five jurisdictions sign memorandum to work from iom in the event of a major disaster
Intermediaries based in the Bahamas, Dubai, Mauritius, Cayman Islands and Bermuda will now be able to temporarily move to the Isle of Man in the event of a major disaster without need for a license.
Concerns that financial services companies might need to run their businesses in the short term from another location have increased with the recent devastation caused by hurricanes in the Cayman Islands, which took out telecommunications systems and power lines; and with the perceived increase in the risk of terrorist attacks on infrastructure.
The island first passed its disaster recovery legislation almost two years ago in November 2003, but the other jurisdictions refused to sign the associated memorandum of understanding (MOU) for fear that the Isle of Man would use it to persuade businesses to stay their permanently, a charge the island has vigorously denied.
Tim Craine, director of e-business, The Treasury, Isle of Man said: "Initially the jurisdictions saw some threat. They felt if it become known it was easier to relocate to the Isle of Man then the companies might stay here. They were concerned that there would be a loss of business and were cautious about signing the MOU. They thought companies would set up shop in the Isle of Man instead."
However, according to Craine, jurisdictions are now reassured and have bowed to pressure from companies who want the reassurance of computer and staff back-up systems in a different country without the cost of setting up a second business with its own license. A key business risk that this addresses is that of loss of data following a computer failure, natural disaster or terrorist action.
The legislation will enable banks, investment businesses including intermediaries and corporate service providers to transfer their back office systems to the Isle of Man or even set up an office to work from.
Events that would be covered include fire, hurricane, tidal wave, tornado, flood, volcanic eruption, acts of war or terrorism and criminal damage.
Under the disaster recovery arrangement these companies will be able to use their Isle of Man-based computer servers without the need of a licence from the Financial Supervision Commission.
Normally if a licence is not held by a company operating in the Isle of Man then this would constitute an offence. To address this problem the FSC will allow qualifying businesses an exemption from Isle of Man regulations in controlled circumstances, where their home regulator has entered into an appropriate agreement with the FSC.
Companies entering into this agreement must not use the Isle of Man as a permanent place of business and engage in other activities which would require them to hold an investment business licence. How this will be monitored by the authorities on either side of the agreement is not clear, as a firm's normal operations tend to include attracting more business.
Craine, said: "Companies looking to relocate have to be regulated in jurisdictions that have signed the MOU. These jurisdictions must have a good level of supervision equivalent to that of the Isle of Man."
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