Activities of OGBS

Activities of the Group

The Group holds a Plenary meeting each year, and a second technical meeting is also held on an annual basis. The last Plenary meeting was held in Macao China in October 2007, and the last technical meeting was held at the offices of the UK Financial Services Authority in March 2008. The next Plenary meeting of the Group will be held at the time of the International Conference of Banking Supervisors which is to be held in Belgium in September 2008. The Plenary meeting in 2009 is due to be held in Jersey in September of that year.

Basel Committee on Banking Supervision

The Group has worked closely with the Basel Committee since the Group was formed at the instigation of that Committee in 1980.

Together the Basel Committee and the Group produced a paper entitled “The Implementation of the Basel Concordat: Practical aspects of International Collaboration between Banking Supervisory Authorities” circulated to supervisors world-wide in 1987. The Group collaborated with the Basel Committee in reviewing the 1987 paper and re-issuing its proposals in 1990 as a supplement to the 1983 Concordat. The Group then joined with the Basel Committee as a Working Group on Cross Border Banking which produced a report on the Supervision of Cross-Border Banking. This Working Group has now been subsumed into the Basel Committee’s International Liaison Group and its Sub-Group the AML/CFT Expert Group, on which latter group the OGBS is represented by the Chairman.

The report on the Supervision of Cross-Border Banking produced by the Cross-Border Banking Working Group, and published by the Basel Committee in 1996, 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. In this report, which members of the Offshore Group endorsed, the view is 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, members of the Offshore Group accept 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.

In May 2001 the Basel Committee issued a paper entitled “Essential elements of a statement of co-operation between banking supervisors” prepared by the Cross-Border Banking Working Group. The Cross-Border Banking Working Group also produced a paper on Customer Due Diligence for Banks which the Basel Committee issued in October 2001. This paper reinforced 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. The Working Group also produced subsequently, as an annex to the customer due diligence paper, a general guide to account opening and customer identification, issued by the Committee in February 2003. Other reports produced by the Joint Working Group included “Shell banks and booking offices” (January 2003); Parallel-owned banking structures” (January 2003) and “Consolidated KYC Risk Management” (October 2004).

The reports produced by the Cross-Border Banking Working Group are available, together with other Basel Committee documents, on the Basel Committee website (www.bis.org ).

The OGBS is also currently represented on the Basel Committee’s Cross-Border Banking Resolution Group which is comparing the national policies, legal frameworks and the allocation of responsibilities for the resolution of banks with significant cross-border operations.

Financial Action Task Force on Money Laundering and Terrorist Financing

The OGBS is represented by the Chairman at meetings of the Financial Action Task Force on Money Laundering and Terrorist Financing. The Group is an observer organisation and is afforded status equivalent to that of the FATF Style Regional Bodies (FSRB). The Group participated in the review by the Task Force of its 40 Recommendations on Money Laundering which review was completed in 2003.

The members of the Group have endorsed their commitment to the FATF 40 Recommendations on Money Laundering and the 9 Special Recommendations on Terrorist Financing.

The Group is committed to the regular assessment/evaluation of members for AML/CFT. Within OGBS member jurisdictions there are a number of persons who have been trained as assessors for mutual evaluations. While OGBS has undertaken its own AML/CFT assessments, it is more usual for members’ compliance with the FATF 40+9 Recommendations to be assessed by the IMF under its OFC assessment programme, or through a joint OGBS/FSRB assessment where there is common membership. The IMF OFC assessment programme also includes assessment of compliance with the international standards set by the Basel Committee on Banking Supervision, the International Organisation of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).

OGBS assessors have been called upon by the IMF and by the FSRBs, particularly where offshore activities are significant where the OGBS assessors have relevant experience/expertise. This is particularly so in respect of the designated non-financial businesses and professions, and trust and company service providers in particular.

Of the members of the OGBS eight are covered by the Caribbean Financial Task Force mutual evaluation programme (Aruba, Bahamas, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Netherlands Antilles and Panama); four are covered by the Asia Pacific Group on Money Laundering (Labuan (Malaysia), Macau China, Samoa and Vanuatu); one is covered by the Eastern and South African Anti-Money Laundering Group. All of the members of the Group are covered by the IMF/OFC assessment programme.

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 covering both prudential regulation and AML/CFT. Accordingly, the Offshore Group is seen as a convenient vehicle for the Financial Action Task Force (and other international bodies) to use in communicating with offshore centres.

OGBS members are committed to publishing their assessment reports in full. These reports appear on the websites of the IMF, or the relevant FSRB with whom OGBS has joined in undertaking an assessment of a member jurisdiction. All the reports are also available on the OGBS website. A comparison of the results of OFC assessments (including a number of OGBS members) with those for FATF member countries assessed for compliance with the current FATF 40+9 Recommendations is attached .

The Offshore Group is participating in the work of the FATF on extending the risk based approach to AML/CFT to designated non-financial businesses and professions, contributing in particular to the approach for trust and company service providers.

Trust and Company Service Providers

The OGBS issued in 2002 a Best Practice Statement in respect of trust and company service providers. This was produced by an ad-hoc group set up by OGBS on which sat representatives from the FATF, the OECD, the IMF and France, Italy, the Netherlands and the UK. It is intended that this group be reconstituted both to review the need to update the Best Practice Statement and to consider what steps can be taken to turn this statement into an international standard.

Allied to the work on the Best Practice Statement on trust and company service providers the Offshore Group encouraged the FATF to undertake work on the misuse of corporate vehicles. The Chairman of the Group led an FATF typologies project on the misuse of corporate vehicles, the report on which was published in October 2006. That report identified a number of next steps which it was recommended the FATF should take, which included what more can be done to ensure that adequate, accurate and timely information on the beneficial ownership and control of legal persons/legal arrangements may be obtained or accessed in a timely fashion by competent authorities.

Other Matters

The Offshore Group participated in the IMF Fifth Round Table for Offshore and Onshore Supervisors and Standard Setters held in Basel in January 2008 which focussed on transparency issues. The presentation made to the Round Table, which was organised by the IMF, is attached.

In June 2008 the Offshore Group made a submission to the UK House of Commons Treasury Select Committee in response to that Committee’s announcement that it was to study the role of offshore financial centres for financial stability and transparency. The submission is attached. In summary the overall message that the summary sought to convey is that in relation to financial stability and transparency, both to the extent of the existing commitment and the need for further action, offshore financial centres ought not to be separately distinguished but should be considered with jurisdictions generally. This is because financial stability issues are global in nature and call for a global response.

The OGBS is keen to maintain relationships with international organisations and representatives of relevant organisations are invited to attend OGBS meetings as observers. These include, representatives of the IMF, the FATF, the Basel Committee on Banking Supervision the Egmont Group, the United Kingdom Financial Services Authority and representatives from the FSRBs.

The Offshore Group is invited to attend meetings organised by the UN Commission on Crime Prevention and Criminal Justice. In August 2007 OGBS was represented at the UN Intergovernmental Working Group on Asset Recovery.
OGBS is an observer to the Financial Stability Forum OFC Review Group. In 2007 the OGBS expressed the view that the Financial Stability Forum can and should now leave the monitoring of compliance with the international standards of financial regulation and AML/CFT to the international standards setters. It was also suggested that the Forum, with its concern for global financial stability, should receive reports from the international standard setters not on the basis of an OFC/non-OFC distinction but according to which jurisdictions are failing to comply with the international standards, their significance for world financial markets and the collective action that might need to be taken to bring those jurisdictions into compliance.

The Offshore Group supports the principle of inclusivity as far as membership of the Group is concerned. Membership is based on a clear political commitment to comply with the international standards of financial regulation and AML/CFT, and on the legislation and administration to put this commitment into effect being either in place or in early prospect. In 2007 the Group accepted into membership the British Virgin Islands and Samoa. Some of the original members of the Offshore Group have withdrawn from membership over the past two years mainly because they are part of other groups such as the Asia Pacific Group on AML and regional groups for financial regulation – the members that have withdrawn in this respect are Bahrain, Cyprus, Gibraltar, Hong Kong China and Singapore. The Offshore Group would welcome approaches from other jurisdictions who believe they have interests in common with the other members of the Group and are able to comply with the Group’s conditions of membership.

20 May 2008