tax & jurisdiction
The Isle of Man, Jersey and Guernsey have agreed to trim the ragged edges of their financial services regulation following the publication of the International Monetary Fund's (IMF) largely positive triple report on the crown dependencies.
Although reasonably minor, the changes demanded will be complied with in full and it is hoped both will set the standard for international financial centres and also keep the critics quiet. The three jurisdictions have been in a continual process of modernisation for the past couple of years and they will simply integrate the IMF's suggestions into the current set of legislative changes.
Allan Bell, treasury minister for the Isle of Man, said that several years ago his jurisdiction had realised it was going to be increasingly untenable to have a low-tax jurisdiction if the highest possible international standards in regulation were not adhered to.
"Early on we recognised there was a fundamental change going on and either we were going to dig our heels in or admit the wind was turning," he said.
Broadly speaking, all three jurisdictions were found to have a high level of compliance with international standards, including those set by the FATF, IAIS, IOSCO and the Basel Core principles.
All three jurisdictions invited the IMF to inspect their regimes, but the unwanted pressure from the EU to conform to standards does not mean tax levels have to conform as well, according to Bell. "It is clear that within the European Union, a diversity of tax regimes is still acceptable," he explained.
The most obvious changes for the Isle of Man will be the de-politicisation of the investment and insurance regulators. At the moment, there are politicians, typically from the treasury, on the boards of the regulators. In the future, they will only be allowed as consultants.
Although the IMF praised the Isle of Man's "comprehensive if somewhat complex regulatory framework" and "proactive approach of regulators to achieve high standards in the financial services sector," it has asked for a strengthening of the legal framework of anti-money laundering. In other words, the regulation is in place, now it wants that regulation put into law.
In both Jersey and Guernsey, the IMF suggested that the Jersey Financial Services Commission had a mandate to 'develop' the financial services industry. And although it had not happened yet, it could be confused with promotion, and this would lead to conflicts of interest with its regulatory function. The IMF has recommended clarifying this separation of responsibilities.
It also suggested that the Convention for Suppression of the Financing of Terrorism be extended to the island.
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