Bermuda has been warned to read the small print before accepting any offers of citizenship from the UK.

And -- as predicted in The Royal Gazette -- the UK is set to require UK and Euro-standard human rights and financial regulation laws as part of the new deal.

The caution came in The Daily Telegraph newspaper -- seen in Britain as having the inside track on the bureaucracy based in London's Whitehall.

An article in The Telegraph's foreign pages said: "Britain's last colonial outposts are to be told to legalise homosexuality and introduce stringent financial regulations that would restrict their status as tax havens.'' It added that the demands for tighter financial regulation likely to be contained in next week's White Paper on the Overseas Territories follow EU pressure on all member states to clamp down on so-called tax havens administered by them.

Britain, according to the article, wants to see an end to anti-gay legislation, the repeal of the death penalty -- plus strict regulations governing the world of high finance.

Bermuda has already legalised gay sex -- unlike the five Caribbean Overseas Territories -- but it retains the death penalty, although it has not been used since 1977.

And it is hoped the fact that Bermuda-based business and the offshore sector pay the same -- although low -- taxes will help the Island escape the regulatory net.

But the Telegraph article warned that the financial part of the package would be likely to cause much more controversy.

It said: "The Territories will be asked to change the law to enable greater co-operation with overseas regulators and investigators and also to introduce British-style independent financial regulators.

"The Territories have voiced concern at EU efforts to harmonise corporate taxes under the guise of `ending harmful tax competition.' "Bermuda is particularly concerned that its zero rate corporate tax could be a prime target.'' The Telegraph's business section also got in on the act with a prediction that the White Paper would be "a modest, smooth-tongued affair.'' The City Comment article said the White Paper was set to be "a modest, smooth-tongued affair'' offering full British passports for the less-than 120,000 citizens of the Territories.

But it added: "The citizens of such places as Bermuda and the Cayman Islands might examine the small print carefully...

And it claimed: "The real target for this open-hearted gesture is the free-wheeling financial regimes, which are seen as an invitation to money laundering on the one hand and an affront to the desire for tax harmony across the European Union.'' It added that -- as Britain tries to demonstrate good faith with its allies in Europe -- it had been reduced to "hitting such footling targets as Caribbean tax havens''.

The article warned: "Of course, the legislation will be couched in soothing words about better regulation breeding trust and prosperity for all.

"But if it really is such a splendid idea for Britain's Overseas Territories to have their version of the Financial Services Act, then perhaps the people there can work it out for themselves.''