British Territories in trouble
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.