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As the international community strengthens international standards, it is critical that these apply to unco-operative jurisdictions and tax havens. Actions taken in these areas are mutually reinforcing. As appropriate they should be implemented jointly and uniformly and tailored to specific country circumstances.
Enhanced efforts to deal with uncooperative jurisdictions are needed in the areas of securities regulation, market conduct and prudential supervision. The Working Group supports the IOSCO contact initiative to ensure that securities regulators from under-regulated or unco-operative jurisdictions become able and willing to meet the international co-operation standard set by the IOSCO MMoU and to have the practical ability to implement those standards. The Group recommends encouraging the BCBS and the IAIS to review their approaches in the light of the objectives of prudential supervision.
The Working Group supports the FATF’s important work against money laundering and terrorist financing, in particular with regard to unco-operative jurisdictions through the ICRG. The Group recommends urging all countries to fully implement the FATF 40+9 Recommendations. The FATF should also take steps to increase its effectiveness, accelerate its efforts and examine available measures. The FATF should develop and adopt procedures to enhance information exchange and direct communication among and between global financial institutions (“group compliance”), supervisors and authorities, including financial intelligence units.
The Working Group recommends that the G20 reaffirm their commitment to the high standards of transparency and exchange of information for tax purposes as reflected in the OECD’s Model Tax Information Exchange Agreement and Article 26 of the OECD Model Tax Convention. All countries should be urged to fully implement the OECD standards. This model was also agreed by the UN.
The Working Groups also recommends urging the international bodies responsible for prudential and regulatory standards, anti money laundering and terrorist financing, and tax matters - the FSF, the FATF and the OECD - to accelerate their work of identifying uncooperative jurisdictions and developing a toolbox of effective countermeasures against these jurisdictions; they should update G20 Finance Ministers and Central Bank Governors.
Finally the Working Group reiterates the support for the World Bank – UN Stolen Assets Recovery Initiative (StAR) to champion the recovery of assets stolen from developing countries. The systematic enforcement of FATF standards with respect to the identification of beneficial ownership and the enhanced monitoring of Politically Exposed Persons would have a significant deterrence effect on corruption and make it easier to detect and deter the flow of proceeds of corruption. The Working Group recommends asking the World Bank to review and develop mechanisms for strengthening global co-operation.
Recommendations going beyond the Action plan
The Working Group recognises that further actions beyond the Action Plan of November 2008 may be needed to ensure the effectiveness of the mechanisms for regulatory and supervisory collaboration:
Against the background of the present crisis the Group recognises that lightly regulated or unregulated entities could undermine confidence in financial markets. It supports the conclusions of the G20 Working Group 1 regarding the expansion of the perimeter of regulation and supervision. Once a regulatory framework is established, we should evaluate how international regulatory and supervisory co-operation can best be effected. The establishment of supervisory colleges for those entities, including rating agencies, could be considered.
Measures in response to a crisis can have adverse effects on investment and trade decisions. There is a need to have support measures to ensure that crisis measures do not create protectionism, including financial protectionism, in the medium term.
Regardless of the scope of regulatory regimes, the effectiveness of enforcement mechanisms should be considered.