Forward Planning: Offshore Alert website will help expose offshore fraud

In many countries, expatriates and citizens alike rely very much on Offshore Financial Centres (OFC) to invest and shelter their money from taxes. Financial centres like the Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Dublin, Guernsey, Hong Kong, Isle of Man, Jersey, Luxembourg, Netherlands Antilles, Singapore, Switzerland and soon Dubai provide a wide range of financial services and great investment opportunities.

To many countries OFCs are another source of revenue very much comparable with tourism. Indeed, they employ many people in their service centres, bring in a steady flow of funds and enhance the local economy. Many benefits have been realised by investors, entrepreneurs and corporations utilising banking facilities and offshore incorporations far away from red tape or government restrictions.

It has given many the possibility of establishing businesses while preserving their ownership and that of their beneficiaries. Offshore finance is defined as the provision of financial services by banks and other agents to non-residents, including bank intermediation of lending or taking deposits from non-residents.

Offshore financial services are also fund management, insurance, trust business, asset protection, corporate and tax planning. Being offshore had a disadvantage, too, because of fraud money, money laundering and scams.

So many people who established trusts or invested through scam artists lost their money and sometimes could not report it because of the fear of getting caught by the tax authority of their own country.

Following the recent financial services regulation reform resulting from the 9/11 events in the U.S., most of these offshore centres are now getting better regulated.

That doesn't mean that fraud money or scams will disappear but it means a definite improvement of the offshore financial services supervision and compliance. The IMF realises the importance of the OFCs and the effect they have on the financial stability of many countries because of the significant financial flow they have captured.

The Fund's Executive Board has extended its financial sector's work to include OFCs and has begun, through a voluntary programme of assessment and technical assistance, to help OFCs strengthen their financial supervision and apply the international rules and arrangements.

The IMF and the World Bank have endorsed internationally recognised standards and codes in areas such as transparency standards, data transparency, fiscal transparency, monetary and financial policy transparency, financial sector standards, banking supervision, securities, insurance, payment systems, anti-money laundering and combating the financing of terrorism, standards concern with market integrity, corporate governance, accounting, auditing and insolvency and creditors' rights.

The IMF staff is assessing which OFCs meet the above mentioned standards and the actions required for others to meet these standards. There have been many risks from offshore operations like the failure of offshore banks and the role played by some banks in the recent financial crises in Asia and Latin America.

The Fund's involvement will definitely bring assurances and integrity to the offshore financial services operation and preserve people's financial interests and rights.

Offshore Alert is a Web site specialised in exposing offshore fraud and financial abuse which has been established by David Merchant, a British journalist who is on a mission to make offshore financial operation a safe place to invest and conduct business. He exposed many wrongdoers detailing their actions through pictures, evidence and court judgements.

In 1993, Merchant's stories of how regulators allowed some of Bermuda's most influential businessmen to strip the Bermuda Fire & Marine Insurance Company of over $40 million of assets before it went belly-up with a net deficiency of over $1.4 billion were quoted in a U.S. Congressional report concerning the lack of regulation in offshore domiciles.

KYC News Inc., the owners of Offshore Alert web site, believe that they exist not only to protect the public from the criminal activities of fraudulent groups but also to expose their business partners.

The writer is a UAE-based insurance consultant and director of Gulf Insurance Consulting