Bermuda is considering extending its Proceeds of Crime Act to include the laundering of funds obtained by tax evasion, the Island's top financial official said yesterday.

The issue over tax evasion has become a controversial one, as Bermuda's businesses and financial institutions are worried that such an addition would invite fishing expeditions from overseas tax authorities.

The UK has demanded that Bermuda adopt an all crimes money laundering legislation by including indictable tax offences in its Proceeds of Crime Act.

Peter Hardy, Financial Secretary at the Ministry of Finance, said the UK and the world's economic powerhouses were putting pressure on Bermuda and other offshore jurisdictions to adopt an "all-crimes money laundering'' legislation.

"It would probably not be unfair to suggest that this action is prompted by the increasing desire to criminalise the laundering of funds obtained by tax evasion,'' he told a conference on money laundering yesterday at The Bermuda College.

However Bermuda was not about to become "tax collector for the world'' he warned.

"Bermuda's position to date has been that we are not collectors of taxes for other jurisdictions, however the other side of that coin is that we may appear to other jurisdictions to be a bolt-hole for their tax fugitives rather than a bona fide offshore financial centre,'' he said. "While it is perfectly reasonable to agree that persons should be able to conduct their personal affairs in private, Bermuda should not develop the reputation of a haven for those wishing to hide the proceeds of tax crimes.'' Mr. Hardy said Bermuda's dilemma was to prevent legitimate private business from being investigated and inspected as a result of overseas court actions while maintaining its reputation.

"It is therefore important that compliance with the existing legislation be full and as comprehensive as possible across the international business sector of this Island in order that Bermuda is the last place anyone thinks of when the topic of money laundering enters the conversation,'' he said.

Bermuda's Proceeds of Crime Act, which was passed last year, extended Bermuda's money laundering laws to delve into the finances of convicts and confiscate crime-related cash and property.

It also requires financial institutions and business to report on suspicious activity, to establish identification of customers, to keep records and to have internal reporting and training procedures.

Mr. Hardy said the increase in financial transactions through computer networks, especially the Internet, had made it more difficult to detect and track money laundering crimes.

Many are afraid such a measure would open their books to fishing expeditions by overseas tax authorities bent on recovering money. Others have said the UK will force such an addition to the act but that mechanisms could be put in place to prevent unsubstantiated scrutiny unless serious tax fraud had been proven in a Bermuda court.

Bermuda Monetary Authority general manager Malcolm Williams, who also spoke at the conference, said Bermuda and other jurisdictions should increase efforts toward more international co-operation to prevent money laundering.

He said Bermuda has lagged behind many other countries in such co-operation however the fault was neither "serious nor sinister''.

That's because the provisions of the Exchange Control Act helped to keep out the unscrupulous by having the BMA vet any issue or transfer of securities in Bermuda registered companies to non-Bermudians.

And Bermuda requires all registered companies to make their beneficial owner, intermediate owner or ultimate owner known to the authorities.

Mr. Williams also sees an increased role for the Group of Seven Financial Action Task Force through regional groups like the Caribbean Action Task Force.

The recently introduced act requiring licensing of those involved in the investment services industry will also help keep money launderers out of the Island.

He said Bermuda could also make bilateral agreements with other countries to provide records and assistance in criminal investigations.

However the Island must beware of enforcing too much legislation that would serve to destroy the functioning of the financial and retail markets.

"I am sure that some of you will agree that regulatory overkill is just as real a threat to the financial services industry as regulatory ambivalence,'' he said. "And, as I have found in all the jurisdictions I have worked in, there is a very real limit as to how far the experience of the other jurisdictions is relevant in fashioning the most appropriate laws, controls and systems for one's own markets.'' John Leek, intelligence officer with the UK's national Criminal Intelligence Service also spoke at the conference. He spoke about methods companies could employ in complying with money laundering legislation.

MONEY COP -- John Leek, intelligence officer with the UK's National Criminal Intelligence Service, spoke at The Prevention of Money Laundering and Cybercrime conference held yesterday at The Bermuda College. About 90 people attended.

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