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Policy Initial assessments completed for offshore centers

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 2005
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Offshore financial centers, which nowadays account for a significant portion of global financial flows, typically do better than many countries in complying with international standards and codes of good practice, and in cooperating and sharing information among regulatory bodies, reflecting the on-average higher incomes of these centers. A staff report on the initial assessment phase of the IMF program noted that 41 of 44 contacted jurisdictions had been appraised, and these centers have published their reports.

The assessments, which are designed to bolster global financial stability through the early identification of gaps in supervision and regulation, evaluate compliance with international standards in banking, insurance, securities, and the policies, laws, and methods needed to prevent money laundering and the financing of terrorism. According to the IMF staff report, progress has been made in meeting priorities set out by the Fund’s Executive Board—regular monitoring, improved transparency, expanded technical assistance, and greater collaboration between standard setters and onshore and offshore supervisors.

Deficiencies remain to be addressed, however, notably in the centers’ efforts to combat money laundering and the financing of terrorism and in providing more effective cross-border cooperation and improving information exchange among jurisdictions and even between domestic agencies. The Financial Stability Forum, which in 2000 encouraged offshore financial centers to take steps to meet international standards and codes and asked the IMF to undertake initial assessments of these centers, welcomed the wrap-up of the first phase.

The Forum also underscored the need to ensure that offshore financial centers continue to meet evolving international standards and redress weaknesses identified by the assessments. It expressed support for the IMF’s follow-up monitoring and encouraged the IMF to give priority to “weaknesses that are systemically important from an international perspective.” The Forum also noted that the IMF should seek input from the various international standard-setting bodies and from national authorities in identifying specific problems and in helping the IMF prioritize and conduct future assessments.

41 financial centers have been appraised for their compliance with international standards
Standard(s) assessed12Jurisdictions3
BCPCosta Rica, Cyprus, Panama
BCP, ICPAruba, Macao SAR
BCP, ICP, SCPGibraltar
BCP, ICP, SCP, FATFBarbados, Luxembourg, Switzerland
BCP, FATFAnguilla, Antigua and Barbuda, Cook Islands, Dominica4, Grenada4, Andorra, Marshall Islands, Mauritius, Montserrat, Palau, Samoa, St. Kitts and Nevis4, St. Lucia4, St. Vincent and the Grenadines, Seychelles
BCP, SCP, FATFThe Bahamas; Monaco (partial BCP)
BCP, ICP, FATFBelize, British Virgin Islands, Netherlands Antilles, Turks and Caicos Islands, Vanuatu
BCP, ICP, SCP, FATFBermuda, Cayman Islands, Guernsey, Hong Kong SAR, Isle of Man, Jersey, Liechtenstein, Malaysia (Labuan), Malta, Singapore
Technical assistanceNauru,5 Niue5
Proposed new jurisdictions to be assessedBrunei, Botswana, Dubai (U.A.E.), San Marino, Uruguay

BCP = Basel Core Principles; ICP = IAIS Insurance Core Principles; SCP = IOSCO Objectives and Principles of Securities Regulation; and FATF = Financial Action Task Force Recommendations. Module 2 assessments evaluate compliance with the BCP, FATF, and, if the sectors are significant, with the ICP and SCP.

In several jurisdictions, the anti-money laundering/combating financing of terrorism (FATF) standard was assessed using draft versions of the methodology available at the time of the assessment mission.

Financial Sector Assessment Program (FSAP) assessments were conducted in Ireland and Lebanon as part of the FSAP pilot. The IMF did not publish reports produced in the pilot. Compliance with the BCP was assessed in Bahrain prior to the start of the program.

Only supervision of the domestic banking system was assessed as part of the Eastern Caribbean Currency Union FSAP. Offshore activities were not significant enough to warrant an assessment, but the jurisdictions have been invited to participate in the information dissemination and monitoring initiative to facilitate offsite monitoring.

Given the limited volume of activities, these jurisdictions are receiving technical assistance in lieu of assessment.

Data: IMF, Offshore Financial Centers—the Assessment Program—a Progress Report.

BCP = Basel Core Principles; ICP = IAIS Insurance Core Principles; SCP = IOSCO Objectives and Principles of Securities Regulation; and FATF = Financial Action Task Force Recommendations. Module 2 assessments evaluate compliance with the BCP, FATF, and, if the sectors are significant, with the ICP and SCP.

In several jurisdictions, the anti-money laundering/combating financing of terrorism (FATF) standard was assessed using draft versions of the methodology available at the time of the assessment mission.

Financial Sector Assessment Program (FSAP) assessments were conducted in Ireland and Lebanon as part of the FSAP pilot. The IMF did not publish reports produced in the pilot. Compliance with the BCP was assessed in Bahrain prior to the start of the program.

Only supervision of the domestic banking system was assessed as part of the Eastern Caribbean Currency Union FSAP. Offshore activities were not significant enough to warrant an assessment, but the jurisdictions have been invited to participate in the information dissemination and monitoring initiative to facilitate offsite monitoring.

Given the limited volume of activities, these jurisdictions are receiving technical assistance in lieu of assessment.

Data: IMF, Offshore Financial Centers—the Assessment Program—a Progress Report.

Laura Wallace

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