The International Monetary Fund's (IMF) Executive Board reviewed issues surrounding work on offshore financial centers on July 10, 2000, and agreed to publication of staff reports related to those discussions on the IMF's website (http://www.imf.org).
Following the Executive Board's review, Eduardo Aninat, Deputy Managing Director and Acting Chairman, summarized the discussions:
"Executive Directors welcomed this opportunity to consider the issues raised for the work of the IMF by offshore financial centers (OFCs). They noted that this discussion marks the beginning of a process of closer collaboration between the IMF and OFCs—a process that will probably need to evolve gradually in light of the views of the IMF's near-global membership. As experience is gained, it will be important for the Board to revisit the subject of OFCs, with a view to ensuring that the IMF's role in this area evolves further in a manner consistent with its mandate, expertise, and resources.
"Directors underscored that the important role that the IMF will play with OFCs, in close collaboration with other organizations, should be seen in the context of its responsibility to help all members identify and reduce vulnerabilities stemming from weaknesses in their financial systems. They agreed that the Fund should continue to maintain a constructive policy dialogue with all members so as to help foster ownership of the initiatives under way in the area of assessment of OFCs. In this context, Directors welcomed the recent consultative meeting held in the IMF with representatives of onshore and offshore centers. They welcomed this meeting as part of a participatory, consultative process to encourage moves by jurisdictions, members, dependencies and territories of members, and nonmembers to endorse and implement relevant international standards.
"Directors recognized that the provision of properly supervised and well-regulated international financial services in developing countries can contribute to economic growth and diversification in many small economies. They noted that only limited evidence is available thus far on the direct risks posed by offshore financial centers and offshore financial vehicles for the global financial system. However, Directors considered that where standards of financial supervision are inadequate and comprehensive risk analysis is hampered by a lack of reliable data on the activities of OFCs, there can be potential risks for financial stability that the IMF must take into account. A number of Directors encouraged further assessment of the potential systemic risks posed by OFCs.
"Directors broadly supported the plan of action for the assessment of OFCs proposed by staff in Section III B of the paper. They noted that the proposed approach builds further on the work on financial systems being undertaken by the IMF, and welcomed the flexibility of the three modules of assessment. Nearly all Directors considered that launching an outreach exercise at the outset will be helpful in building a cooperative process and ensuring that OFCs have greater ownership in it. Directors considered that self-assessments under Module 1 would generally be an appropriate first step in the assessment process. A variety of views was expressed on whether Module 2 or Module 3, or a combination thereof, would be the more appropriate step for subsequent assessments. We will need to address this question later, in light of the circumstances of individual members.
"Directors considered how assessments of offshore financial centers might best be organized. They emphasized that the assessment process will need to be flexible, depending on the financial services provided in each jurisdiction and on the nature of the risks and vulnerabilities. Directors generally considered that the focus of the IMF's assessment should be on financial supervision, covering not only banking, but also insurance and securities, as appropriate. This assessment will help identify vulnerabilities in the financial system. They also underscored the importance of assessing the robustness of consolidated supervision in relevant onshore centers vis-à-vis activities conducted in offshore centers.
"Directors stressed that effective anti-money laundering measures are important for the integrity of the financial system, as well as for fighting financial crime. They noted that such measures are part of the core supervisory principles covering all financial sectors, and are included in the assessments by the IMF and World Bank staff in joint Financial Sector Assessment Program (FSAP) reports and in Basel Core Principle Assessments. Directors also noted that anti-money laundering measures are being assessed and promoted by the Financial Action Task Force (FATF), whose efforts include law enforcement measures, which would not be appropriate for the Fund to assess. However, a few Directors called for intensified cooperation with the FATF, including in order to explore the possibility of preparing Reports on the Observance of Standards and Codes (ROSC) modules that would also cover money laundering issues. A few Directors also underscored the importance of more effective cross-border collaboration among national supervisors, inter alia, to combat money laundering.
"Statistics relating to offshore centers are currently often inadequate for monitoring and analysis, and Directors agreed that the IMF, in close cooperation with the jurisdictions concerned and with other international fora, should intensify efforts to develop more comprehensive coverage. They also agreed that the Fund should continue to play an active role, working closely with others, in providing technical assistance to those centers that are working to upgrade their supervisory laws, structures, and practices.
"Directors noted that IMF involvement with the financial sector is resource intensive. Directors considered that the pace at which the Fund's involvement with OFCs evolves will depend in part on the willingness of interested parties from standard-setting bodies and national authorities to provide additional resources. As we move beyond the initial phases of the IMF's involvement with OFCs, we will need to come back to the issue of resources, including possible reprioritization.
"Directors have addressed two aspects of the issue of how the results of the OFC assessment by the IMF are to be shared by the international community. First, many Directors expressed concern that some recent public announcements of lists by other fora were not based on well-developed criteria nor took into account all the relevant facts. It is evident that OFCs affected by those lists will probably find it in their interest to make public the assessments made under the IMF's initiative. Second, Directors discussed the general issues of publication. A self-assessment will be the property of the commissioning jurisdiction and its publication a matter for that jurisdiction. Publication of IMF-led assessments, whether a stand-alone assessment or a comprehensive FSAP/Financial System Stability Assessment (FSSA) report, will need to be consistent with the existing practices, particularly regarding voluntary publication of ROSCs and technical assistance reports, and with the decisions to be taken on the publication of FSAP/FSSA documents later this year," Mr. Aninat said.
IMF EXTERNAL RELATIONS DEPARTMENT