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.
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.
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
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.