Bermuda's record in tackling money laundering and tightening compliance in the financial sector has been branded "appalling" by the head of Britain's Committee of Public Accounts.

And Britain's top civil servant in the Foreign and Commonwealth Office (FCO) in charge of Overseas Territories was accused of being "asleep on the job" by not enforcing higher standards.

In a hearing late last year, available on the Hansard website, chairman Edward Leigh and other MPs grilled FCO permanent secretary Sir Peter Ricketts over Britain's role in ensuring its territories are up to standard in their financial oversight. Mr. Leigh questioned why Britain was subsidising Bermuda which he described as a "fabulously rich place" with a GDP of $4.9 billion — the highest in the world at $76,000 per head.

He suggested Bermuda could be taking Britain "for a ride" by taking $338,000 a year for the Governor's staff costs.

Sir Peter defended Bermuda and said he was more concerned about smaller territories to which Mr. Leigh responded with: "Some of these territories which you are responsible for perform very badly. There is a large number of red lights. If you look at Bermuda, for instance, money laundering, materially non-compliant, 22 percent."

And he said compliance in Bermuda's insurance sector was materially non-observed in 44 percent of cases.

He also attacked the record of the British Virgin Islands and said Britain's three Crown dependencies, the Isle of Man, Jersey and Guernsey, were doing much better than BVI and Bermuda.

"They are performing poorly and you, Sir Peter, are responsible for them. There is a large risk involved here and apparently you are asleep on the job."

And Mr. Leigh, a Conservative MP, added: "Are they colonies or are they not? If we are responsible for them, you can see that this record in terms of compliance in money laundering, banking, insurance, securities, compared to the three Crown dependencies, Jersey, Guernsey, Isle of Man, is appalling and you are directly responsible for these places.

"We are responsible. There is no point shuffling and saying, 'Oh, they manage themselves.' Why are they still colonies?"

When Sir Peter pointed out that territories like Bermuda were internally self governing and capable of improving Mr. Leigh said: "A GDP of $4.9 billion, a population of 63,000, a GDP per head of $76,000, yet look at their record.

"It is appalling! Perhaps some people might say they are taking you for a ride."

Sir Peter said market forces as well as pressure from the UK would help Bermuda which he said was doing pretty well in banking compliance. However he added: "I agree with you on insurance it is not doing adequately and I think it is something that the Bermuda Government needs to take very seriously."

Earlier in the exchange Mr. Leigh pointed out Bermuda's low rate of suspicious activity reports compared to the Isle of Man as he wondered whether the overseas territories were a significant money laundering risk.

Amid probing from another MP who said the world was awash with "funny money looking for a home", Sir Peter said Bermuda had well developed financial services regulation and he said he had written to Britain's Treasury and other financial authorities urging them to do all they could to work with Bermuda and other territories.

However he said Bermuda had 11 people dealing with financial intelligence and investigations compared with 21 in the Caymans.

The CPA, which is made up of MPs from all sides of the British House of Commons, raised concerns about other areas of good governance during the hearing on December 10.

Labour MP Ian Davidson, chair of the Bermuda-UK Parliamentary Committee, weighed in on Bermuda's public accounts, pointing out some public bodies had not produced accounts since 2002 and 2003, as he suggested the UK's National Audit Office might need to get involved.

Sir Peter said Bermuda was bringing in private sector expertise to improve its record but Mr. Davidson said Bermuda's record was not acceptable but Britain had, in effect, accepted it by not doing anything about it.

But Sir Peter said it was primarily a problem for the Bermuda Government which had the resources to deal with it.

¦ Tomorrow the Committee of Public Accounts will reveal its hard-hitting report into Managing Risk in the Overseas Territories.