Jersey aims to keep it clean
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Jersey came under the spotlight recently when Sergei Dubinin, the former chairman of the Russian Central Bank, said that up to $50bn (u31.25bn) of foreign exchange reserves were "hidden" in one of the island's offshore companies. The move, according to reports, was to prevent these Russian assets being frozen by foreign creditors.
Dubinin's statement comes against a backdrop of the Russian government defaulting on $40bn in rouble-denominated treasury debt after the country's financial collapse last August.
Such news is bound to ruffle Jersey's financial authorities. It is, after all, their mission to keep Jersey clear of mud-slinging. One scandal is easily blown out of proportion and media hype can threaten the island's integrity as a dignified international financial centre, placing it nearer the obscure "offshore tax haven" category.
But, to give the authorities credit, they do their best to operate effective regulatory and legislative frameworks. Three new finance laws are being introduced to tighten controls over who operates in the jurisdiction and enforces its anti-money laundering checks across a wider scale of activity. The authorities are also trying to put together comprehensive codes of practice and guidelines to ensure that the island's providers of financial services know who their clients are and question where new business is coming from.
To consolidate its regulatory integrity, the Jersey government released itself from acting as the island's financial services watchdog. Towards the end of last year the Jersey Financial Services Commission (JFSC) was established to take on the task as regulator, operating independently from government. Such a body was supposed to ensure watchdog procedures are more effective and efficient.
But after news of Dubinin's statement broke, the reaction from the new JFSC was less than dynamic. A spokeswoman said the stories in the national press were "based on speculation" and the commission was unable to act or investigate the matter unless it was instructed to by the Russian regulators.
This inaction, ironically, came at a time when Jersey had expressed its willingness to co-operate with international regulators to combat money laundering. Even though Dubinin is the former chairman of the Russian Central Bank, Jersey is prepared to delay action, thus putting its credibility on the line and allowing its critics to remark smugly how they have been right about "offshore tax havens" all along.
Furthermore, Jersey - like its sister Crown territories Guernsey and the Isle of Man - is having to bear more scrutiny from the UK: so far not on fiscal issues, but on the safeguards that are in place to prevent money laundering. Andrew Edwards, a former senior civil servant, reviewed the three islands' structures on behalf of the UK Home Office. For Jersey, he called for more co-operation with other regulators worldwide - something it is working on.
Undoubtedly, the island has prospered as a financial centre. Only recently, the JFSC announced that more than £100bn is deposited in Jersey bank accounts. And there are several more billions invested in Jersey-domiciled collective investment schemes and in structured products.
Jersey traditionally sourced its business primarily from the UK, but it is now gaining more recognition from the international arena. Whereas in the past much of Jersey's business came from its tax-friendly environment, these days more companies are moving to Jersey on the grounds of its sound reputation, its financial credibility and its professionalism.
It is for these reasons, ultimately, that Jersey cannot afford for the wrong image to be filtered into the international press.