island authorities in Jersey, Guernsey and the Isle of Man, of the regulation of their international finance centres, the combating of financial crime and co-operation with other Jurisdictions. The report was laid before the House on 19 November 1998.

  The report concluded that the Islands' international finance centres have infrastructures of legislation, judiciary, prosecution, regulation and law enforcement (mostly based on UK models) which for the most part are extremely good for such relatively small jurisdictions. Also in many areas they have co-operated well with the authorities of other countries in the pursuit of crime and regulatory breaches.

  The report also made a number of recommendations for improvements in prudential regulation, enforcement, policing, co-operation with overseas regulators, and customer protection.

  The Treasury, together with the Lord Chancellor's Department, remains in regular contact with the Island authorities ensuring that they keep up to date with later developments, including in particular the fight against the financing of terrorism. All Island primary legislation is referred to the UK for Royal Assent. Treasury officials assess new financial regulation legislation including recent laws fostering international co-operation and regulation of corporate service providers.

REVIEW OF THE CARIBBEAN OVERSEAS TERRITORIES AND BERMUDA

  This review, undertaken by KPMG and funded jointly by the Government and the Territories under review, assessed the Territories' performance in regulation and supervision of their international financial sectors against international standards and good practice, and made recommendations for improvement. The report was published and laid before Parliament on 27 October 2000.

  The report concluded that some Territories had more to do than others. The three priorities for action were legislation for the establishment of independent regulatory authorities; any necessary enhancements to their laws and systems to combat money laundering; and introducing legal powers that would allow regulatory authorities to obtain key information and share this with overseas regulators in order to assist their investigations.

  The Caribbean Overseas Territories and Bermuda have made good progress towards implementing the recommendations of the KPMG report. All of the Territories have either implemented the three priority measures set out in the review or are preparing the legislation to do so. Progress reports were issued by Treasury and FCO on 8 February 2001, 3 December 2001 and 23 May 2002.

June 2002


 
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Prepared 12 December 2002