3.2. Cfo assessment program by imf

In 1999, IMF together with the World Bank started the activities regarding CFO, by announcing an assessment program of the financial sector (PESF), launched as an experiment. The program consists of a health exam for the financial sector of the countries and allows interpretation of the macro caution indicators which shows the past crises. The assessment program (PESF) equally regards the offshore financial centers.

The program which assesses the offshore financial centers was launched by the IMF in 2000. It contains two groups (5):

• Financial control, containing the assessments;

• Technical assistance and statistics.

The assessment of the offshore financial centers is optional and it is achieved on three levels of intensity (6).

• The 1^st module is a self-assessment, with the professionals’ technical assistance, if the PFO follows the regulations. It regards the PFO responsibility and it is an introduction to the independent assessment.

• The 2^nd module is an independent assessment performed by the IMF on keeping the regulations.

• The 3^rd module is a complete assessment, set by the IMF, of the risks and vulnerabilities if the presumptive international and regulation observance.

As the assessment in modules 2 and 3 is concerned, it can be achieved by a group of surveillance professionals from the surveillance agencies from the offshore centers, experts from the World Bank and additional experts as the one from FATF. In assessing the standards from each module, the priorities are decided according to the activated lead within the centers, insisting on the effort against capital laundry.

IMF supports the offshore centers to gather information which can allow voluntary self-assessment through its technical assistance. In 2004, 4.3% (7) from the technical assistance it was

⁵ http://www.imf.org/external/rp./mae/oshore/2000/eng/role.htm.

1084 Challenges of the Knowledge Society. Finance and Accounting

offered by IMF for the offshore financial centers and the fight against capital laundry and terrorism financing.

Technical assistance to support the centers decreases the statistics and especially helps their participation to the statistical data collection.

3.3. Results of the first cfo assessment stage

According to the IMF report from February 25, 2005 (8), the first stage of the CFO Assessment program was ended (1). 41 from 44 contracted jurisdictions were assessed and published in their reports. Within the 2^nd module, 24 jurisdictions were assessed; 14 chose PSEF (Financial Sector Assessment Program). From the last three, one was assessed within the PSEF and two received technical assistance.

During the first stage the international norms were assessed, as follows:

• The basic principles from Bale – for a more effective financial control – were assessed in 41 jurisdictions and partially in one (Monaco).

• The basic AIS principles (Association Internationale des Controleurs d’Assurance) were assessed in 21 jurisdictions.

• The objectives and the regulation principles for the OICV securities (Organisation Internationale de Commissions des Valeurs) were assessed in 16 jurisdictions.

• The FATF norms (Groupe d’action financiere sur le blanchement de capitaux) were assessed in 25 jurisdictions.

Two jurisdictions (Nauru and Nine), whose activities were limited, weren’t subjected to an assessment, but they received technical assistance. We should still add that the assessment doesn’t hint the same centers: it is distinctive at the centers which don’t take part in Module 1, Module 2 and in the assessment programs of the financial sector (PESF). The statistics background is not the same.

The assessment depends on the development level of the activity sector, especially of the banking sector, money laundry and terrorism financing, company and stock exchange markets, as well as suppliers and fiduciary services.

BANKING SECTOR

The more important activities from the offshore centers are the banking services. More banks placed in CFO represent the branches and subsidiaries of the international banks. Their first activity is receiving deposits on different markets and their sending to their origin establishments.

The offshore banks make, in companies’ accounts, capital tax free operations in foreign currency, on companies, value added, dividends or interest and exchange control. Banks offer special services to natural persons such as managing goods, successional planning, and currency trade and withdrawal regimes. Such proposals regard the non-banking services such as the fiduciary and surveillance services. Assets management in CFO is motivated by different factors: further protection against origin country quest, fiscal optimization.

The contribution of the financial sector in GDP in CFO is large enough.

But there is not enough information on the subject. For example, this indicator reaches 53% from GDP in Jersey, 40% in the Virgin British Islands, 25% in Gibraltar and only 7% in Barbados.

The number of banks registered in centers differs a lot: from one bank in Sf. Lucia to 427 in the Caiman Islands (appendix 1).

The extension of the cross-border financial assets in connection to the % GDP is enormous in certain centers. For example, in the last years, in the Caiman Islands, this indicator has risen to 56871%, in Guernsey to 7384% and in Jersey to 6879% from GDP. GDP is in these centers.

Mădălina Antoaneta Rădoi, Alexandru Olteanu	1085

The results of the assessment are shown in Chart no. 1 on 27 offshore financial⁶⁾. Within the assessments, the compatibility level with the banking surveillance principles of the Basel Committees (BCP – Basel Core Principles)⁷⁾.

Chart no. 1 Level of compatibility with the Core Principles for an effective financial control

		Part of the
		centers consistent
No.	Principle Title	with the		Number of
		principles– in %		assessed centers
		In 60th	In 27th	In 60th	In 27th
		group	group	group	group
1.	Effective systems:
	 transparency, surveillance responsibility	87,0	80,8	60	26
	 independence and resources	60,0	61,5	60	26
	 legal framework	90,0	80,8	60	26
	 surveillance force	80,0	84,6	60	26
		60,2	96,2	59	26
	 legal protection
		68,0	79,1	60	26
	 information access
2.	Permitted activities	93,0	96,2	60	26
3.	License	85,0	80,8	60	26
4.	Property transfer	73,0	88,5	60	26
5.	Investment criterion	73,0	61,5	60	26
6.	Capitals justice	65,0	61,5	60	26
7.	Credit policy	60,0	50,0	60	26
8.	Loan assessment	71,0	53,8	60	26
9.	Risk exposure	75,0	65,4	60	26
10.	Associated loans	58,0	61,5	60	26
11.	Country risk	42,3	56,0	47	25
12.	Market risk	52,0	48,0	60	25
13.	Other risks	55,0	57,7	60	26
14.	Internal control	68,0	73,1	60	26
15.	Money laundry	50,0	80,8	60	26
16.	On-sit and off-sit surveillance	80,0	50,0	60	26
17.	Banking operations power of understanding	87,0	76,9	60	26
18.	Off-sit surveillance	70,0	76,9	60	26
19.	Independent assessment	80,0	69,2	60	26
20.	Consolidated surveillance	39,8	82,4	57	17
21.	Accountancy and trust	77,0	65,4	60	26
22.	Collective action	58,0	80,8	60	26
23.	Worldwide consolidated surveillance	58,3	82,4	43	17
24.	Host counties surveillance	67,5	88,2	48	17
25.	Foreign banks setting	71,4	87,5	59	24

6. Offshore Financial Center Program a Progress Repport. Prepared by the Monetary and Exchange Affairs and Statistics Departments. March 14, 2009. IMF www.imf.org/external/np./mae/oshore/2009/eng/031403.htm.

6. Core principles for effective banking supervision. Basel committee on Bouncing Supervision, Basel, September 1997.