DUBIOUS companies could bring about the island's downfall as a financial jurisdiction without more watchful procedures in place.

Such steps would require Government to openly acknowledge that all businesses relocate here for tax benefits and take measures to enact stringent regulations to keep out those involved in illegal practices, insists Michael Hardy, an FCA with more than 25 years' experience in the local reinsurance industry.

"Why do companies come to Bermuda?Low tax, low tax, low tax," Mr. Hardy said.

"It is a major advantage which Bermuda should retain and guard with its life. It should not pretend it isn't so and should embrace it fully - the companies that come to Bermuda are quite open about it.

"However Bermuda has to be very watchful that its reputation is not sullied any further. The scandals have built up over the past few years due to overzealous acceptance of certain dubious clients without a full check into the background of why they are setting up in Bermuda. We all know that tax evasion is illegal, but so many don't know that tax avoidance can be too."

His comments were in response to an A.M. Best News interview with Premier Ewart Brown and Association of Bermuda Insurers and Reinsurers (ABIR) president and executive director Brad Kading.

Asked what he thought of complaints that some of his policies are hostile to the international business community, Dr. Brown highlighted how that sector has grown over the past ten years.

At issue were the six-year term limit rules for expatriate workers and the proposed Workforce Equity Act requiring Bermudians trained to replace persons on work permits.

According to the Premier, the fact that nearly 3,000 international companies have relocated to the island since the Progressive Labour Party (PLP) came to power in 1998 - and continue to do so - show such criticisms to be politically motivated.

"I haven't been hostile and I haven't been angry. I have just taken some positions that people in the community don't agree with. Those people wanted me out of the government and they wanted me to lose the election. I did not lose, and so now those people have to observe how democracy works."

Mr. Kading offered a similar take. Insisting that reported tensions between the business community and Government are "way overblown", he said policies in place and those proposed are not going to drive insurers to competitive domiciles such as the Caymans, Ireland, Singapore and Dubai.

Without tighter regulation, Mr. Hardy believes the decision on whether the island's success continues will not be left to the insurers but overseas authorities who will "close Bermuda down".

"There has to be a genuine business reason for the company being set up as part of a scheme that is tax favourable," he stated. "Others are downright criminal, involving money laundering or collaboration in white collar crime in all its many shades. Hedge funds have a large, practical role to play in the financial and investment strategies of individuals and companies. But Bermuda must be more wary of those that seek to use such hedge funds for criminal purposes.

"This is where overseas authorities are going to point to if they ever succeed in getting their way and close Bermuda down as a 'tax haven'. The consequences could be draconian, with other jurisdictions closing down all banking transactions with Bermuda."

Mr. Hardy has raised such concerns in the past, highlighting on the UK Parliament website a "longstanding weakness in the enforcement of criminal law as it applies to financial crime, particularly with regard to entities regulated by the Bermuda Monetary Authority (BMA)".

A former director of the Bermuda International Business Association and member of the Insurance Advisory Committee to the Bermuda Government, he insisted the need for improvement remains essential.

"We cannot afford to get involved in Russian high politics and organised crime. We cannot afford to provide balance sheet clean up schemes of multi-billion dollar magnitude, nor accept insurance and reinsurance companies that are no more than massive piggy banks with no meaningful exposure to insurance risk. The bottom line is that we can continue to grow if we shake off the complacency in the regulators and also in the Bermudian service providers.

"(We need to) enforce the laws on the books, investigate suspicious activities more thoroughly and be prepared to involve the Police Force in situations that smell of white-collar crime. The threat of turning people off because of immigration laws is a serious impediment, but pales in comparison with that of bringing the regulatory infrastructure up to speed e.g. hiring fraud investigators and specialist lawyers. The most needed professionals are forensic accountants who are impartial i.e. they don't work for the auditing firms."