Offshore financial centres agree to greater scrutiny

Roger Clarke
Wed, 9 Oct 1996 18:40:06 +1000

Thanks to Ooi Chuin Nee for this one.

Question:  When the black economy goes grey, is the appearance of a new
black economy inevitable?

   Financial Times, October 8, 1996, p. 16.

   Offshore financial centres agree to greater scrutiny

   By George Graham, Banking Correspondent

   Banking supervisors from large offshore financial centres
   have agreed to co-operate more with their counterparts in
   industrialised nations in investigating irregular behaviour
   at banks under their control.

   The agreement between the so-called Basle committee, which
   groups banking supervisors from the Group of Ten leading
   industrial countries and the Offshore Group of Banking
   Supervisors, will plug loopholes which have let banks such
   as the defunct Bank of Credit and Commerce International
   escape close scrutiny.

   The Offshore Group comprises most of the biggest offshore
   financial centres including the Bahamas, Bermuda, the
   Caymans, Gibraltar, the Channel Islands, Hong Kong,
   Lebanon, Panama and Singapore. The agreement is designed to
   ensure that information flows more freely between
   supervisors. They have often found they could not obtain a
   clear picture of the overseas activities of banks under
   their control.

   Information from centres such as the Netherlands Antilles
   was often of questionable quality, while countries such as
   Singapore were until recently reluctant to allow access to
   foreign inspectors.

   Meanwhile, supervisors in offshore centres that hosted
   branches or representative offices complained that when a
   bank failed in an industrialised country, they were the
   last to hear. Yesterday's deal says they should at least be
   on the mailing list.

   The drafting involved hard negotiations on issues such as
   when a supervisor could ask for the identity of an
   individual depositor or investor. A supervisor in Europe
   may, for example, want to know that a bank is not dependent
   for all its deposits on one source, but the offshore centre
   does not want that to serve as an excuse for trawling for
   tax evaders.

   In all, 140 countries have endorsed the deal, which sets
   out procedures for exchanging information between
   supervisors and also establishes a checklist to ensure that
   banking operations in a particular country are subject to
   effective supervision.

   The agreement says home supervisors should be able to
   inspect the books of shell branches wherever they are kept.
   "In no case should access to these books be protected by
   secrecy requirements in the country that licenses the shell
   branch," it says.


Roger Clarke    
Xamax Consultancy Pty Ltd, 78 Sidaway St, Chapman ACT 2611 AUSTRALIA
Tel:  +61  6  288 6916                       Fax:   +61  6  288 1472

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