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Article
Publication date: 17 November 2021

Andrew James Perkins

This paper aims to contend that when tackling financial crimes such as money laundering and terrorist financing, international regulators are seeking to hold offshore jurisdictions

Abstract

Purpose

This paper aims to contend that when tackling financial crimes such as money laundering and terrorist financing, international regulators are seeking to hold offshore jurisdictions such as the Cayman Islands to higher standards and that this detracts from the pursuit of detecting and prosecuting money launders.

Design/methodology/approach

This paper will deal with the following perceived issues: firstly, to offshore jurisdictions as a concept; secondly, to outline the efforts made by the Cayman Islands to combat money laundering and to rate these changes against Financial Action Task Forces’ (FATAF’s) technical criteria; thirdly, to demonstrate that the Cayman Islands is among some of the world’s top jurisdictions for compliance with FATAF’s standards; and finally, to examine whether greylisting was necessary and to comment upon whether efforts by international regulators to hold offshore jurisdictions to higher standards detracts from the actual prosecution of money laundering within the jurisdiction.

Findings

Greylisting the Cayman Islands in these authors’ view was something that should have never happened; the Cayman Islands is being held to standards far beyond what is expected in an onshore jurisdiction. There is a need for harmonisation in respect of international anti money laundering rules and regulations to shift the tone to prosecution and investigation of offences rather than on rating jurisdictions technical compliance with procedural rules where states have a workable anti-money laundering (AML) regime.

Research limitations/implications

The implications of this research are to show that offshore jurisdictions are being held by FATAF and other international regulators to higher AML standards than their onshore counterparties.

Practical implications

The author hopes that this paper will begin the debate as to whether FATAF needs to give reasons as to why offshore jurisdictions are held to higher standards and whether it needs to begin to contemplate higher onshore standards.

Originality/value

This is an original piece of research evaluating the effect of FATAF's reporting on offshore jurisdictions with a case study involving primary and secondary data in relation to the Cayman Islands.

Details

Journal of Money Laundering Control, vol. 25 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 20 July 2012

Philip Morris

The Isle of Man, a British Isles offshore jurisdiction located in the middle of the Irish Sea, has experienced three separate bank collapses during a relatively brief 26 year…

Abstract

Purpose

The Isle of Man, a British Isles offshore jurisdiction located in the middle of the Irish Sea, has experienced three separate bank collapses during a relatively brief 26 year period. These collapses have affected in excess of 20,000 depositors and inflicted significant damage on investor confidence in the Isle of Man as an offshore finance centre. The purpose of this paper is to trace the evolution of deposit protection during this time frame, teasing out the delicate balance required in small offshore jurisdictions between rigorous standards of investor protection on the one hand and the vital importance of remaining competitive with rival offshore finance centres on the other. It critically evaluates the recently enacted Isle of Man deposit compensation scheme (DCS) by reference to this organising principle.

Design/methodology/approach

The paper outlines the nature of the Manx jurisdiction and its offshore development. Focussing on the period 1982‐2010, it discusses the three separate bank collapses and insular regulatory and legislative responses. The focal point of the paper is a critical evaluation of the new Isle of Man DCS including comparisons where appropriate with deposit protection schemes in the Channel Islands offshore jurisdictions of Jersey and Guernsey and discussion of the extent to which the new Isle of Man DCS complies with specific features of recently formulated international best practice standards.

Findings

The paper reports that insular regulatory and government responses to bank collapses have tended to be distinctly short‐term and reactive. Despite being the first small offshore jurisdiction in the world to embrace the principle of deposit protection in 1991, there has been a conspicuous failure in the Isle of Man to develop related financial safety net policies, and the overriding motive for the introduction and indeed continuation of deposit protection has been to repair enduring reputational damage inflicted on its offshore finance centre by successive bank failures. The new Isle of Man DCS conforms to this model, reflecting insular anxieties regarding risks of lost banking business to rival offshore jurisdictions as opposed to rigorous standards of investor protection.

Originality/value

Analysis contained in this paper sheds light on the problem of effective deposit protection in small offshore jurisdictions, including tensions in policy terms between principled investor protection and finance centre reputational and competitiveness concerns. It also highlights, more broadly, the endemic problem of delivering optimum investor protection at (small) jurisdictional level in the context of international banking groups operating on a multi‐jurisdictional basis and deploying entrenched business models which operationalise offshore banking arms as essentially vehicles for the onward transmission of liquid funds to treasury functions located in parent groups' home jurisdictions.

Details

Journal of Financial Regulation and Compliance, vol. 20 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 1 February 2001

Nand C. Bardouille

An offshore sector makes reference to financial services and non‐financial services frameworks in a country/territory. Clientele who make use of these services are non‐residents…

Abstract

An offshore sector makes reference to financial services and non‐financial services frameworks in a country/territory. Clientele who make use of these services are non‐residents of the given jurisdiction. In these service frameworks assets can be diverted to, and business/financial affairs conducted in, an environment where a package of favourable regulatory incentives are in place to benefit clients who would ordinarily not be privy to such regulatory regimes in onshore jurisdictions. These regulatory incentives typically comprise incorporation mechanisms as regards commercial holding companies or overseas subsidiaries in client‐friendly fiscal and exchange control environments.

Details

Journal of Money Laundering Control, vol. 4 no. 4
Type: Research Article
ISSN: 1368-5201

Article
Publication date: 1 March 1999

Rose‐Marie B. Antoine

The principle of offshore financial confidentiality is a controversial issue in offshore law. On the one hand, offshore jurisdictions view confidentiality in financial matters as…

Abstract

The principle of offshore financial confidentiality is a controversial issue in offshore law. On the one hand, offshore jurisdictions view confidentiality in financial matters as an essential ingredient in the offshore industry which deserves to be protected. On the other, onshore states are increasingly hostile to confidentiality and have been willing to take drastic measures to undermine it.

Details

Journal of Financial Crime, vol. 7 no. 1
Type: Research Article
ISSN: 1359-0790

Article
Publication date: 24 July 2007

Rose‐Marie Belle Antoine

To illuminate a new field of legal study – offshore financial law, especially the offshore trust and how it impacts on financial crime.

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Abstract

Purpose

To illuminate a new field of legal study – offshore financial law, especially the offshore trust and how it impacts on financial crime.

Design/methodology/approach

Analytical approach to case law and legislation relevant to the topic.

Findings

Offshore financial law and offshore trusts are innovative, dynamic vehicles for trust and tax planning internationally but have to address avenues for financial crime.

Originality/value

Original and pioneering research into a new area of law. Practitioners in finance law, trusts and tax, academics, legal regulators, accountants and other finance practitioners will find it particularly helpful.

Details

Journal of Financial Crime, vol. 14 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 5 July 2013

Mary Alice Young

The paper aims to highlight the relationship between money laundering and banking confidentiality in offshore financial centres – particularly following the recent publicity and…

3737

Abstract

Purpose

The paper aims to highlight the relationship between money laundering and banking confidentiality in offshore financial centres – particularly following the recent publicity and BBC expose surrounding the criminal use of offshore financial centres. It proposes that there has long been concern over the illegitimate uses of offshore financial centres and that the continuing exploitation of them by criminals is, in part, attributed to the West's use of these financial hotspots. The paper outlines the previous attempts by global regulatory bodies to curb money laundering in offshore financial centres and explores some of the reasons for the continuation of money laundering in offshore financial centres.

Design/methodology/approach

The paper was compiled by accessing and analysing primary and secondary data which is publicly available. The analysed data were complemented by the author's new theory of the West's collusion with offshore financial centres as a possible reason for the superficial commitment to anti‐money laundering laws and guidelines.

Findings

The findings in the paper conclude that even though there have been global efforts to combat money laundering in offshore financial centres, there is little commitment from the offshore financial centres themselves, and the West, to effectively implement anti‐money laundering regulations.

Originality/value

This paper fulfils a gap in the literature by exploring the relationship between the West and offshore financial centres – more specifically the West's continued use of these centres acts as an incentive to avoid relaxing tight banking confidentiality laws. Further research in this area is needed to assess the full impact of the West's relationship with offshore financial centres.

Details

Journal of Money Laundering Control, vol. 16 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 14 August 2007

Alexa Rosdol

To examine if recent changes to the law and practice of certain offshore financial centres (OFCs) means that some OFCs now have more stringent anti‐money laundering measures in…

889

Abstract

Purpose

To examine if recent changes to the law and practice of certain offshore financial centres (OFCs) means that some OFCs now have more stringent anti‐money laundering measures in place compared to their “onshore” counterparts. To further explore the allegation by some that there is a dual standard in terms of the pressure applied to OFCs on the one hand and “onshore” jurisdictions on the other.

Design/methodology/approach

The analysis will focus on the Crown Dependencies and the British Overseas Territories of Bermuda and the Cayman Islands. The “onshore” jurisdictions include the UK, the USA and Australia. Comparison of the implementation of the FATF 40 Recommendations (using the most recent IMF Assessments), trust and company services legislation, and the “Know Your Customer” requirements.

Findings

The results show that the Crown Dependencies and the selected Overseas Territories are not only keeping up with the USA, the UK and Australia but in many cases “outdoing” the AML/CFT regimes of these onshore jurisdictions.

Research limitations/implications

Comparison limited to only certain OFCs and “onshore” jurisdictions. There is a two year difference between the IMF assessments for the OFCs and for the onshore jurisdictions. Future research would include the results of the second phase of the OFC Assessment Program and IMF assessments due in the next few years.

Originality/value

This paper examines a very topical area of financial crime based on the most recent data available.

Details

Journal of Money Laundering Control, vol. 10 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 27 July 2010

P.E. Morris

The global financial turmoil of 2008 spilled over into the British Isles offshore jurisdictions of Guernsey and the Isle of Man resulting in the collapse of two local subsidiaries…

Abstract

Purpose

The global financial turmoil of 2008 spilled over into the British Isles offshore jurisdictions of Guernsey and the Isle of Man resulting in the collapse of two local subsidiaries of major Icelandic banking groups and consequent depositors' losses. The purpose of this paper is to contrast the sharply differing reactions of the insular authorities and critically evaluate Guernsey's recently enacted deposit protection scheme.

Design/methodology/approach

The paper outlines the nature of the Guernsey jurisdiction, its offshore development and policy issues in deposit protection. Legislation establishing Guernsey's deposit protection scheme is described and critically evaluated.

Findings

Guernsey's scheme is a rushed legislative reaction dominated by finance centre reputational concerns. The legislation is clear and comprehensive but the long‐term robustness of its funding model is unclear.

Originality/value

The analysis contained in this paper highlights the ramifications of international bank instability in small offshore jurisdictions and the regulatory problems this poses. Discussion of the legislative basis of the deposit protection scheme clarifies its nature and limitations as an investor protection technique, which is timely given the status of deposit protection as a key theme in the UK Government's initiated Foot Review of nine offshore jurisdictions.

Details

Journal of Financial Regulation and Compliance, vol. 18 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 1 February 1999

Bonita Erbstein

The year 1986 did not bode well for investment banker Dennis Levine. In a civil injunctive action the US Securities and Exchange Commission (SEC or the Commission) alleged that…

Abstract

The year 1986 did not bode well for investment banker Dennis Levine. In a civil injunctive action the US Securities and Exchange Commission (SEC or the Commission) alleged that Levine, through an insider dealing scheme, violated several anti‐fraud provisions of the Securities Exchange Act of 1934. Without admitting or denying that he obtained over $12m in illicit profits from secretly trading in the securities of 54 companies, Levine settled the SEC action and was ordered to disgorge over $10m to the court.

Details

Journal of Money Laundering Control, vol. 2 no. 4
Type: Research Article
ISSN: 1368-5201

Article
Publication date: 1 February 1997

Saul M. Froomkin

There was a time in the tide of men, when ‘offshorejurisdictions were known as ‘tax havens’, when ‘money laundering’ was an unknown phrase, when ‘insider dealing’ was sport…

Abstract

There was a time in the tide of men, when ‘offshorejurisdictions were known as ‘tax havens’, when ‘money laundering’ was an unknown phrase, when ‘insider dealing’ was sport, when ‘bank secrecy’ was applied only to Switzerland, and when far flung islands offered only sun, sand and an exotic holiday experience.

Details

Journal of Money Laundering Control, vol. 1 no. 2
Type: Research Article
ISSN: 1368-5201

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