Fighting talk

Go to the homepage of Kaupthing Singer & Friedlander (Isle of Man) Ltd and you’ll see an ominous black page stating that the bank has gone into liquidation and the Isle of Man Financial Supervision Commission has suspended its licence. Landsbanki Guernsey has a simple holding page, referring visitors to the bank’s administrator. The collapse of the Icelandic banks in 2008 has brought new heat to the UK offshore jurisdictions.

‘There are very significant levels of banking deposits in all of the Crown Dependencies, and in the case of the Isle of Man, there is a depositor protection arrangement, though a lot of the depositors with Kaupthing would describe it as inadequate,’ says Robert Christensen, managing director of Volaw in Jersey. ‘In the case of Guernsey, there wasn’t any depositor protection, but it has since been put in place. In the case of Jersey, there has been a verbal guarantee of protection for all island-based depositors but no deposit protection arrangements for non-resident depositors.’ With depositors up in arms over losing their savings and the government irked by its obligations to offshore depositors in the Isle of Man, a backlash was perhaps inevitable.

Offshore is tainted once again, inducing a torrent of bile fuelled by the panic in the world financial markets. The UK Crown Dependencies (the Channel Islands and the Isle of Man) and Overseas Territories (including the British Virgin Islands and the Cayman Islands) have long been under scrutiny for their status as ‘tax havens’. Now, the effectiveness of offshore financial regulation is well and truly under the microscope. In November, Chancellor Alastair Darling announced in his pre-Budget report that there would be an independent review of British financial offshore centres within the Crown Dependencies and Overseas Territories. An interim report will be published before the Budget in the spring, while a full report will come out later this year.

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