Offshore Financial Centers

By Ferbrache, Mark D. | The FBI Law Enforcement Bulletin, February 2001 | Go to article overview

Offshore Financial Centers


Ferbrache, Mark D., The FBI Law Enforcement Bulletin


Advances in communications technology are making the world a smaller place to do business. A simple mouse click can transfer millions of dollars to the next hemisphere in an instant. As a result, no longer do international borders stand as barriers to criminals who engage in international fraud and money laundering. In fact, they use them to their advantage. To keep tenacious investigators at bay, fraudsters execute their scams in multiple foreign jurisdictions simply to exploit the difficulties that local law enforcement officers often encounter when dealing with other countries.

The Channel Islands and the Isle of Man

Because fraud investigations progress by tracking the money involved, the trail frequently leads to, or passes through, a foreign country. Therefore, the global law enforcement community must respond to the technological advances used by criminals engaged in these activities by actively developing greater cooperation among foreign authorities. This requires the establishment of effective gateways for the timely exchange of information and delivery of assistance.

THE CHANNEL ISLANDS AND THE ISLE OF MAN CONNECTION

Most experienced fraud investigators view the Channel Islands and the Isle of Man [1] as loosely regulated tax havens immune to inquiries from foreign authorities, which make the Islands the choice of criminals to launder their illegal gains. However, two recent reviews of the Islands' financial and legal sectors provide evidence to the contrary. The consensus of these reviews found that the Islands have a well-regulated financial industry, money laundering legislation in place, and a demonstrated willingness to cooperate with and provide assistance to foreign authorities. [2]

In the last 15 to 20 years, the Islands have blossomed as offshore financial centers due, in part, to their proximity to the United Kingdom, low taxes, and overall economic and political stability. What is an "offshore" financial center? Simply, it is any financial center that provides financial services for a substantial number of nonresidents.

Geographic and Historical Aspects

Where are the relatively obscure Channel Islands and their even lesser-known cousin to the north, the Isle of Man? The Channel Islands comprise the islands of Jersey and Guernsey, well known for their two unique breeds of cattle, which bear the islands' names, their fine agriculture and horticulture produce, and beautiful scenery. Located in the English Channel, the Islands lie approximately 13 miles from the northern coast of France and about 85 miles from the southern coast of Great Britain.

The Bailiwick of Jersey comprises the island of Jersey and a few uninhabited islands and covers approximately 45 square miles in surface area, with a resident population of approximately 85,000. The Bailiwick of Guernsey includes the two smaller islands of Alderney and Sark. Guernsey has a surface area of just over 25 square miles, Alderney approximately 3 square miles, and Sark slightly more than 2 square miles. The entire Bailiwick of Guernsey has a resident population of approximately 62,000.

The Isle of Man is centrally located in the Irish Sea between Northern Ireland and Great Britain. The topography ranges from vast stretches of open moorland to thickly wooded glens. A central range of mountains traverses the island from the northeast to the southwest, together with valleys leading to rocky cliffs and secluded bays. The island measures 33 miles running north to south and 13 miles from east to west for a total surface area of 227 square miles, making it 5 times larger than Jersey and 9 times the size of Guernsey. The island's resident population stands at approximately 73,000.

Local history of the Channel Islands is steeped in the memory of invasions and attempted conquests. Along the coast, gray concrete World War II bunkers and fortifications contrast with old castle turrets and towers remaining from the Napoleonic wars and medieval times. …

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