Today is the day tax evasion becomes an offence under Bermuda's anti-money laundering legislation.

Linked to this is the publication of Guidance Notes on the Prevention of Money Laundering Fiscal Offences.

The two relevant Acts are the Proceeds of Crime Amendment Act 2000 and the Taxes Management Amendment Act 1999 which include all the indictable offences.

Finance Minister Eugene Cox, said: "By the introduction of the above two Acts, Bermuda has now included fiscal offences under its proceeds of crime legislation, consistent with Bermuda's own intent and international expectations and anti-money laundering standards.''

Including tax evasion in money laundering offences, together with drug trafficking, terrorism, etc., has been under debate in the entire offshore world for several years. Large, 'onshore' countries have repeatedly put pressure on small offshore jurisdictions to do this as they have watched their tax revenues leak away under the guise of offshore tax structures.

In some offshore jurisdictions there has been considerable resistance to make it an offence, as creating the tax structures companies, trusts, bank accounts has been a staple industry that has operated within the laws of the relevant offshore country.

But in some of these jurisdictions little distinction has been made between clients who are avoiding or minimising their taxes and those who are evading their taxes. Tax avoidance is legal and tax evasion is illegal.

Minimising tax has been the name of the game for the service providers and it has been the bedrock of most offshore financial centres. Extremely knowledgeable people have been able to set up complex structures, often spanning several jurisdictions, for their clients, creating audit trails that even the most skilled investigator finds impossible to follow.

The jurisdictions that have not been too picky about their clients and are now putting in place fiscal offences money laundering legislation have seen an exodus of business in the run up to enactment of the legislation.

But Bermuda is highly unlikely to experience this. It is an offshore centre that has had strong controls over its fiduciary business from the outset and has never been attractive to crooks and tax evaders.

Bermuda's clients who use legitimate means of avoiding or minimising taxation will not be touched by this legislation. The Act refers specifically to a fraudulent breach, a wilful act with intent to defraud the tax authorities. And offences, or potential offences, will have to satisfy Bermuda's definition of an offence, which may not necessarily be the same is in other jurisdictions.

Another important amendment to the Act is provision for the establishment and administration of a confiscated assets fund. The proceeds of criminal conduct that are recovered in Bermuda will be paid into this fund, as will funds paid to Bermuda by a foreign jurisdiction under an asset-sharing arrangement. Creation of this fund is consistent with international expectations and recommendations, especially those of the Financial Action Task Force.

Mr. Cox said: "No separate dedicated fund existed previously. Local seizures of proceeds of criminal conduct were placed in the consolidated fund and as a result used on anything from roads to office supplies.

By establishing the fund, Government is able to direct those criminal proceeds towards combating such crime. Additional resources can be provided to government and its agencies, such as the Police Service, to be used to support the war on drugs and anti-money laundering initiatives.''

In determining whether an offence under the Act has been committed the courts will take account of the fiscal offences guidance notes, also issued today. The guidance notes explain that a tax related offence may give rise to a money laundering offence in the same way as any other criminal conduct. The guidance notes are to assist regulated institutions in their compliance with the law.

Mr. Cox said: "I am pleased to advise that the committee (National Anti-Money Laundering Committee) has been working with representatives of the private sector over a number of months and have prepared specific fiscal offence guidance notes. These are effective from Jun 1st 2001 and are added to the original guidance notes issued in January 1998.

"The guidance notes provide a measure of assistance to those affected by the legislation in their compliance with the requirements of the Act and regulations. On behalf of the Government I would like to publicly thank the private sector for their invaluable and dedicated work in this area.''