Elsewhere in this book the Commission's objective has been described as being to provide effective, professional supervision and modern regulation of the finance sector to the highest international standards within a diverse and innovative environment. The last two years have tested the Commission's ability to meet that objective. The future will be equally challenging.
For example, the United Kingdom Home Office review report of financial regulation in the Crown Dependencies made a number of suggestions as to how Guernsey's regulation of financial services businesses could be changed. Many of those changes had been accepted and planned before the review was announced while others have required reflection by the Commission. The last two years have also seen the publication by the Basle Committee on Banking Supervision (the body which sets international standards for banking supervision) of the Core Principles of Effective Banking Supervision and the methodology to those principles. In addition, the International Organization of Securities Commissions (the body responsible for setting international standards for securities regulation) has recently published its Objectives and Principles of Securities Regulation. The International Association of Insurance Supervision (the body which sets international standards for insurance regulation) has also been active in setting new standards.
This activity by the international regulatory bodies has an attendant effect upon the Commission and financial services businesses in the Bailiwick.
One area not yet subject to international standards is the regulation of directors and trust and company administrators. Nevertheless, these persons represent an important part of Guernsey's finance sector and it is appropriate that the fiduciary sector should be regulated to the same high international standards as the banking, insurance and investment sectors. The fiduciary sector comprises over 200 firms administering in excess of £50 billion of assets. Following the issue of a consultation paper in the summer of 1999 the terms of the proposed fiduciary and administration business law will be agreed in 2000. This ground-breaking legislation will present a challenge to the Commission. However, a great deal of thought has been given to the law and its operation and this, together with the recruitment of specialist executives will, I am sure, lead to the fiduciary sector in the Bailiwick continuing to move from strength to strength.
The Commission's role has had to take account of all of these new standards. In the summer of 1998 the Commission had thirty-five staff and it is likely that there will be over fifty staff within a few months. This may not be the end of expansion of staff members as, in order to meet our international obligations, growth appears inevitable.
In the summer of this year Guernsey was subject to a routine evaluation of its anti-money laundering systems by the Financial Action Task Force on Money Laundering (the body which sets the international standards for the prevention, detection and prosecution of money laundering activity). The Commission was heavily involved with this evaluation and it has become apparent that the Commission's functions in this area have become as important as the roles of the judiciary and law enforcement agencies. This new role is most obvious to the outside world through the issue of the Guidance Notes on the Prevention of Money Laundering by the Commission. Indeed, the law requires that the Guidance Notes are issued by the Commission.
It is likely that other areas of economic crime will also fall within the Commission's remit.
Another significant activity for the Commission is its continuing involvement with the international initiatives facing offshore finance centres. There are some ten published initiatives which the Commission is dealing with currently. Broadly, these fall to be considered under four headings, namely whether offshore centres have adequate regulation of financial services business; whether offshore centres have adequate systems for the prevention, detection and prosecution of economic crime; whether offshore centres can adequately co-operate with other jurisdictions on regulatory and economic crime matters; and whether offshore centres are utilising unfair tax competition to the detriment of other centres.
The United Kingdom is reviewing financial regulation in its Offshore Territories in addition to the Crown Dependencies. Included within all of the reviews by the United Kingdom is discussion of the ability of each offshore centre to co-operate with others. In addition, the Financial Action Task Force evaluation is part of a much wider analysis of all jurisdictions which are committed to meeting that organisation's standards. On the tax front the most significant issue is probably the OECD programme following the publication of a paper entitled "Harmful Tax Competition: An Emerging Global Issue." Forty-seven offshore centres have been asked to prepare a number of papers on their systems of taxation and whether they consider themselves to be tax havens. Guernsey believes that it does not meet the criteria for a tax haven but will have to wait for the OECD's conclusions which are expected in the summer of 2000.
Other important initiatives include the establishment of the G7-Financial Stability Forum and a United Nations programme on the prevention of money laundering. One of the Commission's Directors has already met with representatives of the Financial Stability Forum in Basle and will shortly meet with them again in Singapore. I must confess that the Commission has a particular stake in the United Nations programme as I am a member of the Advisory Group to the United Nations Offshore Forum.
The Commission, therefore, is rapidly moving away from simply acting as a regulator of financial services businesses. I and my staff are now devoting, and will continue to devote, increasing amounts of time to the provision of papers to, and meetings with, organisations engaged in the global scrutiny of international finance centres. Often, a review and the work leading up to it is only a small part of the picture. Indeed, one result of the initiatives is the greater involvement by all of the Commission's Divisions with anti-money laundering measures.
Although self-praise is no recommendation, the Commission has responded well to its new roles. I believe this is because the Bailiwick has a good regulatory framework, because we have a good long-standing reputation for co-operation with other regulators, because of the good standard of local institutions and their clients and because we have co-operated with the organisations undertaking the initiatives. All of the Bailiwick authorities have provided the fullest responses possible to the bodies investigating offshore centres. It is clear that a successful future lies in maintaining this approach. Both the United Nations and the Financial Action Task Force are considering the possibility of identifying non-co-operative jurisdictions rather than taking the view that offshore centres are a single category of jurisdictions requiring attention. I believe that is the correct approach and it is one which the Commission is encouraging.
R A L Walker
Guernsey Financial Services Commission