Memorandum from the Montserrat Financial
In June 2000 the International Money Fund published
a paper "Offshore Financial CentresIMF Background
Paper". The publication listed countries, territories and
jurisdictions which are regarded as Offshore Financial Centres
and Montserrat is included on the list. As a consequence, it is
important that Montserrat provides evidence to this inquiry.
Although Montserrat does not tick all the boxes
that define an offshore financial centre, in that it does not
have relatively large numbers of financial institutions engaged
primarily in business with non-residents; nor moderate or light
financial regulation, nor banking secrecy and anonymity, it is
important Montserrat supports the existence of Offshore Financial
Centres as they facilitate the movement of capital markets and
the growth of investment.
The benefits and services can be measured by
the increase use of offshore financial centres by multi-national
companies and governments and the growth of gross domestic products
in successful Offshore Financial Centres' jurisdictions.
Since the year 2000 when the Financial Stability
Forum published its findings the offshore centres have been under
scrutiny and to date that there has been no evidence that the
centres are a threat to financial stability.
Most Offshore Financial Centres, including Montserrat
have adopted international standards in their regulatory framework
and Montserrat has welcomed the assessment carried out in its
jurisdictions by the International Monetary Fund in 2002. The
assessment provided confirmation and/or made recommendations concerning
the state of compliance to international standards and provided
an impetus for implementing international standards and building
Montserrat's Offshore Financial Centre is transparent
in that it has enacted legislation and entered into agreements
to provide gateways for international co-operation and the exchange
of information. This includes entering into agreements with all
EU Member States for automatic exchange of information under the
EU Savings Directive.
In the matter of deterring the financing of
terrorism Montserrat has enacted relevant legislation for combating
terrorist financing and implemented reporting procedures for entities
regulated by the Financial Services Commission.
UK TREASURY COMMITTEE
Montserrat's financial services industry is
regulated by the Financial Services Commission. The Commission
was established by the Financial Services Commission Act which
came into force in 2001.
The functions of the Commission are legislated
in the Act and include duties to:
administer the financial services
legislation, including the granting and revoking of licences;
supervise financial institutions
in accordance with internationally accepted standards;
monitor compliance by financial institutions
with the Anti-Money Laundering Regulations 2000 and such other
legislation or guidelines relating to money laundering as may
monitor financial services business
carried on, in or from Montserrat and to take action against persons
carrying unlicensed financial services business, in respect of
which licences are required to be obtained;
take such regulatory measures as
it considers appropriate to protect the financial services industry
monitor the effectiveness of the
financial services legislation in providing for the supervision
and regulation of financial services business in Montserrat to
internationally accepted standards;
advise the Governor on matters relating
to financial services business;
make recommendations to the Government
of Montserrat on such amendments to the financial services legislation
or such new legislation relating to financial services business
as the Commission may consider necessary or appropriate;
maintain contact and develop relations
with persons engaged in financial services business in or from
within Montserrat with a view to encouraging the development of
high professional standards within the financial services industry,
and promoting industry codes of conduct; and
maintain contact and relations with
foreign regulatory authorities and international associations
of regulatory authorities and to provide regulatory assistance
to foreign regulators authorities.
With regard the request for evidence the Financial
Services Commission as the regulatory body provides the following
responses to the questions raised by the Treasury Committee in
its invitation of 30 April 2008.
1. In response to what extent, and why are
Offshore Financial Centres (OFCs) important to worldwide markets:
Montserrat regards the existence of OFCs important
to worldwide financial markets in that benefits are derived from
corporate entities who achieve higher growth rate in jurisdiction
where their fiscal obligations are not subject to annual changes.
The benefits include higher income yields which are reinvested
creating jobs and investment opportunities where the capital is
The effect is that financial markets do not remain
immobile and OFCs contribute to the economic growth of the home
jurisdiction where the capital is employed and growth of the gross
national product of OFCS.
2. In response to the question to what extent
does the use of OFCs threaten financial stability:
There is no evidence to support this assertion.
In fact, the Financial Stability Forum in April 2000 report
stated that OFCs do not appear to have been a major casual factor
in the creation of system financial problems.
At the request of the Financial Stability Forum
the IMF carried out assessments of OFCs and observed non-compliance
of international standards in some of the jurisdictions, including
Montserrat and, as a result of their recommendations Montserrat
has enhanced its compliance with internationals standards by strengthening
its legislative framework and increasing capacity in the regulatory
3. 1. In response to the question how
transparent are OFCs:
Montserrat's OFC is transparent in that the jurisdiction
has enacted legislation that introduced gateways for providing
international co-operation and exchange of information. These
include the following:
i. Montserrat Reporting of Savings Income
Information Order 2005 (European Savings Directive).
ii. Exchange of Information Act.
iii. The Financial Services Commission Act.
iv. International Bank and Trust Companies
v. Criminal Justice (International (Co-operation)
vi. The Company Management Act.
vii. Mutual Legal Assistance Criminal Matters
2. With regard the question how transparent are
the transactions that pass through its financial institutions:
In Montserrat, under the EU Directive has adopted
the automatic exchange of information policy and as a consequence
regulated entities are obliged to report to the relevant EU authorities
transactions which subject to be declared under the EU Savings
It should be noted that Montserrat was not listed
on the Financial Action Task Force (FATF) list of "Non-cooperative
Countries and Territories.
4. In response to the question as to what
extent does the growth in complex financial instruments rely on
There is no evidence that the growth in complex
financial instruments rely on OFCs. For example, the growth in
U.S. sub-prime market did not depend on the use of OFCs to reach
a stage where it caused financial markets worldwide to become
5. In response to the question how important
the levels of transparency and taxation in OFCs been in explaining
their current position in worldwide financial markets:
Montserrat OFC is very small; however, it is
subject to the obligations in the EU Savings Directive and the
individual agreements signed with EU Member Countries which ensures
that in relation to the EU Tax Authorities its current position
6. In response to the question how do taxation
policies of OFCs impact on UK tax revenue and policy:
The position in Montserrat is that under EU Savings
Directive and the agreement reached with the United Kingdom residents
of the U.K. whose income subject to EU Savings Directive is reported
to the relevant reporting authority in the U.K.
7. In response to the question, are British
Overseas Territories and Crown Dependencies well-regarded as OFCs,
both in comparison to their peers and international standards:
The U.K. has recently published the House of
Commons Committee of Public Accounts 17th Report on Foreign and
Commonwealth Office: Managing Risk in the Overseas Territories
and the National Audit Office ReportManaging Risk in the
Overseas Territories and this regard the reports provide evidence
of how the U.K. regard its territories.
The reports informed public opinion and in respect
of Montserrat they do not reflect the current position in relation
to its legislative framework and the regulatory regime. Unfortunately
the reports, though published in 2008 were based on information
gathered by a third party, the IMF in their assessment of the
jurisdiction in 2002 and its report which was published in 2003.
In this regard a copy of the Montserrat's response
to the House of Commons Committee Report is attached for reference.
8. In response to the question to what extent
have OFCs ensured that they cannot be used in terrorist financing?
In implementing measures to ensure its jurisdiction,
Montserrat has complied with international standards and introduced
legislation to combat financing of terrorism. In this regard the
following legislation have been introduced:
i. The Anti-Terrorism (Financial and Other
Measures) (Overseas Territories) Order.
ii. The Al-Qa'ida and Taliban (United Nations
iii. The Criminal Justice (International
iv. The Terrorism (United Nations Measures)
(Overseas Territories) Order 2001
In addition, the regulatory body in Montserrat,
the Financial Services Commission, periodically circulate to relevant
regulated entities the United Nations revised list of persons
and entities listed pursuant to UNSCR 1390 (2002).
Further, all regulated entities are mandatorily
obliged under the Proceeds of Crime Act to submit Suspicious Transaction
Reports to the Reporting Authority and, under Anti-Terrorism (Financial
and Other Measures) (Overseas Territories) Order, to disclose
information where there is suspicion that an offence has been
9. In response to the question what are
the implications for the policies of HM Treasury arising from
In our opinion, the implications for the policies
of HM Treasury arising from OFCs should reflect and recognise
the co-operation received from Offshore Financial Centres in responding
to matters concerning transparency, the legislative framework
OFCs established to international co-operation, the value of interdependence
and the conclusion of the Financial Stability Forum that well
regulated offshore financial centres do not destabilise financial
10. In response to the question, what has
been and is the extent and effect of double taxation treaty abuse
Montserrat recently entered into Double Taxation
Agreement with the U.K. However, its economy is small and therefore
it would not be in position to disregard its obligations under
11. In response to question as to what extent
do OFCs investigate businesses and individuals that appear to
be evading UK taxation:
It should be noted that the Government of Montserrat
is committed to co-operating in any investigation or complaints
from the U.K. Inland Revenue that individuals or businesses domiciled
in Montserrat are evading UK Taxation.
390 Financial Stability Forum Report of the Working
Group on Offshore Centres-April 2000 Back
FATF Report on Non-Cooperative Countries and Territories-February
IMF Assessment of the Supervision and Regulation of the Financial
Sector: Volume II: Detailed Assessment of Observance of Standards
and Codes-Montserrat-October 2003 Back