Bermuda's financial wheelers and dealers yesterday warned the Island would have to treat UK plans to toughen up regulation of offshore centres with caution.

Bermuda International Business Association chairman Glenn Titterton highlighted a UK insistence on "transparency and cooperation with law enforcement authorities'' would have to be explored further "as regards to client privacy issues.'' He said: "This is just one area which needs further clarification to see if we need to go beyond the high standards we already employ.'' But he added his general view was "cautiously optimistic'' about UK Foreign Secretary Robin Cook's White Paper on a rewrite with its Overseas Territories.

Chamber of Commerce International Companies Division chief David Ezekiel said the citizenship offer had to looked at in isolation from financial issues -- already under the microscope by several international bodies.

He added: "Citizenship has got to be a positive thing -- it doesn't come with any additional strings attached.

"And we've known that several bodies have increased their focus in this area, but at the same time we have a pretty strong case for the way we do business.'' Mr. Ezekiel added that there was also no discrimination in tax matters between Island companies and offshore ones in Bermuda -- which should be considered by regulators.

The White Paper said: "Action is necessary in all Overseas Territories with financial centres... to improve standards.

"Overseas Territory governments must speed up the work they have in hand so that all measures are in place by the end of 1999.'' And Mr. Cook promised an "in-depth independent review by regulatory experts in 1999 to assess progress made in implementing these measures and make recommendations on how to deal with outstanding issues and to what timetable.

Among the items listed as top priorities for the end of the year are: Legislation to regulate the offshore sector to international standards; Comprehensive measures to combat money laundering applying to all institutions and tougher laws on company formation agents and managers; Powers to ensure that "whatever the secrecy laws'' regulators and law enforcement in offshore jurisdictions can "cooperate properly with their overseas counterparts -- which includes investigation and enforcement and; Equality on licencing and regulation among Overseas Territories to ensure fair competition.

The White Paper backed Organisation for Economic Cooperation and Development, European Union and the G7 group of the top industrial countries in their crackdowns on "harmful tax regimes.'' It added that EU countries had agreed not to introduce harmful tax measures in 1997 -- which extends to the Overseas Territories of member states.

The White Paper added that the EU is also considering a draft directive to force "a withholding tax on cross-border income from savings by individuals or to provide information on savings income to other member states'' -- also planned to extend to colonies.

And the paper warned: "These initiatives will require greater international cooperation through, for example, the exchange of information on tax matters and improved transparency.'' Mr. Ezekiel admitted he was worried by the prospect of a tax on cross-border income being extended to Bermuda.

He said: "This is the sort of thing we would look at very closely.

"We would be fighting against anything which imposes on us something we don't think is appropriate to the way we run our Country.''