Introduction

It has been said of regulatory agencies that ‘Their missions are amorphous and multifaceted, their statutory obligations miscellaneous and poorly integrated. Each of their activities contributes towards some aspect of mission accomplishment, even if the tangled web of causes and effects makes linking specific actions to specific outcomes difficult or impossible’. This chapter tries to identify some of the reasons why this may or may not be true. Regulation is inexact, it is not a science and there will be failures. Using the UK's FSA's terminology, a ‘non-zero failure regime’ does not apply.

In a previous chapter, tax and regulation were identified as the two factors that give rise to most criticism about the ‘Offshore’ environment. Chapter 5 focused on tax, and this chapter considers regulation.

According to the President of the FATF, ‘effective regulation should not be seen as an option, it is a necessary cost which must be met if a jurisdiction wants to reap the benefits which flow from a financial services industry’. In this respect, service providers in ‘Offshore Centres’ want to be able to demonstrate to prospective customers that they are regulated to a high standard. It seems that this reassures clients, although most accept this at face value without question and without any real understanding of what it means. For example, licensing in one jurisdiction may be little more than a formality while elsewhere it might be a more meaningful process.