SHADOW Finance Minister Grant Gibbons yesterday accused Government and the Bermuda Monetary Authority (BMA) of weak regulation in terms of who is allowed to set up companies in Bermuda, writes Jonathan Kent.

And he said the revelations of the island's involvement in the Congo oil scam and the alleged "laundering" of more than $470 million through Sphynx Bermuda was "a real embarrassment to Bermuda's reputation".

The BMA, which is involved in the due diligence procedure aimed at ensuring that only "fit and proper" people are allowed to do business on the island, declined to address the case directly. We asked whether the BMA considered that due diligence had been carried out with regard to Sphynx and whether there were any plans to investigate the company or have it struck off, given the recent High Court revelations.

The BMA responded: "All companies incorporated in Bermuda are subject to due diligence requirements and statutory procedures under the Companies Act 1981, conducted by the BMA on behalf of the Minister of Finance. The development and active enforcement of 'know your customer' requirements here have resulted in Bermuda having a well-recognised history of leadership in the proper oversight of Bermuda-based entities.

"Where concerns arise in any particular case, the authorities in Bermuda undertake enquiries necessary to establish the facts and take any action that is deemed necessary."

We also asked for a comment from Finance Minister Paula Cox, but we did not receive a response by press time.

Dr. Gibbons was speaking about a case in London's High Court, which illustrated how the island company was used as part of network of sham companies to hide Congolese oil money from creditors.

"This is a real embarrassment to Bermuda's reputation, that this company has allegedly laundered over $470 million that should have been used for the benefit of the people of the Republic of Congo," Dr. Gibbons said.

"It comes hard on the heels of another embarrassment, involving a huge fund that is the subject of a money laundering and corruption investigation, involving the Russian IT and Communications Minister, Leonid Reiman. There is still no answer as to what the BMA has done or is doing about this."

Dr. Gibbons was referring to the IPOC International Growth Fund, set up in Bermuda five years ago by a convicted fraudster. The Wall Street Journal alleged last month that the fund was effectively a holding company for around $1 billion in telecommunications assets transferred through a network of shell companies.

Sphynx (Bermuda) is still an active company, according to the Registrar of Companies. Dr. Gibbons demanded action.

"We need an explanation as to what the BMA and the Finance Ministry have done to shut down or resolve this alleged money-laundering operation in Bermuda," he said.

"It raises the question as to how many other operations like this have been allowed to slip through because of weak due diligence on the part of the Government."

The Republic of Congo has a global reputation for corruption and the court found that incorporation documents identified, from the outset, the owner of Sphynx (Bermuda) as Denis Gokana, a top official in the Congo state oil company SNPC.

"This raises serious issues as to why the company was allowed to be incorporated in the first place," Dr. Gibbons said.

"Mr. Gokana's position as a special adviser to the President of Congo shows that he should have been considered a high-risk individual by most regulators."

Dr. Gibbons said the case also raised serious questions about the "alleged lack of oversight" of Sphynx Bermuda's local directors, Trevor Williams and Arthur Jones.

The judgement had shown that owner Mr. Gokana had been authorised to be sole signatory for the Sphynx bank account, yet he was not a director of the company.

"Also, more than $470 million passed through the company without the directors having any sense of what was happening," Dr. Gibbons added.