Moving Goal Posts on the Level Playing Field

While international standards for best practice in anti-money laundering were first advocated by the Financial Action Task Force in 1990, and radically overhauled in 2003, many countries still lag behind these standards. The Nine Special Recommendations on Terrorist Financing appeared in their current format in 2004. Ironically it’s the founder member countries that fail to comply with many of these requirements.

For example Japan has a 46% compliance rating with the 40+9 Recommendations according to KYC360 Factbook, and the UK stands at 72% with the US weighing in at 70%. Compare this to offshore jurisdictions, the currently demonised ‘tax havens’ like Jersey have a shining 94% and Guernsey 95%. Since initial poor reports from the FATF or FSRB (FATF Style Regional Body) many territories have gone a long way in changing their regulatory environment.

For all their hard work in improving regulatory standards offshore territories have proven to be politically expedient scapegoats for the financial crisis while countries scrabble to find lost revenue. The G20 list of jurisdictions committed to implementing internationally agreed tax standards may spur on further action for change; with the removal of all countries from the actual 'blacklist' grey list countries could be seen as the new black.

A flurry of tax information exchange agreements have been made in the wake of the grey list; and is reminiscent of the effect of NCCT (non-compliant country or territory) branding by the FATF that motivated countries that dragged their heels in the past. More flights and phone calls have been made in a truly ground-breaking international effort.

“Tax havens” have come a long way since the first round of mutual evaluations by the FATF. Many have radically reformed their regulatory environments and with the push for tax transparency these jurisdictions look more like safe havens with tighter regulation and oversight than ever before rapidly making their ubiquitous tax haven tag a thing of the past.

Further Information

• FATF: http://www.fatf-gafi.org 
• FATF compliance ratings from KYC360 Factbook: http://www.kyc360/factbook
• OECD Report on Jurisdictions surveyed in Implementing the International Agreed Tax Standards http://www.oecd.org/dataoecd/50/0/42704399.pdf

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