Let me first join in welcoming you all to this Conference, particularly those of you who have traveled from overseas to be with us.

We greatly appreciate the time and trouble that you have taken to participate in this encounter.

The Government of Antigua and Barbuda is extremely keen to maintain your institutions on our register and to keep your business in our jurisdiction.

Equally, we are anxious to provide a regulatory framework for offshore financial services that correspond to the highest international standards and the best practices worldwide.

We are very well aware that if the international community sees our jurisdiction as lax or poorly regulated, your institutions will suffer. For, none of the Banks in major financial capitals will do business with institutions which operate in jurisdictions that are doubtful.
For this reason, it is important for the growth of our economy, and for the successful operations of your businesses, that our jurisdiction enjoys the widest possible approval in the financial centers of the world.

This encounter provides an opportunity for the Government, the regulator and the industry to explore together the means by which we, as a jurisdiction, and you as operators within it, can comply with the growing requirements of the international community for high standards in offshore financial services.

It also allows us to discuss ways to forge a partnership in which you conduct profitable business in a jurisdiction that enjoys a reputation in the global community of being well-respected and well-regulated.

Let us look at the international environment in which this encounter is taking place.

We are living in a world in which three issues dominate the international financial services. These are: money laundering, tax evasion and terrorist financing.

There is no doubt that narcotics trafficking, arms smuggling, grand corruption, tax evasion and even civil war in some countries have been facilitated and sustained by illicit networks embedded in the world's financial services infrastructure.

Here in Antigua and Barbuda, we have suffered in the past from the abuse of our banking system by those engaged in arms smuggling, money laundering, corruption and fraud.

Our jurisdiction was labeled with a reputation not of our own making. It was caused by those who abused our banking system and those bankers who were more concerned with the income derived from transactions and deposits, than they were with the value of their own reputations.

As a jurisdiction, we resolved that our nation's reputation and the ability of our financial institution to do business worldwide were worth more to us than the fees we earned from licensing financial institutions.

Therefore, we enacted comprehensive measures to combat money laundering and to promote financial transparency. We strengthened our regulations, established new and stringent laws against money laundering and financial crime, and set up machinery for monitoring and enforcing compliance.

The result of these efforts were two-fold: the number of offshore financial institutions on our register declined from over 70 to the 21 entities represented in this room today. Some left because they did not like our enhanced regulatory and legislative regime, others were struck from our register for non-compliance. We were not sorry to see them go. If they left because of unhappiness with our enhanced regulatory structure or non-compliance with our rules, it means that they were unwilling to implement the high standards and best practices that are necessary for survival in today's world.

The second effect was the withdrawal by the US and UK governments of financial advisories that they had imposed upon us in April 1999, and the public recognition by the Financial Action Task Force (FATF) that our jurisdiction is fully cooperative in the fight against money laundering.

Today, Antigua and Barbuda enjoys a reputation internationally as a well-regulated jurisdiction that enforces its anti-money laundering laws. That reputation is good for the institutions you own or represent for it provides you with an environment free of international suspicion in which to conduct your business.

To maintain that reputation, we need your help in two important ways.

First, we need you to recognize that global money laundering is a consequence of globalization, putting bankers, banks and banking accountants in constant contact with people and businesses they do not know. Instead of having relationships with people they trust, some of these institutions have accepted the notion that they could trust in the money or in the record of the transactions with no further obligation.

I think we are all now well aware of the consequences of banking that was based on "No questions asked".

In this connection, we need you to develop and enforce stringently the principle of "Know your customer". This would include:

(1) Adopting procedures so that you accept only those clients whose source of wealth and funds can be reasonably established to be legitimate,
(2) Engaging in additional diligence in cases involving the use of numbered accounts, alternative name accounts or high risk countries, and
(3) Updating client files where there are major changes in control or identity.

The second important way in which we need your help is in identifying unusual or suspicious transactions, following them up and telling our supervisory authority for money laundering. This will entail the development and implementation of a control policy, but in the end it will be worth it to ensure that your bank, its owners, directors and management are not ensnared in any attempts to launder money.

I said earlier that the three issues dominating international financial services are money laundering, tax evasion and terrorist financing. I have dealt, albeit briefly, with money laundering. Let me turn now to tax evasion.

The government of Antigua and Barbuda is firmly of the view that our financial services sector cannot be maintained or sustained on illegal money. Such money is at best transient and at worst has a short life. Therefore, we frown on our financial services sector providing a haven for tax evasion. We are also convinced that no serious financial institution would knowingly harbor tax evasion funds. Just as our jurisdiction could not be sustained on illegal money, neither could your banks.

It is in this context that in November last year we signed a tax information exchange agreement with the United States. We already had in place a mutual legal assistance treaty in criminal matters, including criminal tax matters, with both the US and UK governments.

In part, this was also the context in which we agreed to work with the organization for economic corporation and development (the OECD) on it's modified harmful tax competition initiative.

Essentially, that initiative would establish mechanisms for the sharing of information on tax offences with tax authorities of other states. It would also ensure that tax and regulatory authorities have access to bank information that may be relevant for the investigation or prosecution of tax matters.

My government is now a participant in the OECD's global forum working group that will develop, over the next two years, definitions of transparency and effective exchange of information, and decide how these two principles will be applied and monitored in every country in the world.

In our contribution to this work, we will be diligent in ensuring that our own jurisdiction is not placed at a disadvantage in relation to any others. In other words, we will insist that the same standards that apply to us are applied to everyone else.

We are for ensuring transparency and effective exchange of information, but only on the basis of a level playing field for all.

In this exercise, my government would welcome your views. After all, you are the people who actually operate in the industry and who must be guided by the rules and standards that are established. In this connection, you have a right to comment on their practicality and operation.

It will interest you to know that although Antigua and Barbuda was invited to participate in the OECD's global forum only on March 1st, we have already commented on the draft documents on information exchange and advised the co-chairs of the forum that we would like the private sector in all of the participating countries to comment on them.

In the case of Antigua and Barbuda, if the offshore banks would establish an umbrella organization by which they collectively relate to the government, we would be very pleased to share the documents with you and to take account of your views on them.

Transparency, as far as we are concerned, must include the involvement of the private sector in the development of rules and standards that govern the industry.

In any event, Antigua and Barbuda will not be on the OECD's blacklist whenever it is published. This means that our jurisdiction now enjoys the expressed approval of the FATF, the OECD and the UK and US governments. We are better off than many who are still on the FATF blacklist and against whom the major financial centers of the world have now imposed financial advisories.

I come now to the last of the three issues dominating global financial services: terrorist financing.

In the wake of the terrorist atrocities in the US, my government enacted legislation making it a crime for any financial institution to facilitate terrorist financing. We were the first Caribbean country to enact legislation criminalizing such activity. We also did this before the now famous US Patriot Act was passed into law by the US congress.

Right now, a working group established by the Prime Minister is examining the FATF's eight new criteria to determine compliance with measures to counter terrorism financing. We are obliged to submit answers to an FATF questionnaire by May 1st on which a preliminary judgment will be made as to our compliance. We expect to pass this test easily, and we consider this to be in your interest because it means that you are operating in a jurisdiction that is approved by the FATF and its members who are the biggest financial centers in the world.

However, there is one aspect of the Patriot Act that affects both you, as operators, and us as a jurisdiction. Title III of the Act prohibits all US licensed financial institutions from establishing, maintaining, administering or managing correspondent accounts with shell banks. "Shell banks" are defined in law as institutions lacking any physical presence in a jurisdiction and functioning as unregulated institutions. In this regard, some of your institutions could be classified as "shell banks" because of the absence of a physical presence here.

In response to this, every reputable Caribbean jurisdiction now requires the financial institutions registered with it to have a physical presence in its territory.

Failure to do so would result not only in US banks cutting off correspondent relations with your institutions, it would also encourage the US Secretary to the Treasury to declare our jurisdiction as "high risk" or "non cooperative". Should he do so, all of our financial institutions would be affected.

This is a serious matter of vital importance both to your institutions and to us as a jurisdiction. We have to resolve it, and we want to do so not arbitrarily but in partnership with you. We would like to explore ideas that will satisfy the genuine and understandable concerns of the US government in the context of the atrocities of September 11th. At the same time, we also want to reach an understanding that does not cripple your operations financially and permits our regulators to ensure compliance with our international obligations.

Ladies and Gentlemen, I want to end this presentation by pointing out that 90% of the worlds offshore funds is in the financial centers of the industrialized countries, with 33% in Switzerland alone. Of the remaining 10%, the bulk is in jurisdictions such as Hong Kong. This leaves less than 5% in the Caribbean.

The law of averages tells me that if only 5% of the world's offshore funds are in the Caribbean, the Caribbean can only have 5% of the world's tax evasion money. Most of that tax evasion money has to be in the industrialized countries themselves. I suspect that is a lesson they will learn in time.

We have only to look at the incidence of money laundering to confirm this point. While it is true that money has been laundered through the Caribbean, it is a well-known fact that the vast majority of it has been laundered through Switzerland, the UK and the US.

And with respect to terrorism financing, it is startling and telling that only six of the forty-one jurisdictions targeted by the OECD had any terrorist funds. Yet eleven of the thirty OECD countries handled accounts for the terrorist groups including the US, the UK, Switzerland, Germany and Austria. Significantly of the six non-OECD countries, only three were in the Caribbean, and Antigua and Barbuda was not amongst them.

Nonetheless, as a jurisdiction, Antigua and Barbuda will continue to do all in its power to establish and enforce the highest standards and the best practices in international financial services. We regard this not only as a moral responsibility to the world, but as a duty to our own reputation as a nation and to you as institutions that operate within our jurisdiction.

We want you to be comfortable in a well-regulated environment that upholds your rights and interests with the same fervor with which we fulfill our obligations to the world.

We look forward to working closely with you in developing mechanisms to enhance the credibility of our jurisdiction and to increase the profitability of your institutions.

Thank you.