1082 Challenges of the Knowledge Society. Finance and Accounting

More offshore banks from Asia are used for operation on the capital markets. They don’t know the contribution of the offshore funds to the credits in the region. This is the cause of a liquidity risk on the exchange market and on the financial system of those countries.

Another risk is represented by the greater offshore banks in comparison with the onshore banks. The assets concentration in offshore banks produces a risk for the local banks. The solution doesn’t consist only in a close surveillance of a CFO, but a consolidated surveillance in the origin countries is imposed. This is due to the fact that IMF introduced the financial vulnerability assessment for both: onshore and offshore centers.

Capital laundry and terrorism financing

Nobody knows exactly what the actual level of world capital laundry is. The level is estimated to reach between 2 to 5% from the global GDP (4).

After September 11 2001, capital laundry and terrorism financing have become issues to be discussed globally.

The social and political costs of capital laundry are consistent. “Organized crime can be the core of the financial institutions, which can produce reduction in large economic sectors and can corrupt the political system. Dirty money also destabilizes the financial system of a country and supports a severe crisis.”³⁾ The offshore financial centers offer favorable conditions for such activities, due to the fact that the offshore financial centers assessment program contains FATF norms.

3. Results of the offshore financial centers assessment 3.1. Initiatives of the international institutions

The control authorities and a number of international courts work together on control issues on offshore financial centers activities. The analyzed issues regard less than three aspects: money laundry, fiscality and financial regulations. We should emphasize the role of IMF, GASI, OCDE and FSF among the institutions who deal with CFO.

The financial action group for capital laundry (FATF) deals with the implications of money laundry and terrorism financing at criminal and legal level.

In FATF last report it was signaled that from 12 centers, the anti-money laundry devise shows weak criticism. FATF publishes in his report a list of 15 “non-cooperative jurisdictions”. This list was corrected in the sense that seven jurisdictions in progress were removed from the “non-cooperative” list from the countries territory, but they supported 6 new centers. In 2005 IMF and the World Bank made 48 FATF recommendations regarding the reference their operational activities register.

OCDE focuses on fraud, fiscal competition and fiscal regulation differences. It launched a project on “damaging fiscal practices”, which regards the centers. OCDE published a list with 35 jurisdictions identified as a fiscal paradise (“high installment”). During the Barbados reunion, OCDE and the developing countries (CFO included) created a special group to deal with the regulations acceptable for the operations from the fiscal paradises.

The Financial Stability Forum (FSF) delegated the work group in April 1999 to study the implications of the offshore financial centers in the international financial stability.

The first report⁴⁾ of the group regards the financial surveillance of the CFO, the second (May, 2005) classifies the centers in three categories according to the control quality, cooperation level and priority set for the future assessments.

3. Op. Cit. ⁵⁾.

4. ^{The report of the work group was published in April, 5th, 2005, it is available on the Forum site.}

Mădălina Antoaneta Rădoi, Alexandru Olteanu	1083

In the first group there are included the CFO which have the fiscal paradise status opposite the ones which use the regulations against the fiscal paradises. The second group regards the countries which are not fiscal paradises. And the third contains the countries which are occasionally included in the paradises list.

Other assessments

The results of some of the CFO assessments are published in the following reports:

• “The Edwards Report”, published by the government of Great Britain in 1998, which assesses the centers situated on the territories from Great Britain (Jersey, Guernsey, Sark and the Man Islands);

• “The KPMG Report”, completed in 2000, assesses 6 overseas territories of Great Britain which offer offshore services (Caimans, the British Virgin Islands, Turk Islands and Caicos, Anguilla, Monserrat and Bermuda).

• “The Ad-Hock Group on Non Cooperative Jurisdictions”, created by FATF in 1998⁵⁾, assessed 31 non cooperative jurisdictions, according to 25 criteria from the capital laundry point of view.

• A 15 non cooperative jurisdiction list was published as a result of this activity in 2000.