Select Committee on Foreign Affairs Appendices to the Minutes of Evidence


Memorandum from the Government of Gibraltar


Financial Services Sector


  1.  Gibraltar has met all the relevant international initiatives in a constructive fashion over the last few years. It has been held out to other Overseas Territories as a benchmark in financial regulation by former Foreign Secretary Robin Cook in 1997 and Andrew Edwards cited Gibraltar in similar terms in his Review of the Crown Dependencies in 1998. Most recently, Gibraltar's standards have been comprehensively audited and endorsed by several independent bodies.

General Background

  2.  As a British territory within the European Union:

    —  Gibraltar is required to implement in full all EU legislation on financial services regulation and related matters such as money laundering.

    —  Gibraltar therefore co-operates on matters such as insider dealing and other investigations carried out under EU directives.

    —  By law, Gibraltar is required to match United Kingdom standards of financial supervision where EU legislation applies.

    —  The Financial Services Commission (FSC) is appointed by the United Kingdom Government.

FATF—anti-money laundering standards

  3.  Gibraltar has a record of full co-operation with all the relevant international bodies. It was reviewed fully by the Financial Action Task Force (FATF) and classified as a co-operative jurisdiction in June 2000. The FATF simultaneously published a list of 15 other non-cooperative jurisdictions. Gibraltar complies fully with internationally-accepted standards and indeed, was the first offshore financial centre to introduce all-crimes money-laundering legislation (which includes terrorism-related offences) in 1995.

US Internal Revenue Service

  4.  Significantly Gibraltar was also among the first wave of countries and territories to be granted Qualified Intermediary status by the United States Internal Revenue Service in October 2000. This means that Gibraltar's know-your-customer rules were regarded as acceptable by the United States.


  5.  In October 2000, the Government of Gibraltar volunteered to undergo Module 2 assessments by the IMF on the full range of financial services; namely banking, insurance, investment services, and trust and company management (Gibraltar has regulated trust and company management since 1989, ahead of most other jurisdictions). These assessments are the same in substance and form as those carried out on major countries such as Canada. A nine-strong IMF team spent two full weeks in Gibraltar in May 2001 and their report was published simultaneously on the IMF, Government of Gibraltar and Financial Services Commission websites on 19 March 2002 (,, In the report, Gibraltar was judged by the IMF to be compliant with 66 out of 67 internationally-accepted standards (the sole area of "material non-observance" was in relation to onsite visits to insurance companies, which many major nations such as the UK do not carry out).

  6.  The IMF noted in its report that Gibraltar "is at the forefront of the development of good practices". It further stated: "It is worth nothing that Gibraltar was one of the first jurisdictions to have introduced regulation and supervision of the company and trust services business". The IMF concluded that Gibraltar's regulator, the Financial Services Commission, "carries out its duties diligently and has an intimate knowledge of the institutions under its supervision. . . The results of our assessments indicated that supervision is generally effective and thorough and that Gibraltar ranks as a well-developed supervisor. The regulatory regime across the industry meets most international standards and accords with best practice."


  7.  As regards the OECD, Gibraltar submitted a letter of commitment to transparency and effective exchange of information on 27 February 2002. Our approach has consistently been one of constructive dialogue with the OECD. The OECD has itself also recognised the importance of a global level playing field and of a role for all jurisdiction in developing international standards to ensure the fairness and success of its own objectives to eliminate harmful tax practices. We are confident that jurisdictionally we are held in high regard by the OECD and are considered to be a fundamentally co-operative jurisdiction internationally. We would also point out that many of the objectives of the OECD Report are already reflected in Gibraltar's laws and administrative practices. The letter of commitment has been published and is available on the OECD's website (

Anti-money laundering regime

  8.  Legislation in Gibraltar to counter money laundering has existed since 1988. Under the Drug Trafficking Offences Ordinance 1988 it was an offence to assist another to retain the benefit of Drug Trafficking knowing or suspecting that the other person was a drug trafficker or had benefited from drug trafficking. The 1988 Ordinance was replaced by the Drug Trafficking Offences Ordinance 1995 which added further offences. The Drug Trafficking (Money Laundering) Regulations 1995 required relevant financial businesses to have in place systems and training to prevent money laundering and laid down identification and record keeping procedures. These gave effect to the Vienna Convention of 1988 and EEC Directive 91/308/EEC. The Criminal Justice Ordinance 1995, which came into effect in 1996, extended money laundering provisions to encompass the proceeds of all criminal conduct. Further amendments are being contemplated in the course of the normal review of legislation.


(i)  General

  9.  Gibraltar is a co-operative jurisdiction. The policy of the Government is to ensure that mechanisms are in place to enable the enforcement authorities of Gibraltar to co-operate with overseas bodies. The necessary gateways to allow information exchange with external counterparts are in place.

  10.  Membership of international enforcement bodies would enhance the work of the Gibraltar enforcement authorities (police, customs, Financial Intelligence Unit). However, this sometimes meets Spanish political objections. For example in 1997-98, the Gibraltar Financial Intelligence Unit (a special enforcement arm of the Royal Gibraltar Police) applied to join the Egmont Group (an international organisation of FIUs representing over 30 countries). However, and though all other countries supported Gibraltar's application, the application for membership by the Gibraltar FIU was vetoed by the Spanish FIU (SEPBLAC), which threatened to withdraw from the international body if Gibraltar was admitted.

(ii)  Reponse to September 11 events—summary of enforcement action

  11.  As a case study of the enforcement work conducted in Gibraltar, the following summary in relation to work post 11 September 2001 tragedies in the United States may be of interest to the Foreign Affairs Committee.

  12.  Following the tragic events on 11 September 2001, the Government of Gibraltar wrote to the Government of the United States offering any assistance necessary in tracking terrorist-related assets. No requests for assistance have been received.

  13.  In any event, Gibraltar's Financial Services Commissioner wrote to all licensed entities reminding them of their obligation under Gibraltar's anti-money laundering arrangements to report all suspicious transactions to the Gibraltar Financial Intelligence Unit (GFIU) and urging them to "use their corporate memories" and look back to past instances, including occasions where introductions and transactions may not have been consummated, but which with the benefit of hindsight might now be considered as suspicious.

  14.  In order to assist licences institutions in checking the many names of terrorism-related suspects, the Financial Services Commission (FSC) has been providing access from its website (with a link from the Gibraltar Government website) to other sites containing key lists of names. The linked information includes the FBI list and documents issued by the Federal Reserve Bank, the Office of Foreign Assets Control (OFAC) list and US Presidential Executive Order of 23 September 2001 and the additional OFAC list of 12 October 2001. Consistent with its general approach, the FSC alerts all licensed entities whenever new names are added.

  15.  United Nations sanctions, such as those against Afghanistan and Osama bin Laden apply to Gibraltar by Order in Council. On 29 October 2001, for instance, the FSC drew attention to the promulgation of the Terrorism (United Nations Measures) (Overseas Territories) Order 2001, which came into effect on 10 October 2001. The Order reflects United Nations Security Council Resolution No 1373, adopted on 28 September 2001, which contains mandatory provisions against terrorism.

  16.  Furthermore, in addition to these Orders, there are (and will be in the future) comparative measures taken by the European Union to enforce UN Security Council Resolutions, which will have direct applicability within Gibraltar, given the territory's EU status. In more general terms, the Government of Gibraltar is in close liaison with the Government of the United Kingdom and closely monitoring the new initiatives and legislation that the UK is adopting. The Government of Gibraltar is committed to rapidly adopting all international initiatives, models or standards to ensure that our financial infrastructure is not in any way abused by terrorism-related or other illegal activities.

Government of Gibraltar

1 July 2002

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