The Status of Money Laundering Enforcement in the Isle of Man

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Thursday, August 1, 2002
Trifin J. Roule and Michael Salak
The Isle of Man, a dependency of the British Crown located in the center of the British Isles, has a long standing relationship with citizens of neighboring jurisdictions who seek a stable off-shore haven for the deposit of licit and illicit funds. While the Isle of Man (?Island?) is informally linked to the European Union through Protocol 3 of the Treaty of Accession to the European Community, the Island is not party to the EU Money Laundering profitable off-shore financial sector. As a result, the per capita income of the Island, supported by a financial sector that accounts for more than 30% of the annual GDP, is now greater than the United Kingdom. In response to criticisms and the OECD, the Island promptly signed a Memorandum of Understanding (MOU) that requires domestic financial institutions to remove favorable treatment for foreigners investing in the country, and mandates the abolition of any financial privacy that restricts the sharing of banking and tax information with members of the OECD. As a result of these efforts, the Island was removed from the OECD list of unfair tax competitors within six months. The Island responded to further criticism by French, Irish and British regulators by broadening due diligence standards to include accounts opened on the Island prior to 1998. Despite these efforts, the Financial Aid Task Force (FATF) remains concerned about the manner in which suspicious transactions are reported on the Island, the regulation of more than 24,000 ?exempt companies?, which are frequently owned by non-residents of the Island, and a series of high-profile money laundering cases involving prominent senior officials from Bulgaria, Nigeria, the Russian Federation, and Zimbabwe.