British Territories in trouble over annual reports

It might raise a few eyebrows to learn that the last time the Cayman Islands
submitted an annual report was in 2003. With that in mind, it may be more
concerning to find that the National Audit Office says that this is one of the
better performing British Territories in terms of robust regulatory frameworks.

The current situation looks dire: from the evidence on the table, delivering
punctual audit reports and keeping government departments in check is by no
means easy in the tropical idylls.

In the ten years since the last study was launched into the territories’
public sector watchdogs, accounts committees in many of these places still
struggle to provide effective, apolitical and timely scrutiny of the executive,
the NAO has said.

With the exception of The Falklands and The Pitcairns, none of the 11
territories which have permanent populations submitted their last set of figures
more recently than December 2005. The Caymans are something of a special case
because the Public Accounts Committee has to sign off on their numbers, but it
took until November 2006 for the accounts to be released by the PAC.

An acute shortage of capacity in bookkeeping and basic accounting skills,
coupled with ‘inertia or complacency on the part of responsible officials’ has
made the situation even worse in some areas.

The Acting Auditor General of the British Virgin Islands estimated her
staffing levels were one third below what they needed to be.

The accounts for 2006 were still being audited at the time of the NAO’s
study. Despite its 2005 audit going to the relevant authorities, the 2004 study
was still waiting to be signed off, admittedly due to Hurricane Ivan.

Of the 11 territories monitored by the foreign office, Bermuda, The Caymans,
the British Virgin Islands, Gibraltar, the Turks and Caicos Islands, Anguilla
and Montserrat are highlighted by the NAO as being globally important offshore
financial centres, but the aforementioned lack of capacity has some serious
knock-on effects.

‘The capacity limitations in the offshore financial sector have stunted the
Territories’ ability to investigate suspicious activity reports,’ the NAO said.
So attempts to stamp out money laundering, which, whether they like it or not,
is more associated with offshore centres, is being hampered by the territories’
lack of accounting expertise.

Foreign office chiefs have been urged by the NAO to work alongside the
Treasury, the FSA and the Serious Organised Crime Agency to beef up regulatory
standards. It looks like it can’t happen too soon.

Related reading

tax dictionary