Government of Anguilla's Response to the KPMG Report on the Review of Financial Regulation in Anguilla

Introduction

The Government of Anguilla is pleased to note that the KPMG Report is very positive in its assessment of Anguilla's regulatory and legislative regimes. The Report confirms that Anguilla "has many of the features necessary to be considered a well regulated jurisdiction." It further states: "of particular note is the development of the ACORN company registration system and the operation of the company registry in general which are considered, with some comparatively minor enhancements, to be an example of how online registration can be developed in a well regulated manner." The KPMG report expresses the view that the ACORN system "enhances rather than detracts from the regulatory environment."

The Report makes a number of positive recommendations in terms of both supervisory standards and of existing legislation, which have already been recognised by the Government of Anguilla as being good practice. These recommendations will be prioritised and implemented by September 2001, subject to the availability of legislative time.

Regulatory Authority

In terms of the structure and staffing of the Regulatory Authority, the Report recommends that the current regulatory body, which is a department of Government, should become operationally and financially independent of government as called for under international standards. The Government of Anguilla supports this recommendation and statutory body legislation covering the structure, funding, licensing and supervisory roles and powers of the proposed body is already in draft form. It is intended that agreement on this legislation as well as the implementation of the underlying administrative changes to the existing structure will be finalised by mid 2001. It is also intended that the recommended full complement of staff for the regulatory body will be also put in place. The recommendation that the Director of the Regulatory Authority should not be involved in any marketing role is also being implemented on the basis that there could be a potential conflict of interest and possible drain on regulatory resources.

Banking

With regards to the regulation of banking activity, the Report puts forward the recommendation that there could be a single banking regulator for both domestic and offshore. Consideration will be given to this. However it is noted that the Eastern Caribbean Central Bank (ECCB) has not conducted full onsite examinations of some of the domestic banks, for which it has regulatory responsibility, since 1993 and 1994. The Government of Anguilla must therefore consider carefully whether or not such regulatory responsibility should be conferred to ECCB with regards to offshore banking.

It is further noted that the Report recommends that Anguilla's domestic banking legislation should be brought more into line with Basel Committee principles and this matter will be followed up with ECCB.

As far as offshore banking legislation is concerned, the power to carry out on-site inspections is already in place and is being implemented. Anguilla fully agrees with the recommendation that formal prudential meetings should be held with licensees' auditors

Insurance

In respect of the insurance sector, Anguilla has only two locally-owned and registered insurance companies, both involved principally with motor vehicle insurance. The bulk of the domestic insurance industry is otherwise carried out by foreign-owned insurers, which are already regulated in their home countries. The regulatory body is conscious that a system to monitor the level of domestic insurance being undertaken in Anguilla needs to be set up and this is currently being done. In addition, it is recognised that the activities of insurance agents appointed by the foreign insurers underwriting domestic risks in Anguilla need to be better supervised, which was not a point specifically raised in the Report.

The Government of Anguilla intends to enact new insurance legislation, which will bring regulatory and reporting standards for both domestic and captive insurance activities up to IAIS standards. This legislation is currently being drafted.

Securities/Investment, Mutual Funds and Stock Exchange

There are a number of recommendations in these areas, some of which will have little impact on Anguilla directly in the short term. It is as yet unclear whether the proposed Eastern Caribbean Securities Act will cover offshore mutual fund activities, as indicated in the Report. In the meantime Anguilla is reviewing ECCB's draft legislation as recommended in the Report. It is nevertheless Anguilla's intention to bring in offshore Mutual Funds legislation as soon as possible.

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Companies and Partnerships

There are a number of recommendations in the Report concerning companies and partnership legislation. It is noted that given the recent amendments to the Companies Act, the Report is of the opinion that this Act is "broadly compliant with established good practice."

Some of the recommendations made in respect of the International Business Company (IBC) legislation relate more to current standards of market practice in the industry such as the immobilisation of bearer shares and the names of directors of an IBC forming part of the publicly available information held at the companies registry. The Government of Anguilla agrees generally with the former recommendation but does not agree with the latter recommendation on the requirement to publicise directors of IBC's, which are not public companies. It is not considered necessarily in the public interest to make director information publicly available, where an IBC is a private company, and Anguilla considers there may be other ways of achieving transparency in the context of good corporate and partnership industry practices.

It is recognised that reporting requirements for public companies together with other minor amendments need to be introduced in the International Business Companies Act to reflect what already exists in the Companies Act. Otherwise it is noted in the Report that the IBC Act "is in line with many good practice standards".

The Report raises the possible need to develop legislation on insolvency, which is already covered to a degree in Part IV of the Companies Act, as well as certain matters in respect of the issue of prospectuses. Anguilla recognises that detailed insolvency legislation will require a thorough review and possibly stand alone legislation. The Companies Act covers in some detail the requirements for the issue of prospectuses as well as the rights of shareholders, but these matters will be reviewed in line with the Report's recommendations.

Company Service Providers

Improved legislation has now been enacted for the supervision of company service providers, as indicated in the Report, and "meets a significant number of the criteria set down by the Guidance Notes". There are a number of supervisory recommendations made in the Report to the existing licensing legislation, including the establishment of a code of practice and the onsite inspection of service providers, and these will be duly implemented. The specific recommendation concerning the ability to pass details of client files to overseas regulators will be considered. However it should be noted that the Anguillian legislation already allows for this but with the restriction that a court order is required.

Trusts and Trust Service Providers

In respect of trusts and trust service providers, there are now five trust service providers in Anguilla. As with the other pieces of licensing legislation, this legislation has been redrafted to reflect modern standards in terms of trust structures and regulatory framework. This is a growing area of activity for Anguilla. There are a number of regulatory recommendations, including the issue of a code of practice and on-site inspections, which will be implemented.

International Co-operation

The Report highlights that Anguilla has taken a number of positive steps in the area of international co-operation and "is in substantial compliance with international standards". The Report recommends however a few additional amendments to existing legislation covering regulatory exchange of information, exchange of information between law enforcement authorities and exchange of information between regulatory and law enforcement authorities. All these recommendations are being considered with a view to their implementation.

Anti-Money Laundering

Finally the Report recommends a few changes to Anguilla's anti-money laundering legislation and practices. The Report highlights the fact that the legislation is mostly compliant with international standards. It should be noted that the Government of Anguilla has now enacted and issued the appropriate Anti-Money Laundering Regulations and detailed Guidance Notes to support the primary legislation, Proceeds of Criminal Conduct Act, and have been sent to all licensed financial institutions and service providers for implementation. In addition the Government of Anguilla has already established a Reporting Authority for the receipt of suspicious transactions and this body is now operative.

There are a number of minor recommended amendments to the anti-money laundering legislation and these are being considered with a view to implementation.

Summary

The Government of Anguilla has been pleased to participate fully in the KPMG review.

Hon Minister of Finance
Government of Anguilla

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