11th September and revelations from the Enron collapse add to the mounting pressure on offshore financial centres

Published date01 December 2002
Pages341-354
DOIhttps://doi.org/10.1108/13581980210810328
Date01 December 2002
AuthorJackie Johnson
Subject MatterAccounting & finance
11th September and revelations from the
Enron collapse add to the mounting
pressure on offshore financial centres
Jackie Johnson
Received: 1st May, 2002
UWA Business School, The University of Western Australia, 35 Stirling Highway, Crawley, WA 6009,
Australia; tel: +61 8 9380 2444; fax: +61 8 9380 1047; e-mail: Jackie.Johnson@uwa.edu.au
Dr Jackie Johnson is a senior lecturer in the
UWA Business School at the University of
Western Australia. She teaches in the area
of financial institution regulation and control
and has for a number of years had a keen
interest in financial regulation, compliance
issues and initiatives designed to counter
the growing threat of money laundering.
ABSTRACT
Offshore financial centres (OFCs) have again
come under the spotlight. They have been
accused of aiding terrorists by laundering their
financial resources, allowing the funding of ter-
rorism to go undetected. Their role as tax
havens have also been highlighted in the col-
lapse of Enron, a company that used OFCs to
avoid paying millions of dollars in US tax. In
response many OFCs have agreed to freeze ter-
rorists’ assets, tighten money laundering legisla-
tion, provide a more open tax system and share
information. There are, however, some OFCs
that are resisting the mounting pressure to con-
form to international standards. These will
become targets once more in June, 2002, when
the Financial Action Task Force starts the pro-
cess of identifying jurisdictions that ‘lack appro-
priate measures to combat terrorist financing’.
INTRODUCTION
As a result of the 11th September, 2001 ter-
rorist attacks, offshore financial centres
(OFCs) have again come under the spot-
light They have been accused of aiding ter-
rorists by laundering their financial
resources, allowing the funding of terror-
ism to go undetected. Close examination
of the operations of OFCs is not new, the
International Monetary Fund (IMF) lists
three ongoing and 15 recent policy initia-
tives involving offshore issues.
1
OFC activities were made public:
in April, 2000 by the Financial Stability
Forum (FSF) in their assessment of
OFC’s financial supervision and regula-
tion
— in the OECD’s reports on ‘tax havens’
in June, 2000 and April, 2002
— in the Financial Action Task Force
(FATF) money laundering ‘blacklists’
of June, 2000 and 2001.
OFCs are again facing criticism of the way
they run their financial services sector and
the need for legislative reform in this area.
This is not without objection from a
number of OFCs who view their anti-
money laundering regulations to be more
stringent than many onshore centres and
their taxation policies as their own concern.
Given the severity of the 11th September
attacks, the resulting global condemnation
of terrorism and its financing, Enron’s use
Page 341
Journal of Financial Regulation and Compliance Volume 10 Number 4
Journal of Financial Regulation
and Compliance, Vol. 10, No. 4,
2002, pp. 341–354
#Henry Stewart Publications,
1358–1988

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