His Excellency William A. Harrison
Governor of Anguilla
Government House
Old Ta
Anguilla

Dear Sir,

Response of the private sector representatives of Anguilla’s financial services industry to the ‘Foot Report’

1. The leading private sector representatives of the financial services industry in the form of the officers of the Anguilla Branch of the Society of Trust and Estate Practitioners (STEP), the leading worldwide professional body for practitioners in the fields of trusts, estates and related issues, and the Anguilla Financial Services Association (AFSA), having long recognized their mutual interests were to an extent interwoven, recently convened a joint meeting to discuss the Report of the Independent Review of the British Offshore Financial Service Centres, also known as the “Foot Report.”

2. The Foot Report (also referred to herein as “the Report”) speaks to the very existence of Anguilla’s financial services industry, which at present cannot be taken for granted and therefore needs to be helped. The Report says in part:

1.63 Increasing the quantum and expertise of resources available to the Financial Services Commissions in Anguilla and the Turks and Caicos Islands to bring them up to international standards may take longer. These jurisdictions must, however, explain how and when they will provide these resources. Delivering these commitments is a necessary condition if these jurisdictions wish to continue to offer themselves as international financial services centres.

1.65 Anguilla, the British Virgin Islands (BVI) and the Turks and Caicos Islands recognise that the technical and human resources to fight financial crime also need to be boosted.

3. The above comments gave rise to some concern in the industry, which is responsible for employing many Anguillians in jobs which require a high level of training and proficiency and where the wages and salaries reflect those levels of expertise. In the circumstances the private sector noted several points (in the following paragraphs) which should be considered when reviewing the Foot Report.

4. A report by James R. Hines Jr. of the University of Michigan shows how Professor Jason Sharman of Griffith University in Queensland, Australia was unable to establish anonymous corporations using corporate service providers located in commonly identified IFCs, including: the Bahamas, the British Virgin Islands, the Cayman Islands, Dominica, Nauru, Panama, and the Seychelles. By contrast, corporate service providers in OECD countries, including the United States, the United Kingdom, Spain and Canada, proved most helpful to his enterprise.

5. A major concern raised was that the Foot Report is influenced by the representations of non-governmental organisations (NGOs) which are known to have a particular view against the offshore financial services industry. The private sector is therefore concerned that the Report is unbalanced, seemingly biased and paints a needlessly unfavourable position of Anguilla's overall financial situation without focusing on the proper context of Anguilla's situation. NGOs such as Transparency International and Oxfam hold stated positions which are often anti-offshore and whose claims have been challenged over the years given their known anti-offshore agenda.

6. Mr. Foot repeatedly refers to the issue of transparency and although he comments in the latter part of the Report about the uniquely opaque nature of Delaware entities, he fails to note or reference the broader context of regulation in the offshore jurisdictions when compared with onshore jurisdictions.

7. The Report’s constant reference to international standards are undermined by the fact that the same standards which are being imposed by unelected governmental bodies and institutions, unaccountable to anyone, are not applied in the "onshore" world. Mr. Foot’s pronouncements are further undermined by his failure to note the greater scrutiny placed on service providers in the offshore jurisdictions when compared to their onshore counterparts.
8. We also take issue with the Report's comments on the public finances of Anguilla and its alarmist tone which is used as a means to stoke the flames of increasing taxes and destroying Anguilla's competitive advantage on the issue of taxation. The Report gives the impression that the situation in Anguilla is unique and a consequence of peculiar circumstances without noting that the public finances in the more developed countries are in worse shape and their policy options are even more limited.

9 The references to the Deloitte Report are unseemly and we reject attempts to apply, and pressure Anguilla to adopt tax policies which are considered to be international norms of taxation. There have never been international norms. There is a considerable history of tax competition amongst various jurisdictions of the Euro-American sphere.

10. Each jurisdiction should be allowed therefore to adopt its own taxation policies which reflect the norms, cultural and social values and economic goals of that jurisdiction. We see no merit in discussing the view of the Deloitte Report, included as an annex to the Foot Report when issues of taxation in Anguilla are to be decided by the Anguillian people solely without the imposed input of others.

11.We are concerned that there is increasing control being exercised by the UK Government bordering on micromanagement for unknown and inexplicable reasons. The Foot Report should not be taken in isolation and outside of the correct context which is one of increasing hostility towards the concept of taxation differentials. We reject this dialogue of tax harmonisation through the guise of transparency and international standards which are being imposed by countries which do not adhere to the concept of tax competition.

12.We also take issue with specific comments in the Report regarding staffing of the Financial Services Commission (FSC), the number of suspicious transactions and other resource based comments which give the impression that there is an ideal number for each of these without allowing for variations of focus, need and strategy.

13. The Foot Report states that although it shares NGOs concerns about the extent to which international standards still permit a lack of transparency in the ownership of corporate vehicles in the jurisdictions, it notes that such transparency issues also arise in most major jurisdictions.

14.Noting that transparency issues arise in most major jurisdictions, the Foot Report states that, although attractive in principle, action by the UK and the nine jurisdictions ahead of changes to international standards would likely result in a loss of business to other jurisdictions due to regulatory arbitrage rather than a resolution of the underlying concerns.

15. We welcome the Report's conclusion that the UK should take the lead internationally in encouraging improvements to:

• ‘know your customer’ international minimum standards (particularly in respect of the role of ‘eligible introducers’);
• the monitoring of ‘politically exposed persons’ (PEPs); and
• the transparency of beneficial ownership of companies and trusts.
16. However, by the same logic, we question whether the UK Government is right to reserve to itself the role of “World Policeman” on this matter. We believe that in the interests of transparency and justice, the proper forum which can and should make a binding resolution on such matters is the United Nations and that it, in turn, should insist on equivalent standards being applied to all jurisdictions, starting with the largest ones - the United States (including Delaware and Nevada) and the People's Republic of China (including Hong Kong and Macau SARs) with these standards being applied to smaller jurisdictions as a lesser priority - and that service providers in all such jurisdictions should be regulated effectively, in deed and in word, by a body equivalent to Anguilla’s FSC, which includes being subject to rigorous onsite inspections.

17. On the important issue which the Foot Report raises about the staffing of the FSC and the Financial Intelligence Unit (FIU), the private sector agrees that if the FSC feels it is understaffed and under-resourced, this is purely an internal matter. The FSC certainly has the financial muscle to bolster its staff and resources. However, the private sector concluded that the statistics relative to the Anguilla part of the Report were flawed and misleading, and therefore the Report as a whole and its recommendations for Anguilla are equally flawed.

18. A keystone in the evaluation of Anguilla was the number of employees of the FSC. The Report says there were 7 in 2008; there are 8 at the time of writing. The Report at paragraph 5.14 says that anything less than 10 is below a ‘critical mass’ that can be effective although it gives no objective evidence to support this statement. In any event, it is noted that when counting the number of personnel at FSCs in other territories – the BVI is a good example – it also includes the number at the Companies Registry. The staffing of the Anguilla Registry is 6 and so, taking the FSC and the Registry numbers together in order to make us comparable with other jurisdictions, the number of personnel totals 14, a number which is above the critical mass. As mentioned before, if the FSC and FIU are overworked, we support their call for more staffing; if we react in a knee-jerk manner to what one participant referred to as the Report’s “Lies, Damn Lies and Statistics”, our position would clearly not be carefully considered.

19. In responding to questions on the above point at the recent Financial Services Industry meeting, Your Excellency agreed that a knee-jerk response was not appropriate but that the FSC should be allowed to grow organically to meet its operational needs. The private sector agrees with this pragmatic approach.

20. Another concern raised by the private sector at its meeting was the tendency for certain people to generate sensational headlines. It was reported a few months ago, around the time of the arrival of Your Excellency, and subsequently repeated by others in positions of influence and authority, that there was a massive scam involving hundreds of millions of dollars relating to Anguillian banks and/or service providers. Since then we have heard nothing but damage has already been done to the industry and its reputation. We call on those at the FIU and persons in positions of responsibility to refrain from making such sensational claims. We urge that extreme caution is taken before claims such as these are publicly heralded as they can cause irreparable damage to the jurisdiction.

21. On the subject of the role of Governors and their predecessors, there seems to be a tendency to assume that the sole function is to represent in Anguilla the interests of Her Majesty’s government. However, annex C10 of the Foot Report says that part of the Governor’s job is to not only represent Her Majesty in Anguilla, but also to represent Anguilla’s interests to Whitehall. Part of Anguilla’s interests will be the private sector’s Response to the Foot Report. Thus far, it seems to the private sector that the way it works is that the multinational bodies pass their instructions to Whitehall who then, via more draconian legislation and guidelines, pass them down to the private sector service providers and their clients in the Overseas Territories. Frankly speaking, this approach is no longer acceptable.

22. The private sector therefore looks forward to further discussions on matters relating to the development of the industry and ways by which we can contribute and cooperate in ensuring that Anguilla continues to grow as a reputable and well regulated jurisdiction.

This document has been prepared and approved by the governing bodies of both organizations and is signed on their behalf by the undersigned.

Yours faithfully,

………………………
Mr. J Alex Richardson
President, Anguilla Financial Services Association

……………………..
Mr. Carlyle K Rogers
Chairman, STEP Anguilla Branch

Cc:Hon. Osbourne B Fleming, Chief Minister of Anguilla
Hon. Victor F Banks, Minister of Finance, Anguilla
Hon. Hubert Hughes, Leader of the Opposition
Director, Anguilla Financial Services Commission
Deputy Director, Anguilla Financial Services Commission, Her Majesty’s Treasury
Local media: Radio Anguilla, The Anguillian, Upbeat Radio, et al

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