Activities of OGBS

Activities of the Group

In 1996 the Offshore Group joined with the Basel Committee on Banking Supervision as co-chairs in the formation of a Working Group on Cross-Border Banking with the task of preparing a report on the supervision of cross-border banking. The report produced by the Working Group presented a number of proposals for overcoming the impediments experienced by banking supervisors in conducting effective supervision of the cross-border operations of international banks. The recommendations in this report, which was endorsed by banking supervisors from 140 countries at the June 1996 International Conference of Banking Supervisors in Stockholm, are concerned to ensure (among other things) the necessary exchange of information between supervisors to ensure safety and soundness in the international banking system.

In this report, which the members of the Offshore Group have endorsed, the view is also expressed that supervisory authorities in all countries need to ensure that their banks remain vigilant for evidence that a serious crime has been committed, such as terrorism, theft, kidnapping, drug trafficking, extortion, money laundering, or fraud and that all supervisors should be required to report such evidence acquired in the course of their supervisory activities to the appropriate authorities. While recognising that there are legitimate reasons for protecting customer confidentiality, it is accepted by members of the Group that secrecy laws should not impede the ability of supervisors to ensure safety and soundness in the international banking system by preventing the sharing of relevant information with other relevant authorities.

Through the Working Group on Cross-Border Banking the Offshore Group also joined with the Basel Committee on Banking Supervision in preparing a paper on Customer Due Diligence for Banks, which the Basel Committee issued in October, 2001. This paper reinforces the principles established in earlier Basel Committee papers by providing more precise guidance on the essential elements of "know your customer" standards and their implementation. Offshore Group members are fully committed to the "know your customer" standards contained in the paper. The Working Group also has produced as an annex to the Customer Due Diligence paper a General Guide to Account Opening and Customer Identification.

The paper and annex are available, together with other Basel Committee documents, on the Basel website (www.bis.org)

The Offshore Group attends meetings of the Financial Action Task Force on money laundering as an observer organisation and is afforded equivalent status to that of the FATF style regional bodies. The Offshore Group has actively participated in the current review by the Task Force of its Forty Recommendations.

The Offshore Group usually meets once a year. The next annual meeting of the Offshore Group will be held in July 2003 in Mauritius.

A special meeting of the Offshore Group was held in London in November, 2001. At that meeting members endorsed the action taken by the Financial Action Task Force at its meeting in Washington on the 29lh/30th October to adopt a set of special recommendations on terrorism financing and to agree a comprehensive plan of action to ensure the swift and effective implementation of the new standards. Members welcomed the global approach being proposed by the FATF in which members intend to play a full and active part. Offshore Group members either have already taken, or have indicated their firm intention to take, necessary further action to detect and deter any misuse of the financial institutions in their jurisdictions in the financing of terrorism and to support and contribute to the international effort through full, prompt and effective cooperation with other authorities.

The Offshore Group in 2002 established a Working Group on the Setting of International Standards for the Regulation of Trust and Company Service Providers in which a number of G10 countries, together with the OECD, the IMF and the FATF, accepted an invitation to participate. The first meeting of the Working Group took place in London on the 9l January, 2002. The terms of reference of the Working Group are -

"To produce a recommended statement of minimum/guidelines for trust and company service providers; and to consider and make recommendations to the Offshore Group of Banking Supervisors for onward transmission to all relevant international organisations/authorities on how best to ensure the recommended minimum standards/guidelines are adopted as international standards and implemented on a global basis."

The Working Group in September 2002 issued a Statement of Best Practice which has been welcomed by relevant international bodies such as the Financial Stability Forum and the IMF.

Other Matters

While the Offshore Group is a body of banking supervisors, most if not all of those attending meetings of the Group have a wider role embracing the
regulation of financial institutions generally. Accordingly, the Offshore Group is a convenient vehicle for the Financial Action Task Force to use in communicating with offshore centres. It is also in a good position to promote compliance with the Financial Action Task Force's forty recommendations.

In 1997, the Offshore Group agreed with the Financial Action Task Force a procedure for assessing the performance of members of the Offshore Group in the implementation of anti-money laundering measures. Of the members of the Group, three are covered by the FATF mutual evaluation programme (Bahrain, Hong Kong and Singapore); one is covered by the Council of Europe mutual evaluation programme with OGBS participation (Cyprus); seven are covered by the Caribbean Financial Action Task Force mutual evaluation programme (Aruba, Bahamas, Barbados, Bermuda, Cayman Islands, Netherlands Antilles and Panama); five are evaluated in accordance with the specific procedure agreed between the OGBS and FATF ( Gibraltar, Guernsey, Isle of Man, Jersey, and Mauritius); and three are evaluated jointly by the Asia Pacific Group on money laundering with OGBS participation (Labuan, Macau China, and Vanuatu).

Assisted by the relative smallness of their communities, those engaged in the regulation of financial institutions in the jurisdictions making up the Group have a working relationship with other enforcement agencies in their jurisdiction, in the pursuit of those engaged in criminal activities, that can be and often is much closer than in larger communities. The experience of many members of the Offshore Group also offers strong support for the argument that the pursuit of a policy of compliance with international standards, whether it be in the sphere of financial regulation or combating money laundering, can be consistent with success as an offshore international finance centre.

Reflecting a general commitment to international standards of financial regulation and anti-money laundering measures, the Offshore Group has actively involved itself in a number of international initiatives concerned with offshore centres. However while willingly participating in such initiatives as the FATF identification of non-co-operating countries and territories, the United Nations Offshore Forum (now embraced by the UN Global Programme on Money Laundering) and the G7 Financial Stability Forum, when invited to do so, the Offshore Group has sought to ensure a proper emphasis on distinguishing between those financial centres that comply or do not comply with agreed international standards and not simply between so-called offshore and onshore international finance centres.

Future Work Programme

The Offshore Group's future work programme is to -

engage in a further round of FATF type mutual evaluations;
continue to actively participate in the review of the FATF Forty Recommendations;
continue to actively promote compliance with the FATF Forty Recommendations on money laundering and the eight Special Recommendations on terrorist financing;
support the programme of assessment of financial regulation and anti-money laundering measures undertaken by the International Monetary Fund;
encourage other offshore financial centres to raise standards so that they can meet the Offshore Group membership conditions;
encourage member jurisdictions to participate in training programmes in improving financial regulatory and anti-money laundering practices organised by the BIS Financial Stability Institute and other relevant international, regional and national organisations;
continue to participate in the work of the joint Basel Committee/Offshore Group Cross-Border Banking Working Group;
continue to actively promote compliance with the Basel Committee's Core Principles;
actively support the development of international standards and best practice guidance in fighting corruption, including being represented at the meetings of the Ad Hoc Committee on the Negotiation of the UN Convention Against Corruption;
continue to work with all relevant organisations in the setting of standards, and monitoring compliance, on all matters of financial regulation and anti-money laundering.