Jersey: Banking Confidentiality

Jersey's Financial Regulatory Regime

Banks are registered in Jersey under the Banking Business (Jersey) Law, 1991 and the associated Banking Business (General Provisions) (Jersey) Order, 1991 which is administered by the Jersey Financial Services Commission. Applications for new banks or branches (more usual) are carefully vetted both from a prudential point of view and commercially.

The Financial Services Commission says that the Banking Law has three main objectives:

To protect depositors
To protect the reputation of Jersey as an International banking centre
To protect the best economic interests of Jersey.

As with many offshore jurisdictions (and for that matter, onshore ones also), Jersey's banking law has traditionally established the confidentiality of a bank account to a great extent, but other laws provide a number of routes by which that confidentiality can be breached on application from other countries with a demonstrable case against a particular individual or company. Fishing expeditions are not entertained.

The history of the last ten or so years as regards Jersey's banking secrecy is not so much concerned with the underlying law as with the attempts of the OECD and the EU to impose extensive information-sharing requirements on the island's financial institutions.

Jersey, like many other offshore jurisdictions, first had to pay serious attention to international perceptions of its financial regime in late 1999 when the OECD began its public campaign against 'offshore'. And as with other jurisdictions, tax issues were conflated with the question of confidentiality. In November of that year, in a submission to the OECD's review of offshore financial centres, Colin Powell, Jersey's ranking civil servant at the time, said: 'It is not the island that has made itself more and more attractive; it is the relatively high tax structures of the main industrial countries that have made them relatively unattractive. If Jersey's low-tax regime is harmful, then so too must be the regional and industrial aid policies pursued by the G7 countries and EU and OECD member states.'

From the beginning of the OECD process, Jersey received a fairly good press from the USA. After initially criticising Jersey's offshore regime, John Moscow, New York Assistant District Attorney, praised Jersey's 'special willingness to co-operate in international investigations' into money-laundering and fraud at the prestigious Cambridge International Crime Symposium in October, 1999. Participants at the Symposium included Richard Pratt, Financial Services Commissioner, and Anthony Edwards, who conducted the review of Britain's offshore financial centres. Mr Pratt noted the importance of being able to meet with key international regulators, and said that other jurisdictions could see that Jersey's privacy rules did not interfere with the Island's policy of co-operation in properly-conducted investigations.

Anthony Edwards's report on Jersey had prepared the jurisdiction for the need to review its legislative structure, and the Task Force set up to do that reported in late 1999. It didn't accept all of Mr Edwards's recommendations, but it did agree that the Jersey Financial Services Commission should be free of Government control, and that a new financial crimes unit should be established.

Commenting on the Task Force report, Jersey Senator Pierre Horsfall said at the time that "the Edwards Report has endorsed the fact that Jersey is a major player on the international finance stage where high quality business is independently regulated to international standards. One year on Jersey has emerged from the Edwards Report better placed than ever before to consolidated our position as a leading international finance centre."

By the spring of 2000, Jersey had begun to legislate, and in April the Financial Services Commission welcomed the decision by the Finance and Economics Committee to lodge the Financial Services (Extension) (Jersey) Law 2001 with the States of Jersey. The Commission had led the process of consultation with the Jersey finance industry.

Richard Pratt, Director General of the Commission said: "The new law will, if passed by the States, demonstrate Jersey's commitment to high standards of regulation. Not many jurisdictions yet regulate trust companies and company service providers. But where Jersey and the other Crown Dependencies have led, others will follow."

He continued : "High quality regulation attracts high quality business. New company incorporations are over 50% higher in the first few months of 2000 compared with 1999. There is no suggestion that the forthcoming regulation, of which the market has been aware for some time, is in any way slowing down the flow of good quality business to Jersey."

Helen Hatton, Deputy Director General of the Commission congratulated the industry for the part they played in the development of the draft law. "We have enjoyed tremendous support from the Industry" she said today, "and I would like to pay special tribute to the Steering Group who have worked so hard with the Commission on this issue".

An IMF report on Jersey's regulatory and law enforcement regime, published in November 2003, was complimentary. The jurisdiction was found to have a high level of compliance with each of the international standards against which it was judged. These included the Basel Core Principles for Effective Banking Supervision, the Insurance Core Principles of the International Association of Insurance Supervisors, and the Financial Action Task Force's 40+8 anti-money laundering recommendations.

Jersey won praise from the multilateral body for its legal and supervisory system, the measures which have been put in place to facilitate international cooperation, the number of information exchange agreements entered into with foreign supervisory agencies, the measures put in place by the Jersey authorities in order to preserve the Island's reputation, the fact that Jersey was one of the first jurisdictions to apply a comprehensive regulatory regime for trust and company service providers, and the high levels of anti-money laundering awareness demonstrated by financial services firms visited by the IMF delegation.

In a joint statement, president of Jersey's Policy and Resources Committee at the time, Senator Frank Walker, and chairman of the Jersey Financial Services Commission, Colin Powell, announced that: "This is an excellent outcome and we attach tremendous importance to the IMF's assessment. It is a valuable process and we are delighted that it has clearly demonstrated Jersey's high degree of compliance with international standards."

Key Jersey legislation dealing with money laundering and terrorist financing includes:

• Drug Trafficking Offences (Jersey) Law 1988
• Investigation of Fraud (Jersey) Law 1991
• Money Laundering (Jersey) Order 1999
• Proceeds of Crime (Jersey) Law 1999
• Criminal Justice (International Co-Operation) (Jersey) Law 2001
• The Terrorism (United Nations Measures)(Channel Islands) Order 2001
• The Terrorism (Jersey) Law 2002

2003 also saw the signing of a Memorandum of Understanding (MoU) by the Jersey Financial Services Commission with the International Organisation of Securities Commissions (IOSCO).

The MoU, which was initially agreed in 2002, was designed to combat securities and derivatives violations. It obliged signatories to share information about the illegal use of their securities and derivatives markets with each other. In signing up to the MoU, Jersey joined another 24 members. However, according to the JFSC, the island was one of the first offshore finance centres to join.

"By signing this memorandum with IOSCO, Jersey reinforces its status as a leading international financial centre and gives international investors greater confidence in the island," JFSC compliance director, John Pallot explained.

In June, 2004, the Jersey Financial Services Commission unveiled a restructuring programme that would see the island’s regulator organised more along industry lines.

Under the changes, the previous divisions, Compliance, Authorisation and Insurance, were replaced by four new divisions: Banking; Securities (including Funds and Investment Business); Trust Companies; and Insurance.

According to the FSC, each of the Divisions would be headed by an Executive Director who would be responsible for regulatory and supervisory oversight of their respective industry sectors. The Directors would also be responsible for delivering regulatory and supervisory policies for those sectors and they would be assisted in this by a new Research and Development Unit.

The four Directors report to the Deputy Director General, who has overall responsibility for co-ordinating their activities, including policy development.

Other Divisions of the Commission, including Enforcement and the Registry report directly to the Director General. This also included a new Risk Unit to be responsible for risk management, quality assurance and internal audit.

Commenting on the changes, David Carse, Director General of the Commission noted at the time that: "The new structure will provide a greater industry focus to the Commission's work, promote greater industry expertise within the Commission and lead to greater cohesiveness in its policy-making."

According to a comprehensive global money laundering report by the US State Department in March, 2006: 'Jersey’s sophisticated array of offshore services is similar to that of international financial services centers worldwide.

'The Government of Jersey has established an anti-money laundering program that in some instances, such as the regulation of trust company businesses and the requirement for companies to file beneficial ownership with Jersey’s Financial Services Commission (JFSC) go beyond what international standards require, in order to directly address Jersey’s particular vulnerabilities to money laundering.

'Jersey should establish reporting requirements for the cross-border transportation of currency and monetary instruments. Jersey should continue to demonstrate its commitment to fighting financial crime by enhancing its anti-money laundering/counterterrorist financing regime in areas of vulnerability.'

In March, 2006, the Dubai Financial Services Authority (DFSA) entered into a Memorandum of Understanding with the Jersey Financial Services Commission (JFSC).

The MoU was signed by Mr. David Knott, Chief Executive of the DFSA, and Mr. David Carse, Director General of the JFSC. The agreement formalised arrangements for cooperation and information sharing between the two regulators. It recognises that both regulators place reliance on the quality of regulatory standards administered in the other’s jurisdiction.

Commenting on the development, Mr. Knott noted that: “The business links between financial firms in Jersey and the Dubai International Financial Centre are significant and, with the introduction of trust and collective investment fund regimes in the DIFC this year, these links will become increasingly significant, making the JFSC an important relationship for the DFSA.”

The DFSA is an independent, integrated regulatory authority responsible for the regulation of all financial and ancillary services conducted in or from the Dubai International Financial Centre (DIFC), including asset management, banking, securities trading, Islamic finance, re-insurance, and an international financial exchange.

Also welcoming the signature of the MoU, Dr. Habib Al Mulla, Chairman of the DFSA, commented that: “It is pleasing to see closer regulatory ties with our counterpart in Jersey. The DFSA is actively building effective working relationships with other regulators, both within our own region and beyond."

Meanwhile, Mr. Carse announced that: “I am delighted to sign this Memorandum of Understanding with the Dubai Financial Services Authority. It is the latest in a number of MoUs established between the Commission and other regulators around the world and reflects the Commission’s commitment to cross-border regulatory co-operation.”

The JFSC is responsible for the regulation and supervision of banking, collective investment funds, insurance business, investment business and trust company business in Jersey.

The Spectre Of Information-Sharing

From an early point in the OECD saga, it was the threat of wholesale information sharing that Jersey saw as a major issue, rather than the need to tighten up on supervisory legislation as such, which was relatively non-contentious.

In July 2000, the possibility that the UK would coerce Jersey into complying with EU-wide information-sharing was sufficiently real that Senator Paul Le Claire said he would ask the States of Jersey to set up a referendum to decide on full independence from the UK.

Le Claire was just one of a large number of senior Jersey figures who felt that the the UK's push for world-wide information-exchange standards was calculated to destroy the island's business, and that protestations of loyalty from London were just so much cynical hot air.

The island also could not but notice that the British Government, supposedly so supportive, provided the Chair of the EU's 'Code of Conduct' Committee on Unfair Tax Practices, in the person of Dawn Primarolo, then Paymaster-General.

Senator Le Claire didn't mince his words: 'The British Government had better prepare itself for 90,000 fewer allies, with GBP90bn in their care'.

Surprisingly though, in the same month Frank Walker, then president of Jersey's Finance and Economic Committee, said that Jersey would consider following any changes to prevailing international tax standards, for instance as regards the exchange of information.

He said that Jersey must be recognised as a valuable and reputable neighbour of the European Union: 'We are not in the EU, nor is there any prospect of us ever being in it, but the flow of investment funds from Europe means we must be seen as co-operative and responsible, and it may mean adjusting our tax structure so that we cannot be regarded in any way as harmful.’

Walker remarked that as pressure was mounting internationally for an exchange of information on tax matters, if there was a move in international standards, then Jersey could not rule out following it. Jersey depended on business from both London and European finance centres, and Walker said that it was imperative that this business continued:

‘I think there is a perception that we have been a problem for Europe. That perception is changing, and will change further so we do not have the constant hassle with the EU or other bodies and are seen as a good neighbour. There is no question, whatever we do, of giving in to pressure from the UK or anywhere else. We will take our own decisions. It may be that it involves changing the tax structure in some way so it is more generally in tune with international standards.'

Institutionalised exchange of tax information was not the only danger faced by Jersey's financial sector, however, as became apparent when in August, 2004, accounting firm PricewaterhouseCoopers warned firms based in the Channel Islands that they might find themselves the target of a renewed UK Inland Revenue campaign to crack down on tax avoidance.

These fears were somewhat realised on 2006-07, when the Inland Revenue launched an 'amnesty' for offshore account holders. For more information on this, see below.

Jersey Starts To Come To Terms With The OECD

By September 2000 it was becoming clear that Jersey, along with Guernsey and the Isle of Man, was closer to settling with the OECD than some might think, and would easily be able to get itself removed from the OECD blacklist.

Jersey had certainly been one of the more outspoken jurisdictions in condemning the list of 35 tax havens published by the OECD, but Richard Pratt, director general of the Jersey Financial Services Commission, was pushing for agreement, marking a distinct departure from the attitude the island displayed in the immediate aftermath of the naming and shaming.

Frank Walker, Jersey's then Finance Minister, said the island was confident that it was close to satisfying the conditions for being removed from the OECD's list: 'We are not that far apart and we are confident we will be able to reach a mutually acceptable agreement.'

As 2000 continued, and offshore jurisdictions began to see the FATF's strictures as more potent than those of the OECD, the emphasis turned rather more to money-laundering than to tax evasion as such, and Jersey certainly made no secret of the fact that it was getting tough on suspicious transactions on the island. There is a growing emphasis on the part of the island's authorities on combatting money laundering.

The Jersey Financial Services Commission issued new advice to the local finance industry in the form of an Anti-Money Laundering Guidance Update, which provided guidance to the industry on doing businesses with fellow offshore financial centres such as Russia (perhaps predictably) and Antigua and Barbuda. Jersey also warned its financial institutions to be wary of transactions with companies from the Cayman Islands and Malta because of concerns about money laundering.

The Commission said that Jersey's banks and financial businesses could no longer asssume that business introduced from the Cayman Islands and Malta had been subject to due diligence and "know your customer" procedures that were equivalent to those in Jersey and thus Jersey institutions should take it upon themselves to check that any business was legitimate before accepting it.

Commenting on the Update, Richard Pratt, Director General of the Commission at the time, stated: 'Jersey is determined to protect itself from money laundering. This Update, the first of a series, represents further guidance to the industry. This determination has kept us off the FATF non co-operating jurisdiction list. This notice shows how damaging inclusion would have been. The international regulatory and law enforcement agencies remain interested in what Jersey does. To maintain our reputation and keep off the FATF non co-operative list, we must and will press on with our reform agenda, such as regulation of trust companies and company service providers. We will keep abreast of the latest thinking of our international colleagues about the fight against crime.'

In September of that year, Jersey was praised for its good practice in combating money laundering throughout the island's financial system. Inspectors from America and France agreed that Jersey's anti-money laundering procedures met internationally recognised standards.

The positive appraisal came in a report produced by the Offshore Group of Banking Supervisors using 40 criteria set out by the Financial Action Task Force (FATF). As a test of its improved practices, Jersey's FSC invited the Banking Supervisors' Group to perform their assessment.

Maltese, US and French representatives had visited Jersey for some time in order to monitor and evaluate its regulatory framework. Mr Pratt confirmed that the results of the evaluation were very positive as Jersey had satisfied all 40 of the FATF criteria.

Jersey's Trust Management Regime Goes Live

Jersey's aforementioned Financial Services (Extension) Law came into force in late 2000, extending the remit of the FSC under the Investment Business (Jersey) Law 1998 over banking, investment funds and insurance activities into trust and company management, if the underlying activity was connected with financial services.

The law's code of practice applied to relevant financial service providers from November 27 of that year, with business licensing and qualification regulations in force from February 2, 2001, by when all firms needed a licence in order to trade. May 28, 2001 was the final deadline after which all other businesses were obliged to be operating in full compliance with the code of practice. Qualification requirements for most lower category staff were to have been fulfilled before November 2003; the deadline for top and middle category employees was November 2005.

The FSC said the aim of the legislation was to: 'establish and maintain high standards in the provision of these services, and thereby enhance Jersey's reputation as a finance centre of high repute ... customers, both in Jersey and elsewhere, will be able to have confidence that certain standards of competence, integrity and solvency are being required and that adherence to such standards are being monitored.'

The FSC claimed that the extension to the law would be a landmark and would influence many other tax regimes worldwide. It said: 'Jersey will be one of the first jurisdictions in the world to bring trust companies and company service providers into regulation. The other Crown Dependencies (Guernsey and the Isle of Man) are preparing similar legislation. Moreover, it seems likely that international standard setting bodies will encourage other jurisdictions to follow suit.'

Jersey's progress towards conformity with international standards was confirmed in October of that year, when the Financial Services Commission confirmed that the US Internal Revenue Service (IRS) had approved the island's "know your customer" rules, thus demonstrating, according to the organisation, that Jersey 'has a robust arsenal of legislation, regulations and administrative practices to counter money laundering' which will avoid significant increases in workload for Jersey's financial businesses.

Like a number of other offshore jurisdictions, Jersey was invited to set out its "know your customer" procedures in responses to 18 specific questions listed by the IRS. Approval of the island's anti-money laundering procedures was necessary under the IRS's new rules concerning US withholding taxes. The Commission stated that the IRS decision showed that the tax body was satisfied with the level and quality of Jersey's anti money laundering regime. Approval of the "know your customer" rules meant that Jersey financial institutions could apply for "Qualified Intermediary" status.

Richard Pratt was delighted at the approval of Jersey's anti-money laundering legislation and procedures from across the pond. He said: 'This further independent endorsement of Jersey's "know your customer" provisions - which are at the heart of our anti money laundering defences - is very welcome. Without this approval from the IRS, Jersey's businesses would have been subject to highly onerous reporting requirements. The Jersey Financial Services Commission has worked extensively with the industry and negotiated with the IRS to achieve this result."

Jersey Polishes Up Its 'Know Your Customer' Regime

As 2000 drew to an end, the Jersey Financial Services Commission (FSC) published a consultation document, entitled Overriding Principles For A Revised Know Your Customer Framework, which was essentially a joint initiative from financial regulators in Jersey, Guernsey and the Isle of Man to bolster their existing anti-money laundering regulations.

The consultation paper stated: 'Representatives of all three jurisdictions have entered into detailed discussions and, where possible, have agreed to minimise any inconsistencies in their approaches to certain specified overriding principles for a revised know your customer framework. These are to be known as the Overriding Principles, which are not an exhaustive list of issues raised by the FATF, but are major points relevant to the Anti-Money Laundering Guidance Notes that are common to all Crown Dependencies. It has also been agreed that the Islands will consult with their respective finance sectors on their Overriding Principles with a view to adopting guidance in these areas in each jurisdiction's anti-money laundering guidance notes.'

The areas to be covered by the Overriding Principles were as follows:

• In the majority of circumstances, financial services businesses will be required to verify the identity of their customers, and if different, the principals behind their customers. No distinction is to be made between accounts opened in person and those opened remotely.
• Reliable introductions must only be accepted from regulated entities subject to anti-money laundering regulations and resident in "approved" jurisdictions. Documentary evidence of identity of the underlying customer must be held in Jersey on the accepting financial services business' file.
• A list of jurisdictions will be agreed by all three Crown Dependencies although each will have discretion to draw up from the agreed list their own list of "approved" jurisdictions.
• Financial services businesses must introduce a progressive client review programme.
• Exemptions for certain postal, telephonic and electronic business will be restricted to certain businesses in specified circumstances.

The directors-general of the Financial Services Commisssions of Guernsey, Jersey and the Isle of Man announced in a joint statement: 'This consultation paper demonstrates the Crown dependencies' determination to work together to defeat money laundering. Our existing defences have all been endorsed as robust and effective. This further clarification of key principles and the tightening of standards will be a useful further reinforcement of those defences.'

After a period of consultation, the Overriding Principles were adopted as a kind of 'to do list' which was later actioned by a series of amendments to appropriate pieces of legislation.

Jersey's Efforts Rewarded

In early 2001, media reports of public figures attempting to conceal their assets in offshore accounts led the Jersey Financial Services Commission (FSC) to urge financial institutions operating in the Island to be diligent when dealing with such high profile account holders. 'Naturally,' stated the FSC's Enforcement Update Newsletter, 'many of those instances reported have not concerned Jersey. But Jersey has not been immune.'

The FSC was referring to revelations that the late General Abacha, former president of Nigeria, had dealings with some financial institutions in Jersey and this had prompted the FSC to warn that it had launched a 'number of cases under its regulatory laws and may launch further investigations in future.'

The commission was eager to maintain Jersey's international image as a reputable offshore finance centre and said that reports concerning General Abacha's interest in the island could damage its reputation: 'the use of the island's facilities by public figures carries a very real reputational risk to the Island and to any institution concerned. Some (although, of course, by no means all) such public figures may be seeking to use the island to conceal assets that have been acquired as a result of an abuse of the public position of the individual or individuals concerned.'

In light of this 'reputational risk', the FSC said that it strongly advised all regulated institutions in Jersey to review all accounts held by public figures and if found to reveal doubts about the legitimacy of the funds the institution would be required to report any suspicious transactions to the Joint Financial Crimes Unit.

Such action no doubt contributed to the good report card issued on Jersey by the US Department of State and the Securities Commission in British Columbia which "unanimously highlighted the high standards of the Jersey Financial Services Commission in fighting financial crime and its cooperative approach in working with other regulatory authorities."

Richard Pratt, Director General of the Jersey Financial Services Commission, welcomed the endorsements, and said in a statement: 'Such reviews by independent international regulators, based on evaluation and practical experience, are tremendously important. They confirm the substantial progress that has been made in the last few years. This gives us great confidence as we prepare further careful measures to further reinforce the quality and standards of our regulatory processes.'

In the 2001 issue of its annual International Narcotics Control Strategy Report, the US Department of State described Jersey's service industry as "sophisticated", adding: 'Jersey has established a comprehensive anti money laundering programme and has demonstrated its commitment for fighting financial crime. Jersey officials co-operate with international anti money laundering authorities.' The report, which analyses anti-money laundering regimes in the majority of jurisdictions around the world, also noted the recent report carried out by a US, France, Malta and UK team, which described Jersey as "close to complete adherence" to the FATF's forty recommendations on anti-money laundering measures.

In a separate endorsement from Canada, the Director and Chief Litigation Council of the British Columbia Securities Commission thanked the FSC for extensive assistance over a long period of time with regard to an insider dealing case. The Securities Commission told the FSC: 'As a result of the co-operation of your authority the British Columbia Securities Commission was provided with testimony and documents which enabled it to prove that various registrants promoters and lawyers ... were involved in activities which are in breach of our Securities Act. The extent of the co-operation has been remarkable... as a result we have been able to send the message effectively... that use of... the Island of Jersey will not shield {market participants} from breaching the Securities Law of the province of British Columbia.'

September, 2001

As for many offshore jurisdictions, the horrific events of September 2001 had important consequences for Jersey. The month had begun with a welcome from the Policy and Resources Department for the 'significant change in approach' taken by the OECD as a result of the recent shift in US policy. These had included the later publication of the second blacklist, the removal of ring-fencing from the list of criteria which might earn a jurisdiction a listing, and the delay of the implementation of 'defensive measures' against countries deemed as uncooperative until April 2003 at the earliest.

However, the Island expressed concern at the delay in the publication of the 2001 Progress Report intended to fully explain modifications agreed in June. 'We understand that publication of the report may have been blocked by Spain because of certain difficulties concerning its relations with the United Kingdom over Gibraltar and there is no apparent evidence of any early resolution of the matter,' said the report. 'This is problematic because it means that uncertainty continues.'

The Department's Memorandum noted that the removal, or substantial dismantling, of ring-fenced tax regimes had been dropped as a criterion for ‘listing’. To avoid being listed as ‘unco-operative’, if and when the OECD’s list appeared, the OECD now said that a jurisdiction need only make commitments in respect of effective exchange of information and transparency. Those jurisdictions that have already given a commitment to remove ‘ring-fencing’ had been given the opportunity to review their earlier commitments and any consequent implementation plan that may have been agreed with the OECD.

'The policy change that has taken place over the last couple of months,' said the Memorandum, 'is of considerable significance for Guernsey and Jersey. The Authorities in both Islands have been heartened by the impact of the new US position and the way other countries have fallen into line behind it. The change does not, however, mean that the Islands can sit back and relax - far from it. The exchange of information and transparency agendas are still challenging, and we can perhaps expect them to be prosecuted now with additional vigour.'

The Memorandum noted that even the consensus the OECD had been able to achieve in July was not joined by Belgium, Portugal, Switzerland or Luxembourg. 'Four European abstentions plus the carefully delineated US position plus an unpublished report plus a couple of months silence obviously need to be factored into our assessment of the next steps,' said the Memorandum meaningfully.

The islands made it clear that they would accept what amounted to an existing international consensus on information exchange as regards criminal matters, but were more hesitant when it came to 'civil' investigations. 'Guernsey and Jersey,' they said, 'will be content to agree to such international standards when they are eventually agreed, on the assumption that the Islands have been invited to participate in a satisfactory international forum which has as its aim the development of such standards and their global adoption.'

The Memorandum described in detail the extent to which the islands would be prepared to circumscribe their historical standards of privacy, and concluded that they were offering enough not to be included on any reissued list:

'Our considered view at this stage is that the position outlined... should be viewed by the OECD as a credible way forward which gives assurance that Guernsey and Jersey are not in any sense ‘unco-operative’ and thus should not be ‘listed’ as such on 30 November or at any other date. We believe that the outcome of this will be satisfactory.'

It had been no secret that the Channel Island jurisdiction had viewed the OECD's behaviour as less than even-handed in the past, but the Department's statement concluded with the hope the past difficulties could be overcome. 'Much of what the OECD is now seeking by way of commitment on exchange of information and transparency is, in principle, not problematic for either island' it said. 'We believe that the outcome of this will be satisfactory.'

Then came September 11, and soon afterwards the US executive order requiring the freezing of accounts for a list of nominated individuals. Jersey said it would comply with the US demands, although like the UK it had to work via its regulatory authority. "Jersey should be in a position to meet the demands of the US because one can find ways of doing so," said Richard Pratt.

EU officials were quick to attack offshore jurisdictions such as Jersey, saying that their regimes were now unsustainable, but this criticism was expected, and didn't cut much ice.

"There is no distinction really to be drawn between the offshore and the onshore world," suggested Colin Powell, chairman of the Offshore Group of Banking Supervisors. "We are all working to the same standards and we all have, generally speaking, the same legislation in place."

Jersey Philosophical In The Face Of A French Assault

In a 400-page report issued in October 2001, French Socialist deputy Arnaud Monteburg launched a vitriolic attack on the City of London and the UK crown dependencies, accusing them of hindering international investigations. 'The island is a haven for dirty money,' he stormed. 'In Jersey, requests for co-operation from European investigating magistrates are subjected to obsessive legal nit-picking. They're preventing us from fighting money-laundering because they're making a living off it.'

However, Jersey's Attorney General, William Bailhache accepted this criticism philospohically: 'This is an area where the French and Anglo-Saxon legal systems don't fit well,' he suggested, explaining that under Jersey law, French investigators are not endowed with the same authority in a court of law. But Mr Bailhache emphasized that Jersey had responded to international pressure and the terrorist attacks in the US: 'We're a small jurisdiction and we're well aware how easy it is for outsiders to criticize our finance industry. We're not going to allow that to happen,' Mr Bailhache pledged.

On the same day as the French report was released, he pointed out, the Terrorist Financing Order came into force in Jersey. The order allowed the jurisdiction's authorities to freeze the assets of suspects named by US President George Bush in the Executive Orders. The island was also seeking the adoption of the UN Convention for the Supression of Terrorist Financing, which when adopted would mean that Jersey would be able to try an individual for terrorist crimes committed outside the island.

Phil Austin, Chief Executive of the finance industry's representative body, Jersey Finance, also confirmed that the jurisdiction was being pro-active in facing up to international realities:

"Jersey is also likely to incorporate in domestic law any enhancements to the Financial Action Task Force (FATF) recommendations to deal with terrorist financing adopted at the FATF Plenary at the end of October."

"We are calling on all jurisdictions both onshore and offshore to examine their regulations against financial crime and, where necessary, improve them as a matter of urgency."

"Regulators and law enforcement agencies have acknowledged the significant level of regulation in place in Jersey. However, other commentators often group all offshore centres together in some sort of 'catch all' classification that inaccurately implies we all too easily allow money laundering, and that we are cloaked in bank secrecy," said Mr. Austin.

"For its part, Jersey's laws against terrorism and laundering the proceeds of crime are at the cutting edge and our 'know your customer' rules equate with the best international practice. Jersey's anti money laundering defences were examined by an international evaluation team which included representatives from the US, UK and France and in 1999 concluded that the Island was "close to complete adherence" to the 40 recommendations of FATF."

"The Jersey authorities believe that the timescale now envisaged for (the adoption of the UN Convention) will be well ahead of that in almost all EU Member States," said Mr. Austin.

"The finance industry in Jersey supports the measures that the Island's Government and regulators are fast tracking through the Island's legislature, and we call on all other centres onshore and offshore to do the same without delay," added Mr. Austin. "Terrorist financing is a global problem and it has to be tackled by the Governments, regulators and finance industries around the world working together."

Ironically, the Jersey authorities signed an information exchange deal with French financial regulators in December, covering offences such as market manipulation and unlicensed financial service provision, intended as the first in a series of accords with overseas financial authorities.

Jersey Signs Up To The OECD . . .

Shortly before the OECD's deadline of 28th February, 2002, by which offshore jurisdictions were supposed to commit to the organisation's demands, the British Government threatened Jersey with sanctions if it didn't fall into line. The official pressure on Jersey reflected anxiety in the Treasury about potential embarrassment for Gordon Brown, then Chancellor of the Exchequer, who had campaigned for greater financial transparency worldwide. "What Jersey doesn't realise is how serious the government is," said one official. "They have taken a very aggressive attitude."

The Jersey government however said it still had "one or two problems" with the OECD initiative, adding that the OECD had tried to reopen areas of debate the island considered resolved. "We are less than wholly happy with the administrative approach," the official said. "Issues which we regard as completely closed and dealt with suddenly bubble up again."

Then, just hours before the multilateral organisation's deadline for commitment on tax reform and transparency initiatives expired on 28th February 2002, Jersey and Guernsey announced that they had come to an agreement with the OECD.

In a joint statement, the Islands revealed that: 'Following clear recognition from the OECD of the essential importance of a level playing field, Guernsey and Jersey have agreed to reflect the OECD's principles of exchange of information and transparency both in a general political commitment and in tax information exchange agreements to be negotiated with individual jurisdictions.'

The jurisdictions stressed in the statement that in both offshore centres there were already information exchange provisions in line with OECD recommendations on criminal tax matters in place. However, they expressed concerns that the 'level playing field' was not, in fact, all that level.

The statement pointed to the fact that OECD members such as Switzerland and Luxembourg were refusing to endorse the harmful tax practices process as an illustration of this point.

Reacting to the news, Phil Austin commented that:

'We are delighted that agreement has been reached. Our finance industry is happy with the terms of this agreement, which properly protects its competitive position in the global finance market.' However, Mr Austin did stress that the financial sectors of both jurisdictions would expect Jersey and Guernsey to be fully involved in the international decision making process over tax and transparency requirements.

. . . But It's Not Enough For London's Terriers

With the OECD out of the way, attention in Europe turned to the Savings Tax Directive, with Jersey singled out as one of the main roadblocks in the way of adoption of the information exchange regime by the end of 2002, along with Switzerland and the US - distinguished company indeed!

The EU's Directive, laboriously agreed after years of wrangling, had been made dependent on the adherence of non-members such as Switzerland and the US, and also assumed that member states' dependent territories such as Gibraltar and Jersey, in the UK's case, would apply the same rules.

That comfortable assumption never seemed sustainable to external observers, and negotiations between the UK and its rebellious offshore territories reached crisis point in April 2003.

Speaking in early April, Jersey Taxation Society President, John Riva, stressed that the jurisdiction was not making any promises regarding the EU plans. He explained that:

'Jersey has made it very clear that, although it is willing to enter into dialogue with the UK, it will not introduce any aspect of the package that might compromise its competitive position.'

Then, with just eight months to go before the EU's self-imposed deadline for agreement on the terms of an information-sharing regime for the taxation of savings interest, politicians in London and Brussels started to become nervous about the Union's failure to persuade the major external financial centres to sign up to the proposed system, which would require banks to report interest payments to non-nationals to their home tax authorities.

In mid-April of that year, the UK government accused Jersey of 'wrecking' the Directive, and of putting London's international bond market at risk by failing to move swiftly to improve transparency.

Dawn Primarolo, the UK's junior finance minister at the time, had made no progress in the latest round of talks with Jersey politicians, and Gordon Brown was said to be angry that Jersey's intransigence could allow other non-EU countries to evade signing information agreements.

A Treasury insider said: "Our patience with Jersey has snapped. Because of the intransigent position Jersey is taking ...the whole debate about the withholding tax could be reopened. We are not prepared to put at risk the interests of the City of London. We went through tortuous negotiation in the EU to reach a deal which prevented a withholding tax being imposed on the City. We are not prepared to see that package unravel."

The Treasury revealed at the time that it was considering the options it had to force Jersey into line; but with the island in good standing with the OECD, the FATF and the US, unilateral sanctions by the UK didn't seem likely.

In response to the Treasury's threats, Jersey's President of Policy and Resources at the time, Senator Pierre Horsfall, urged the States authorities to rise to the challenge of negotiating with the UK and the European Union over the savings tax directive with 'determination and resolve'.

However, said Senator Horsfall, the Island's concerns that EU members such as Luxembourg and Switzerland had not agreed to the proposals had not yet been addressed. In addition, Jersey's de facto Chief Minister pointed out, a decision of such significance for the jurisdiction's financial sector could not be taken by him alone, and would require full consultation, thus making the deadline suggested by the UK government impossible to meet.

'The exempt company has been a cornerstone of our tax regime for over 40 years and is the foundation on which the success of our finance industry has been built,' he explained. 'Our competitive position on bank deposits would be jeopardised if we moved to automatic information exchange but our two major European competitors, Luxembourg and Switzerland, did not.'

Speaking to States members, Senator Horsfall revealed that the UK government had threatened to make potentially damaging reference to the Island at a Code of Conduct meeting due to take place in Brussels, but said that Dawn Primarolo had hinted in conversation that she 'might be prepared to think again' if the Policy and Resources Committee agreed to share all the fiscal review papers and background work with Treasury officials. Once again the Senator said, he refused to agree to such a move as the decision was not his to make alone.

He told the House that he had written to the British government, warning of the consequences of a public declaration that the jurisdiction is 'uncooperative':

'There is a very real danger that we would come under intense political pressure to withdraw, publicly, from the search for agreement on the tax package,' the letter warned. 'The alternative to this potentially very damaging state of affairs is your acceptance of the sufficiency of my word, given in good faith, and our using this incident as a turning point for building a better mutual relationship.'

Senator Horsfall told politicians that he had also protested the fact that Jersey was being singled out for criticism, emphasising that Jersey's position was no different than that held by Guernsey and the Isle of Man.

'For Jersey to be singled out adversely, in the manner that both you and your officials have indicated may be done on 18 April, would not only be unfair, but also disproportionate and unreasonable. It would also provoke intense adverse reaction in the States of Jersey, and indeed the whole Island,' he told Ms Primarolo.

Late in April, Senator Frank Walker, revealed that the release of a long-awaited fiscal strategy consultation document was likely to be delayed by up to four weeks as a result of the recent developments over the EU savings tax directive.

The consultation document had been due to be published on 25th April, but following the ultimatum from then UK Paymaster General, Dawn Primarolo, the implications of any action (or inaction) on the issue had to be thoroughly considered.

'To produce any sort of fiscal strategy consultative document now following the events of the last ten days would be totally unacceptable without taking full account of those events,' Senator Walker explained.

Speaking to States Members, the Policy and Resources VP hinted that although Jersey would continue to safeguard its own economic position in the face of EU and UK pressure, fundamental changes to the jurisdiction's tax structure might be necessary.

The Senator played his cards close to his chest, however, declining to elaborate on this statement, and revealing that Members would be informed of further developments subject to 'judgement and discretion', given the sensitivity of the situation.

The Treasury's secret weapon against Jersey was revealed in Gordon Brown's April budget, which included an enabling clause which would allow the Treasury to levy additional taxes on UK firms and controlled foreign companies located in overseas jurisdictions 'where harmful tax practices are prevalent'.

Given the then standoff between the UK government and the States of Jersey authorities over information exchange on non-resident savings interest, there were fears that this could apply to many British owned companies operating from the Channel Island jurisdiction, which could face an additional 10% tax, on top of the 20% corporate rate already payable in Jersey.

Companies that could be affected by such a measure included a number of big UK high street names with sizeable operations on Jersey, such as retail banking operations Barclays and RBSI, and a large number of UK-owned offshore sector investment and service providers.

In May, 2003, it seemed that at first Jersey was prepared, in principle, to make some concessions - the first Crown Dependency or Overseas Territory to do so within the context of the EU package. But then at a meeting in Jersey of political leaders from England, Ireland, Northern Ireland, Scotland, the Channel Islands, and the Isle of Man, UK Prime Minister at the time, Tony Blair stressed that the UK government's stance on the issue of banking secrecy was not intended to shine the spotlight on Jersey in particular, but was aimed at ensuring a level playing field on the issue within Europe.

Mr Blair spoke to Senator Pierre Horsfall, President of the Policy and Resources Committee for 15 minutes in private, a meeting which Senator Harsfall described as 'invaluable'. 'It will stand Jersey in good stead in a number of ways,' he told the local media,' adding that: 'It went better than we could have hoped for.'

Jersey Plays The Good Guy . . .

In the new co-operative climate, Jersey said in October, 2003, that it would be likely to follow suit when the UK adopted tough new laws regarding the seizing of criminal assets under the Proceeds of Crime Act. Chairman of the Jersey Finance Industry Association, Anthony Dessain explained at the time that: 'The Act is not yet in force in the UK and until it gets through the political system we will not know exactly what form it will take and we will want to look at it in detail.'

He continued: 'I do not see that it is going to impact greatly on the finance industry, in the sense that it will put a bit more detail on what we already have in place. But the impact will be on people who provide high value goods - jewellers, car dealers and estate agents who may be subject to know your customer requirements.'

However, the JFIA chief concluded that: 'Given that we have exactly the same regime as the UK, and recognising that the UK and Jersey are ahead of many countries, it is important that we do not fall behind because that gives people the opportunity to dump themselves on us. We would certainly expect that, as a matter of principle, we would want to be in step.'

Then Jersey signed an agreement (TIEA or Tax Information Exchange Agreement) with the US to share information on taxes, as part of a campaign to tackle tax evasion and the threat of terrorist money laundering. The US had already signed such deals with other offshore jurisdictions, including the Isle of Man, the British Virgin Islands, the Cayman Islands, Bermuda and Antigua.

In December of that year, Pierre Horsfall revealed that talks on tax reform between the Channel Island jurisdiction and the United Kingdom were proceeding on 'a cordial basis'. He said that the turning point in the relationship between the two countries had come during a meeting with UK officials on the fringes of a finance meeting in London.

'My discussions with the Paymaster-General were a turning point,' he told the Jersey Evening Post, 'but by then our technical people had contributed their work, which led to a better understanding of our position and why some things are extremely difficult for us.'

The P&R chief also suggested that the signing of a tax information exchange agreement with the United States had done much to advance the Island's cause in the eyes of the UK and European Union: 'We have nailed our colours to the mast, and that's what people are looking for,' he explained.

A further TIEA followed, with Ireland. Speaking in late November, 2003, Frank Daly, head of Ireland's Revenue Commissioners announced that talks between the Irish tax authority and its counterparts in Jersey, Guernsey and the Isle of Man had taken place under the auspices of the OECD tax cooperation initiative.

The EU Denouement

Developments affecting Jersey's banking sector in 2004 were largely driven by the EU's Savings Tax Directive, finally more or less agreed in January, and this was recognised in April when senior PricewaterhouseCoopers officials urged the Jersey government to consider its relationship with the United Kingdom and the wider context of the tax debate before making any decision on the EU's directive, which allowed Jersey to choose between full-blown information-sharing and the introduction of a withholding tax.

Although many finance professionals in Jersey and Guernsey had expressed a preference for the withholding tax option, which would allow banking customers to choose for themselves, Philip Taylor, senior partner at PwC in the Channel Islands suggested that, given the far greater importance to the Island's economy of the EU's code of business conduct proposals, the industry should consider making a small sacrifice in the name of a harmonious relationship with the UK.

'Any choice we make needs to weigh carefully the long-term interests of the Island and the importance of a constructive relationship with the UK,' he said, adding that: 'When we look back we may think that the true significance of that choice was that it gave Jersey a valuable bargaining chip in the wider debate in Europe on tax change.'

The banking sector was sure of one thing at least, that gearing the industry's systems up to be compliant with the requirements of the European Union Savings Tax Directive would be a huge challenge. Bankers Association representative and Barclays director Martin Scriven warned that whether the island opted for a withholding tax or exchange of information, the burden of rewriting systems would be very costly.

"We do look with an element of concern from a purely operational point of view. It will mean a huge cost to the industry which is not going to develop any more business and will ultimately reflect on the customer base. It is causing huge concerns within individual institutions," observed Mr Scriven at the time.

In June, Jersey and the Isle of Man revealed that they would both be following Guernsey's example, and would, from January 2005 (eventually July, 2005), levy a withholding tax rather than exchange information on the savings interest of EU residents. Senator Frank Walker observed that although Jersey does not belong to the EU, it is in the jurisdiction's best interests to cooperate with the European body and adopt a 'good neighbour' attitude.

'We believe that a high international standing for Jersey brings tangible rewards to our finance industry and to the Island generally,' he explained, continuing: 'This good reputation is best achieved by constructive engagement with international institutions and governments.'

Jersey Finance chief executive, Phil Austin commented that: 'This proposal reflects the views of the majority of our industry members and we believe it is in the best interests of our industry going forward. It will give customers affected by the EU agreement a choice. EU resident investors with savings held in Jersey will be able to either opt for the retention tax, or authorise disclosure of the interest earned to their home authority.'

He went on to add: 'Since some of the EU member states and our major competitors have opted for a withholding tax, we are pleased that our government now proposes to move in the same direction. This will preserve our competitiveness as a finance centre, which is so important to the long term future of our leading industry.

Jersey's 'retention tax' is now being levied at (initially) 15% on returns from savings under the Directive, shared 25/75 with the Member States in question.

Early evidence in 2006 suggested that European investors had easily outwitted EU tax collectors by shifting their assets to locations not covered by the directive. In the first six months of the operation of the legislation, Swiss institutions withheld and passed on to the tax authority about EUR100 million (US$128 million) from the savings of individuals resident in EU member states. In the same period, Luxembourg collected EUR48 million, Jersey EUR13 million, Belgium EUR9.7 million, Guernsey EUR4.5 million, Liechtenstein EUR2.5 million and Ireland EUR400,000.

According to the Jersey government, this was in line with the initial estimates. The retention tax will eventually increase to 35% under the terms of agreements.

A statement by the States of Jersey revealed that both the Comptroller of Income Tax and the President of the Jersey Bankers’ Association were satisfied at that time that the process of exchanging information and the retention of tax has worked smoothly.

"Both information and tax have been transferred efficiently to the Income Tax Department for onward transmission to the relevant competent authorities in the EU Member States before the 30 June 2006 as required under the Agreements," the statement explained.

Commenting, Chief Minister Senator Walker, noted that: “This first payment of retention tax to the EU Member States is ample evidence, if it is needed, of the good neighbour policy we follow in our relations with the EU, a policy that we expect to see reciprocated.”

Developments In 2006-07

In April, 2006, the Jersey Financial Services Commission and the Qatar Central Bank (QCB) signed a Memorandum of Understanding to establish a formal framework for mutual assistance and the exchange of information.

The MoU followed a meeting in Qatar between the Director General of the Commission, David Carse, and the Governor of the QCB.

The agreement aimed to facilitate the enforcement of, and compliance with, the laws of their respective jurisdictions in a bid to help protect investors and depositors and to promote the integrity of financial services markets in the two jurisdictions.

The MoU commited both regulators to providing help within the limits of each jurisdiction’s laws and established rules for the use of information exchanged.

Mr Carse described the agreement as "another significant step" in its strategy to establish a network of MoUs with overseas regulators.

"It is particularly important to be able to sign such agreements with jurisdictions such as Qatar that are of growing strategic importance to Jersey and where there are links with each other’s financial systems that create the need for supervisory cooperation," he observed.

In May, 2006, the Financial Services Commission published a consultation paper on a proposed new Money Laundering (Jersey) Order and accompanying Handbook for the Prevention and Detection of Money Laundering and Terrorist Financing, to replace the existing Guidance Notes for the Finance Sector.

The purpose of the consultation paper was to convey proposals to update Jersey’s measures to combat money laundering and terrorist financing so that these are consistent with certain key elements of the revised Financial Action Task Force (“FATF”) Recommendations on Money Laundering and Terrorist Financing.

The FSC said that the proposals were consistent with Jersey’s commitment to the implementation of international standards to combat money laundering and terrorist financing.

The draft Money Laundering Order and Handbook proposed a number of important changes. In particular:

• A risk-based approach to customer due diligence was set out, that permits reduced or simplified measures in the case of lower risk relationships, and requires enhanced customer due diligence in the case of higher risk relationships.
• Much more emphasis was placed on customer due diligence measures other than identification and verification of identity, and, in particular, on ongoing monitoring of unusual, complex, and higher risk activity and transactions.
• More customer friendly ways of verifying the identity of applicants for business or customers were suggested, including scope for greater reliance on a single document to verify identity in lower risk circumstances, for example, a passport.
• Measures to guard against the financial exclusion of Jersey residents were clarified. In particular, in the case of a lower risk minor, whose parent or guardian is unable to provide standard documentation to verify the minor’s identity, identity may be verified through use of the minor’s birth certificate.
• The responsibilities of senior management in preventing and detecting money laundering were also emphasised as part of a section addressing corporate governance.

In addition, the consultation paper highlighted that the FATF Recommendations required the extension of measures to combat money laundering and terrorist financing to non-financial businesses and professions, and to include certain activities conducted by lawyers, accountants and estate agents, and the sale of high value goods for cash. The paper considered how Jersey might address this requirement.

David Carse, Director General of the Commission, said: “These proposals are intended to enable Jersey to meet its international obligations, in line with the standards established by the Financial Action Task Force, to combat money laundering and terrorist financing. The proposals highlight the importance of a risk based approach to combating money laundering and terrorist financing, which is intended to focus resources on higher risk customers, whilst at the same time easing the burden on other customers.”

In June, 2006, the Jersey Financial Services Commission (JFSC) announced that it had entered into a Statement of Co-operation (SoC) with the China Banking Regulatory Commission (CBRC).

According to the JFSC, the objectives of the statement included working towards the mutual understanding of both jurisdictions’ regulatory regimes, strengthening co-operation between the two, including the provision of assistance where necessary, and establishing dialogue in this regard.

"Over time, this should help to facilitate market access into the respective jurisdictions," a JFSC statement explained.

The SoC was signed by David Carse, Director General of the JFSC, and Liu Mingkang, Chairman of the CBRC.

Commenting on the agreement, Mr. Carse noted that: "This is in line with the Commission’s commitment to cross-border regulatory co-operation and also recognises that cross-border activity between our two jurisdictions is likely to increase. The SoC should provide a good basis for building a mutually beneficial relationship.”

In October, 2006, the Jersey Financial Services Commission and de Nederlandsche Bank (dNB) signed a memorandum of understanding designed to further co-operation between the two regulatory bodies. The MoU came into effect on 4 October 2006, the Financial Services Commission announced.

It established a formal framework for mutual assistance and the exchange of information between both regulators to facilitate the enforcement of, and compliance with, the laws of each jurisdiction. Such collaboration should help to protect investors and depositors and to promote the integrity of financial services markets in Jersey and the Netherlands.

The MOU commited both dNB and the Commission to provide help within the limits of each jurisdiction’s laws, and establishes procedures and liaison points so that requests for information needed for tackling financial regulatory offences can be handled rapidly and efficiently.

David Carse commented: “I am delighted that we have been able to conclude formal arrangements for sharing regulatory information with a significant European jurisdiction with which Jersey has a number of business links. This is the latest in a number of such agreements signed this year and is further evidence of the Commission’s continuing commitment to developing cross border co-operation wherever it is relevant to do so.”

In April, 2007, the Jersey Financial Services Commission (JFSC) and the Irish Financial Services Regulatory Authority (IFSRA) signed a Memorandum of Understanding.

The Memorandum of Understanding established a formal framework for mutual assistance and the exchange of information between each regulator to facilitate the enforcement of, and secure compliance with, the laws and regulations of each jurisdiction.

The Memorandum of Understanding commited both regulators to providing help within the limits of each jurisdictions’ laws, and establishes procedures and liaison points so that requests for information needed for tackling financial regulatory offences can be handled rapidly and efficiently.

In August, 2007, the Jersey Financial Services Commission and the British Virgin Islands Financial Services Commission signed a memorandum of understanding designed to further co-operation between the two regulatory bodies.

The MOU established a formal basis for co-operation, including the exchange of information and investigative assistance. Such collaboration should help to protect investors and depositors and to promote the integrity of financial services markets in Jersey and the British Virgin Islands.

John Harris, current Director General of the Jersey FSC, stated that: “I am delighted that we have been able to conclude formal arrangements for sharing regulatory information with the British Virgin Islands Financial Services Commission. A number of finance industry firms have a presence in both jurisdictions and this Memorandum of Understanding will ensure that where regulatory information needs to be exchanged it can be done in a rapid and efficient manner.”

Robert Mathavious, Managing Director and Chief Executive Officer of the BVI FSC, said, ““As leading international finance centres, Jersey and the BVI have cooperated formally and informally on regulatory matters over a number of years. I am delighted that this Memorandum of Understanding will enable us to work more closely together to the benefit of both of our regulatory regimes. For the BVI FSC, the Memorandum is a further sign of our commitment towards effective international cooperation that builds our capacity as a world-class jurisdiction.

“The business communities in the BVI and Jersey already work closely together in many ways. The Memorandum of Understanding will provide them with further assurance of being able to rely on high quality regulation in both jurisdictions.”

In February 2007, meanwhile, it emerged that four of the UK's high street banks would be compelled to hand over details of their customers' offshore accounts to HM Revenue and Customs.

The ruling in favour of the UK tax authority was delivered by the Finance and Tax Tribunals Special Commissioners, and was reported to pertain to offshore accounts held with HSBC, HBOS, Lloyds TSB, and Royal Bank of Scotland.

It was expected that HMRC will receive around GBP275 million in additional revenue from taxpayers with previously undeclared assets held overseas by the banks in question.

The in April, HM Revenue and Customs announced arrangements enabling investors with offshore accounts to disclose to HMRC any income and gains not previously included in their tax returns.

The UK tax authority explained that:

"HMRC has recently obtained information about holders of offshore accounts from a number of banks and has obtained similar details through the European Savings Directive."

HMRC continued:

"There is nothing wrong with holding an offshore account as long as you pay any tax due on the money deposited in it, and on the interest from it. If you have done this you do not need to use the Offshore Disclosure Facility."

"We want to encourage those with unpaid tax and duties to pay what they owe. Therefore, we are introducing the Offshore Disclosure Facility to help them get their tax affairs up to date."

The facility was open to those who hold or have held an offshore account, either directly or indirectly, that is in any way connected to a loss of UK tax and/or duty.

For a limited period, taxpayers could come forward and make a full disclosure of all undeclared liabilities, not just those connected with an offshore account.

To use these arrangements, investors were told that they would need to notify HMRC by 22 June 2007 of their intention to make a disclosure, and then make their disclosure by 26 November 2007.

HMRC warned, however, that:

"At the end of the notification period, HMRC will target those with offshore bank accounts and undeclared tax liabilities who have chosen not to come forward to make a disclosure."

In May 2007, it emerged that the UK tax authority planned to launch its clampdown on undisclosed tax liabilities in offshore accounts on 9 July - just 16 days after the 22 June notification deadline under its new offshore amnesty facility.

However, the initiative wasn't quite the rip-roaring success envisaged by HMRC, just ahead of the June deadline, it emerged that only 1% of the estimated 400,000 bank accounts identified by HM Revenue and Customs as part of its offshore tax avoidance crackdown had been declared to the tax man under HMRC's offshore disclosure scheme.

According to the Financial Times, only about 4,300 offshore account holders had at that point come forward under the amnesty. But HMRC chief David Harnett reportedly denied being disappointed by the low take-up, and stated that he expected a last-minute rush of declarations as the June 22 disclosure deadline approaches.

"When we look at amnesties in other parts of the world, there tend to be a lot of disclosures in the last week," he told the paper.

In May 2007, Jersey's Council of Ministers revealed that it was considering extending the controls which exist to prevent the jurisdiction being used by money launderers or for financing terrorism.

The review was part of the preparation for a 2008 review of Jersey’s performance as a financial centre conducted by the International Monetary Fund (IMF).

The Council of Ministers has set up a group to oversee the preparations for the IMF visit. The group will also oversee the Island’s strategy for preventing Jersey businesses being used by criminals engaged in money laundering or financing terrorism.

Much preparatory work had already been completed in May, and more was planned. The Group (AML/CFT Strategy Group) issued two consultation papers on further proposals to update and extend the Island’s AML/CFT framework, taking steps to comply with the latest international standards.

When the IMF undertakes its review it will be testing for active compliance with international standards. The proposals in the consultation papers suggest how changes could be made in Jersey to bring the Island’s regulations into line with those standards. Representatives of the IMF will visit Jersey, Guernsey and the Isle of Man in 2008 and will assess how each complies with international standards in anti-money laundering and countering the financing of terrorism.

The first of the two consultation papers set out proposals which would require a number of business sectors to comply for the first time with laws which prevent Jersey businesses being used by people seeking to launder money or finance terrorists.

The business sectors in question are:

• Estate agents, when involved in transactions for their clients concerning the buying and selling of real estate;
• High value goods dealers (such as car dealers, boat dealers, auctioneers and jewellers) when accepting payment in cash above a set level – expected to be about GBP10,000;
• Lawyers, notaries and other independent legal professionals when participating in or assisting in the planning or execution of financial or property transactions; and
• Accountants, auditors, tax advisors and insolvency practitioners.

The second consultation paper put forward a legal framework which would establish a mechanism for the supervision of these businesses. It would require the businesses to make provision to guard against being used by persons seeking to launder money or finance terrorists.

Businesses which are already required to comply with these regulations, but whose compliance is not currently overseen by a supervisory authority, would become subject to oversight by such an authority under the proposals. These businesses include: money service businesses (bureaux de change, money transmitters and cheque cashers); issuers of electronic money; lenders; certain traders in financial instruments; money brokers; and persons who provide safe custody services.

Commenting on the proposals at the time, Martin De Forest-Brown, the States Director of International Finance said:

"It is imperative that Jersey gets a good result from the IMF review next year. We have established an excellent reputation as a well regulated international financial services centre and we must continue to be vigilant and flexible, ensuring that we take all necessary steps to maintain our position."

"Compliance with the highest standards in anti-money laundering and countering the financing of terrorism is the biggest single test for any offshore financial centre wanting to maintain its position in this global industry. We should take all necessary steps to maintain the success of Jersey’s finance industry, because it is so vital for our prosperity and maintains our high standard of living."

"Complying with the standards expected by the IMF, or other similar international agencies, is what we have to do to ensure the future success of our industry. If we want to be a global player, we have to play by their rules. I hope that Island businesses will respond positively to our proposals, because they all benefit from the wealth which the financial services industry brings."

De Forest-Brown added:

"While the proposals will result in estate agents and high value goods dealers being subject to such legislation for the first time, the work involved will be directly related to the level of risk which each business faces. In many cases, this should not be great."

In June 2007, it emerged that Dutch State Secretary for Finance, Jan Kees de Jager had signed agreements with the Chief Minister of Jersey, Senator Frank Walker, regarding the exchange of information relating to tax matters.

The Netherlands and Jersey additionally affirmed their wish to deepen economic and trade ties with the signing of two agreements and a Memorandum of Understanding.

The information exchange agreement between the Netherlands and Jersey was based on the OECD’s Model Agreement on the Exchange of Information on Tax Matters.

Further to their agreement, the Netherlands and Jersey will exchange bank and other information on request relating to both criminal and civil tax matters. For criminal tax matters, information exchange can apply whether the investigation relates to conduct before or after the coming into force of the agreement. For civil tax matters, such exchange can apply only in respect of taxable periods beginning on or after the date of entry into force

As well as the information exchange agreement, the Netherlands and Jersey signed an agreement on access to mutual agreement procedures relating to transfer pricing and the application of the Dutch participation exemption.

Finally the Netherlands and Jersey agreed to continue negotiations on further measures needed to alleviate undesired tax barriers and other obstacles of a discriminatory nature that may be included in the domestic tax legislation of the parties, with the intention in due course of integrating partial results achieved into a double taxation agreement.

In July 2007, Financial Secretary to the UK Treasury, Jane Kennedy announced details of the UK's treaty negotiating priorities for the year to 31 March 2008.

Ms Kennedy stated that:

"I am pleased to announce the programme of work on double taxation conventions for the year to 31 March 2008. The UK has a comprehensive network of bilateral conventions and is committed to maintaining and strengthening this network. Double taxation conventions provide an agreed framework for individuals and businesses when dealing with overseas tax systems."

Commenting on the matter, HMRC revealed that that:

"We plan to complete work on new DTCs with the Faroes, Macedonia, Moldova, Slovenia and Thailand; and on Protocols with Australia, Mexico, New Zealand, South Africa and Switzerland. We also plan to complete work on new Tax Information Exchange Agreements (TIEAs) with Jersey, Guernsey, the Isle of Man, Anguilla, Bermuda and the British Virgin Islands."

Also in July, the States of Jersey passed legislation to regulate money service businesses - those in the business of a bureau de change, providing cheque cashing facilities or engaging in money transmission services – under the Financial Services (Jersey) Law 1998 (the Financial Services Law).

The previous absence of such a regulatory regime for money service business placed the Island at variance with international standards issued by the Financial Action Task Force on Money Laundering (FATF). The aim of the legislation is to provide a mechanism for the oversight of money service businesses that will meet international standards but in a way that will avoid placing undue bureaucracy on industry and unrealistic demands on the Commission’s resources.

The legislation will result in the disclosure to the Commission of the identity of all persons who carry on money service business. All money service businesses will become subject to oversight (to varying degrees), as required by FATF recommendations. In the case of persons with turnover in excess of a prescribed threshold of GBP300,000, this oversight will involve a pre-authorisation “fit and proper” assessment and proactive ongoing supervision by the Commission. Such persons will also be subject to the Financial Services Law in its entirety and will be expected to adhere to the Codes of Practice issued by the Commission for the purpose of establishing sound principles for the conduct of money service business.

In the case of other persons whose turnover falls below the prescribed threshold, oversight will involve the notification to the Commission of the carrying on of money service business and the use, by the Commission, of investigatory powers as and when needed.

The combined effect of these requirements on most persons carrying on, or proposing to carry on, money service business is expected to be minimal. This is because the GBP300,000 turnover limit should result in only the largest providers of money service business in Jersey having to seek the authorisation of the Commission to carry on money service business. Consequently, in the majority of cases, a person will be able to lawfully carry on money service business after simply notifying the Commission of its intention to do so, although it will be required to keep records sufficient to determine that its turnover is below the prescribed threshold.

A six-month period was set from 26 July 2007 in which to provide the Commission with a notification or an application as appropriate. The legislation contained transitional provisions so that persons who have made an application by 26 January 2008 (the closing date for applications) may lawfully continue such business pending consideration of their application by the Commission.

The oversight regime provided for by the legislation will be funded by fees levied by the Commission on persons who will be required to register under the Financial Services Law to carry on money service business. Persons who benefit from the turnover exemption and who are simply required to notify the Commission that they intend to carry on money service business will not be charged any fee.

Developments in 2008-09

The Anti-Money Laundering/Countering the Financing of Terrorism Strategy Group (AML/CFT Strategy Group) issued a consultation paper in January 2008 to allow interested parties an opportunity to review and comment on the detail of the draft Proceeds of Crime (Supervisory Bodies) (Jersey) Law 200-.

This law will provide the necessary legal framework to oversee those employed in any business or profession where money laundering or financing of terrorism could take place – including finance companies, lawyers, accountants and insolvency practitioners.

Also included are other groups such as estate agents, casino operators and sellers of high value goods.

It is envisaged that the Jersey Financial Services Commission will be designated as the supervisory body for all of these businesses in the first instance.

However, in the case of the legal and accountancy professions, it is envisaged that the appointment of the Commission would be subject to a review after 18 months to give those professions an opportunity, should they wish to do so, to explore the possible appointment of alternative oversight bodies.

These proposals form part of a raft of legislation and other changes to ensure that Jersey meets international standards in view of an impending review by the IMF of Jersey’s performance as a finance centre.

Issue of these draft laws followed an earlier consultation in May 2007, when the AML/CFT Strategy Group consulted on the principles of the proposed legal framework. In August 2007, the Group published a feedback paper that summarised the responses received and set out the way forward.

Martin De Forest Brown, Director of International Finance, stated:

“As international standards for the finance industry continue to adapt, it is important that Jersey remains up to date and retains its position as a leading international finance centre. Once again, the JFSC has been asked to undertake these tasks and they are already advising those for whom these are new requirements.”

In March 2008, the Dutch government announced that the Tax and Information Exchange agreement concluded in 2007 by the Netherlands and Jersey went into effect at the beginning of the month.

The Netherlands and Jersey signed two agreements: the agreement for the exchange of information relating to tax matters and the agreement on the access to mutual agreements procedures in connection with the adjustment of profits of associated enterprises and the application of the Netherlands participation exemption. Both agreements entered into force on 1 March, 2008.

"The Tax Information Exchange Agreement shall have effect for criminal tax matters on that date and for all other tax matters on that date, but only in respect of taxable periods beginning on or after that date or, where there is no taxable period, all charges to tax arising on or after that date. The agreement on the access to mutual agreements procedures shall apply to proceedings which are initiated after March 1, 2008," the ministry explained in a statement.

In the previous year, the Dutch government said that it was preparing to sign a "considerable number" of TIEAs with offshore and onshore jurisdictions as it commenced a drive to reduce tax evasion. In July 2007, the Dutch newspaper Financiele Dagblad reported Robert ten Have, head of the bilateral tax treaties department of the Dutch Finance Ministry as announcing that the strategy was designed to allow the Dutch authorities to "see what's going on in these territorial jurisdictions".

The House of Commons Treasury Committee announced on April 30, 2009 that was undertaking an inquiry into offshore financial centres and their impact on global business and investment, and the international fight against money laundering.

The inquiry, announced formed part of the committee's ongoing work into Financial Stability and Transparency. The inquiry sought answers to the following questions.

• To what extent, and why, are Offshore Financial Centres important to worldwide financial markets?
• To what extent does the use of Offshore Financial Centres threaten financial stability?
• How transparent are Offshore Financial Centres and the transactions that pass through them to the United Kingdom’s tax authorities and financial regulators?
• To what extent does the growth in complex financial instruments rely on Offshore Financial Centres?
• How important have the levels of transparency and taxation in Offshore Financial Centres been in explaining their current position in worldwide financial markets?
• How do the taxation policies of Offshore Financial Centres impact on UK tax revenue and policy?
• Are British Overseas Territories and Crown Dependencies well-regarded as Offshore Financial Centres, both in comparison to their peers and by international standards?
• To what extent have Offshore Financial Centres ensured that they cannot be used in terrorist financing?
• What are the implications for the policies of HM Treasury arising from Offshore Financial Centres?
• What has been and is the extent and effect of double taxation treaty abuse within Offshore Financial Centres?
• To what extent do Offshore Financial Centres investigate businesses and individuals that appear to be evading UK taxation?

Jersey made numerous submissions in support of the its offshore regime, including ones from then Chief Minister, Senator Frank Walker, the Jersey Financial Services Commission and Jersey Finance Limited.

Members of the Select Committee visited Jersey on 7th-8th July, 2008, and at their request will met ministers, representatives of the Jersey Financial Services Commission and representatives of the finance industry.

In March 2008, the House of Commons Treasury Select Committee published a report on Financial Stability and Transparency in which the Committee indicated that it intended to undertake further work into Offshore Financial Centres in the context of their ongoing scrutiny of financial stability and transparency, to seek to ascertain what risk, if any, such entities pose to financial stability in the UK.

The next major development in 2008 was Senator Walker's signing of a Tax Information Exchange and related agreements with Ministers from seven Nordic countries – Denmark, the Faroes, Finland, Greenland, Iceland, Norway and Sweden.

At the signing ceremony Walker said: “Through the signing of TIEAs Jersey obtains both economic and political benefits. Our commitment to the OECD standards of tax information exchange was publicly recognised at a conference held in Paris last week, and we are pleased to see the firm action that is to be taken to put greater pressure on those countries, including some OECD members, who have not yet shared Jersey’s commitment.”

Jeffrey Owens, the Head of the OECD Centre for Tax Policy and Administration, said at the signing ceremony: “We at the OECD recognise the importance of the progress Jersey has made in signing TIEAs, and in receiving clear political endorsement from OECD member countries. To show that the choice Jersey has made is the right one, we recognise the need for firm action to be taken with regard to those jurisdictions that are not showing the same commitment to tax information exchange."

Ten, in November 2008, the European Commission (EC) announced that it had adopted an amending proposal to the savings tax directive that will widen the scope of the legislation "with a view to closing existing loopholes and eliminating tax evasion."

Effective since 2005, the savings tax directive seeks to ensure that paying agents either report interest income received by taxpayers resident in other EU member states or levy a withholding tax on the interest income received. The Commission proposal seeks to tighten the directive, so member states can tax more interest payments channelled through intermediate tax-exempted structures.

The EC proposes to extend the scope of the directive to forms of income obtained through investments in some "innovative financial products" as well as investments in certain life insurances products.

Laszlo Kovacs, Commissioner for Taxation and Customs, said: "The first report on the operation of the savings tax directive concluded that the directive, although effective within the limits of its scope, can be easily circumvented. The current scope of the directive needs to be extended, in order to meet our goal of stamping out tax evasion, which affects the national budgets and creates disadvantages for the honest citizens."

At present, it is relatively easy for individuals to circumvent the rules of the savings directive by using interposed legal persons or arrangements, such as foundations or trusts, which are not taxed on their income – something that the Commission has long acknowledged.

With regard to interest payments made by paying agents (banks, financial institutions, independent professionals, etc.) established in the EU to certain intermediate structures established outside the EU, the Commission proposes that paying agents in the EU apply the provisions of the directive (exchange of information or withholding tax) at the time of the payment to the intermediate structure, as if this payment was directly made to the individual.

Concerning payments of interest to certain intermediate structures established within the EU, including some non-charitable trusts and foundations, those structures will be always obliged to act as a “paying agent upon receipt” under the proposed new regime. This means that the provisions of the directive must be applied by these structures upon receipt of any interest payment, no matter where they are established and regardless of the actual distribution of any sums to the individual beneficial owners. The suggested definition of "paying agent upon receipt" includes all entities and legal arrangements (trusts, foundations etc) which are not taxed on their income under the general rules for direct taxation in their Member State of residence or establishment.

The savings tax directive can also be circumvented by using financial vehicles other than a classical savings account in a bank. To combat this, the Commission proposes extending the scope of the directive to income from securities which are equivalent to debt claims and life insurance contracts whose performance is strictly linked to income from debt claims.

In addition, the Commission proposal seeks to ensure a level playing field between all investment funds or schemes independently of their legal form. This means that income obtained from those investment funds by individuals resident in the EU will be subject to effective taxation.

In November 2008, the United Kingdom Treasury announced yet another review of the British Crown Dependencies. However, Geoff Cook, Chief Executive of Jersey Finance Limited, said at the time that the review should not be treated as a threat, but an opportunity to demonstrate the high standards of regulation currently in place.

Commenting on the review, announced as part of UK Chancellor Alistair Darling's pre-budget report, he said: “this review provides us with an opportunity to again demonstrate the high standards of regulation that are in place in Jersey, together with the actions we have taken to support the drive for greater transparency in global financial services. Our standards of compliance and governance are world class and we have the facts to support this.”

Jersey Finance said a previous review by the Home Office in the late 1990s listed a number of recommendations which have subsequently been implemented. This review described Jersey as being in the top division of offshore centres and proved to be a helpful report in endorsing Jersey’s strengths in the areas of regulation and supervision in the years following its publication.

Jersey Finance said that the UK Treasury recently listed Jersey as a country it considers has regulation and systems to combat money laundering and terrorism financing which were equivalent to EU standards and acknowledged that Jersey and the other Crown Dependencies were fully compliant with international standards.

"Jersey is active in the OECD tax harmonisation programme and is ahead of most other jurisdictions in signing tax information exchange agreements, which are seen by the OECD as effective in fighting international tax fraud and evasion. Jersey has already signed ten with more planned and the Island’s willingness to engage in this process was recognised by the OECD only last month at a conference in Paris," the agency stated.

Cook added: “so whilst we cannot be complacent, the industry believes that with the robust regulatory and supervisory standards we have in place today, we can participate in this review with considerable confidence. Our standards of compliance and governance are world class and we have the facts to support it.”

In January 2009, the States of Jersey ratified an agreement for the exchange of tax information with Germany , a pact which, according to the Jersey government, will "promote mutual respect and co-operation" between the two jurisdictions.

The Tax Information Exchange Agreement (TIEA) was signed in Berlin in July 2007, when the Federal Republic of Germany issued a Political Declaration which welcomed Jersey “as a member of the community of nations committed to international co-operation and information exchange on tax matters” and which expressed the German government’s wish “to assure the government of Jersey that Jersey will be fully and equally treated as such by the German authorities".

The agreement, which has been ratified by the States of Jersey, would officially come into force once Germany has completed its own domestic procedures. The agreement was tought likely to be in force by March or April 2009.

The Chief Minister, Senator Terry Le Sueur, commented: “I am particularly pleased at this public recognition of Jersey’s commitment to international cooperation and information exchange on tax matters; and to complying with international standards of financial regulation, anti-money laundering, and combating the financing of terrorism.”

“Last year the OECD Secretary General referred to the fact that Jersey has signed a number of Tax Information Exchange Agreements, and called for clear political recognition for those offshore financial centres that have made this kind of progress.”

This TIEA is the same as the previous ones signed by Jersey, in providing for the exchange of information only on request, which has to be formulated in writing with the greatest detail possible.

Jersey’s regulatory environment took the limelight at a worldwide gathering of lawmakers in Kuwait in January 2009 where Ed Shorrock of BakerPlatt Group, a guest speaker, addressed its attendees on the subject of Jersey’s successful efforts at tackling money laundering and corruption.

Speaking at the third conference of the Global Organisation of Parliamentarians Against Corruption (GOPAC), Ed Shorrock, Director of Forensic and Regulatory Services at BakerPlatt Group outlined Jersey’s successes in assisting governments from around the world in recovering stolen assets. He said:

“Jersey has over the past few years made tremendous efforts to put in place a comprehensive legislative and regulatory framework which is designed not only to detect money laundering but, equally as importantly, forestall it, including specific measures designed to address Politically Exposed Persons. Not only have these initiatives been backed with legislation but there has also been a political drive and determination to ensure that the legislation is policed and enforced.”

He cited Jersey’s role in recovering the proceeds of General Abacha’s ‘systematic looting of his country’s coffers’ and also its willingness to prosecute those who facilitated these crimes. He added:

“As offshore centres have increasingly come under the spotlight from foreign governments, enforcement agencies and supranational bodies, there is no doubt that Jersey is playing at the top end of the offshore spectrum in the fight against money laundering and international co-operation efforts to recover stolen assets. Those centres that have failed to act positively are likely to be increasingly marginalised and targeted by the larger countries who may perceive them to be the weakest link in the chain, not only in terms of dealing with the proceeds of corruption, but also in fiscal transparency, international regulatory standards and legislative sophistication.”

The States of Jersey discussed the ratification of agreements for the exchange of information relating to tax matters between Jersey and the Nordic countries of Denmark, the Faroes, Finland, Greenland, Iceland, Norway and Sweden on March 24, with a view to bringing the documents into effect.

The documents represented the further fortification of a political commitment made by Jersey in 2002, to support the OECD’s tax initiative on transparency and information exchange through the negotiation of tax information exchange agreements with each of the OECD member states.

A document disclosed by the State of Jersey explained that the move was as part of Jersey’s commitment to building up an improved rapport with OECD members, notably those within the European Union; to gain general support for the island when it is discussed within international fora; to remove key barriers to market access, such as black lists; and lastly to push towards the closure of ‘unco-operative jurisdictions’ who may be gaining an advantage on Jersey from that position.

In recognition of Jersey's compliance Jeffrey Owens, Head of the OECD Centre for Tax Policy and Administration on a separate occasion stated: “We at the OECD recognise the importance of the progress Jersey has made in signing TIEAs, and in receiving clear political endorsement from OECD member countries. To show that the choice Jersey has made is the right one we recognise the need for firm action to be taken with regard to those jurisdictions that are not showing the same commitment to tax information exchange."

The Nordic TIEAs are similar to those signed with the United States of America in 2002, the Netherlands in 2007, and Germany in 2008 and include an agreement for the avoidance of double taxation in many areas.

At about the same time, the Jersey government announced the signing of a Tax Information Exchange Agreement with France.

The document was signed by Jersey Chief Minister, Terry Le Sueur and French Minister for Finance, Cristine Lagarde.

In a statement following the signing, Le Sueur noted:

“These agreements to co-operate over tax matters highlight the mutual respect between jurisdictions. Our continuing programme of signing agreements with jurisdictions across the globe demonstrates our willingness to comply with international standards of financial regulation, anti-money laundering, and combating the financing of terrorism.”

“Last year the OECD Secretary General referred to the fact that Jersey has signed a number of Tax Information Exchange Agreements, and called for clear political recognition for those offshore financial centres that have made this kind of progress. We hope to see this reflected in the outcome of the G20 Summit in London on April 2 and that there will greater pressure put on those countries, including some OECD members, who have not yet shared Jersey’s commitment to transparency and co-operation.”

"Jersey is close to signing a TIEA with Ireland and negotiations are well-advanced with Australia and New Zealand. Discussions are also underway with Spain and Italy and Jersey is more than willing to extend such agreements to all other jurisdictions, including OECD countries, when they are ready to engage," concluded Le Sueur's statement.

Jersey duly signed a TIEA with Ireland on March 26

The TIEA with Ireland will come into force when both parties have completed their domestic procedures. It was expected to enter into effect on April 1, 2010.

Following the much anticipated G-20 Summit in London on April 2, Chief Minister Le Sueur welcomed the news that Jersey’s long-standing commitment to meeting international standards of financial regulation and transparency has been recognised by the OECD, in its Tax Pledge, published following the summit.

Le Sueur said: “The OECD has published its report into the progress made by financial centres towards meeting the internationally agreed standard on exchange of information for tax purposes. This report highlights Jersey as one of the jurisdictions that have substantially implemented the internationally agreed tax standard. In the report, Jersey features on the ‘white list’ alongside jurisdictions like the UK, USA, France and Germany.”

“We have always been confident that Jersey’s position as a well-regulated, international finance centre which meets global standards of financial regulation and tax information exchange would be recognised internationally.”

“We have been working closely with organisations like the OECD, the International Monetary Fund, the Financial Stability Forum and the Financial Action Task Force on these matters for many years and we will continue to work with the international community as the OECD develops frameworks for strengthening governance of the world economy.”

In the aftermath of the London Summit, the States of Jersey released a letter from United Kingdom Prime Minister Gordon Brown which urged the Crown Dependencies to put 'clear water' between themselves and those territories which have done the bare minimum to meet international standards on tax transparency.

While fully supporting the efforts already made by many of the UK's offshore territories in meeting the OECD's target of signing 12 Tax and Information Exchange Agreements, Brown's letter, addressed to Chief Minister Le Sueur, stressed the importance for the Crown Dependencies (Guernsey, Jersey, Isle of Man) - all of which appear on the OECD 'white list' - to "set the pace" in the process.

"Recent developments have underlined the importance of embracing international standards on tax transparency," Brown's letter began. The letter continued:

"I fully support the current initiatives and believe it is strongly in the interests of all jurisdictions - including the Crown Dependencies - to meet these international standards."

"This standard should be seen as an indicator of commitment to the principle of tax transparency. I think it is particularly important that the Crown Dependencies continue to set the pace in this process and put clear water between themselves and those jurisdiction which only just meet the international standard. If genuine progress in agreeing, implementing and abiding by these agreements does not continue to be made I will encourage the G20 to look at the issue again until all abide by the highest standards."

"Similarly, as all international efforts on harmful tax practices start to refocus on the issue of tax avoidance, it will be vital to the interests of the Crown Dependencies that they can readily meet the new international standards which emerge."

Brown concluded that the Foot Review of UK offshore territories, published on April 22, would provide "support for the Crown Dependencies on these matters" over the coming months.

Welcoming the findings of Foot's interim report Le Sueur said: “The report is a very constructive explanation of how Michael Foot’s review will be conducted. It confirms there will be continued collaboration with the UK government at a time of international uncertainty, and makes it clear that the constitutional position of the financial centres is not within its scope.”

In January, 2010, Jersey signed a comprehensive double taxation agreement (DTA) with Malta. The agreement was the first negotiated by Jersey that incorporates the Organization for Economic Cooperation and Development (OECD) model convention on tax information exchange within the text of a double tax convention.

The DTA also represented Jersey’s sixteenth international tax agreement to meet the OECD tax standard on transparency and information exchange.

The agreement was signed at the Malta High Commission in London by Jersey’s Chief Minister, Terry Le Sueur, and the High Commissioner to the United Kingdom, Joseph Zammit Tabona, for the government of Malta.

Le Sueur said: “The signing of the DTA with Malta is a significant step. We are keen to develop our business relationships with the EU and therefore we are delighted that, through the DTA, we will be further strengthening our political and business relationship with a member state.”

“It is also further evidence of Jersey’s firm commitment to the international tax standards of transparency and information exchange, and of its willingness to continue to negotiate international tax agreements.”

Jersey is continuing to negotiate further tax agreements and is also playing an important international role as one of four Vice-Chairs of the Peer Review Group, which was set up by the Global Forum on Transparency and Exchange of Information for Tax Purposes. The group is responsible for monitoring and assessing compliance with international standards.

In an additional statement, Geoff Cook, Chief Executive of Jersey Finance, said: “We support the government’s efforts to sign tax agreements, whether in the form of a Tax Information Exchange Agreement or a Double Taxation Agreement. Both demonstrate Jersey’s commitment to meeting international tax standards of transparency and information exchange and demonstrate Jersey as being a cooperative jurisdiction within the international arena. Additionally, a DTA, which is a standard OECD agreement between countries, is designed to protect against the risk of double taxation where the same income is taxable in two states. These agreements pave the way for gaining greater market access with some EU countries and in other regions.”

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