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House of Lords Hansard
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British Overseas Territories: Money-Laundering Controls
21 July 2008
Volume 703

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My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest, as a member of my family works in the Cayman Islands.

The Question was as follows:

To ask Her Majesty’s Government what action they are taking to ensure that British Overseas Territories, particularly the Cayman Islands, are included in the white list of financial centres with top-quality anti-money-laundering controls.

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My Lords, the recently published European Union list of equivalent third countries represents the common understanding of member states and will be subject to periodic review. The Treasury intends shortly to write to all UK overseas territories with financial centres, outlining a process by which they may be considered equivalent by the UK. In due course, if merited, the UK is prepared to propose overseas territories for inclusion in the EU list of equivalent third countries.

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My Lords, I am grateful to the Minister for that Answer, but is he aware that the Cayman Islands Government take the issues of anti-money-laundering and counter-terrorist financing very seriously indeed? After all, they comply fully with the Caribbean Financial Action Task Force and, perhaps even more importantly, were rated in the top five in the review of February this year, alongside the UK, Singapore and Belgium. Is it not disappointing to discover that Her Majesty's Treasury seems to have looked after the dependent territories but somehow to have left out the overseas territories? Will the Government now actively and urgently support the inclusion of the Cayman Islands in the white list; and, if not, explain why?

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My Lords, the negotiations that led to the directive were difficult. It is not easy for the United Kingdom to reach all our desired objectives. The noble Lord was kind enough to recognise that we did manage to get the dependencies within the framework. We have more trouble with the overseas territories, because Europeans have some suspicions about the problems of tax havens. It is therefore a difficult negotiation. We recognise that the Cayman Islands look as if they meet the criteria. We are applying tests to establish that that is indeed the case; if they meet the criteria, we will pursue that interest.

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My Lords, does the Minister recognise that those of us who have read the National Audit Office report of last November on risk in the overseas territories and the recent report by the Foreign Affairs Committee in the other place think that there are some real concerns about the development of financial services in the overseas territories—in particular, in the smaller overseas territories? Some of us have received letters this morning from the London representative of the Turks and Caicos Islands about the recently announced inquiry into financial management in the Turks and Caicos.

Does the Minister recall that on 5 March, at the end of a short debate on the overseas territories, his colleague, the noble Lord, Lord Bach, said, referring to the overseas territories,

“we are taking forward the NAO’s recommendation that we should develop a financial services strategy”.—[Official Report, 5/3/08; col. 1163.]

How much progress has been made? Have the Government taken it a little further forward since then?

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My Lords, as I indicated in my original Answer, we intend to take this forward. We are applying to the overseas territories the tests that they will need to meet so that we can support them as far as the European directive is concerned. Obviously, on the issues under negotiation with the European Community, there are difficulties with the overseas territories. They are not uniform and do not fit into a pattern of which Europe as a whole is cognisant. Consequently, we have to work hard on their behalf. We have indicated that we are undertaking that work.

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My Lords, I declare an interest as chairman of the All-Party Group on the Cayman Islands. Is my noble friend aware that the Cayman Islands have observed the European directive on personal accounts held on the islands? Is he further aware that their financial regulation is superior to that of the United States of America?

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My Lords, I am not going to be drawn on the last point. However, the Cayman Islands, as all noble Lords who have contributed this afternoon have attested, are disappointed that they are not within the framework of the European directive because they appear to meet these criteria. We have undertaken to pursue their interests once we can establish categorically that they meet the criteria. The House will recognise that the Government have not had an easy task in these negotiations. In circumstances in which we stand to gain from the acceptance of the financial directive across all 27 European states, it has not been easy for us to deal with the dependencies and the overseas territories. We have already made considerable progress.

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My Lords—

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My Lords, does the noble Lord not agree that if French and Dutch dependencies are included on the white list, it is quite wrong that the Cayman Islands should be excluded?

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My Lords, that is a point, but the French and Dutch dependencies have a rather different constitutional relationship with their mother countries. It will be recognised that the French constitution provides for direct representation of the overseas territories in the French Assembly. Therefore the Government can speak directly on their behalf as full representatives of them. The British constitutional position, as we all know, is somewhat different for historical reasons. That is why Europe is not entirely prepared to accept just our tokens of good will on this matter. We have to substantiate the case.