Why does Britain have its colonies under scrutiny? The Royal Gazette takes a closer look.

A vehicle for attacking international business rivals or a timely review of its responsibilities – the UK's sudden interest in Bermuda and its other overseas territories has sparked a variety of reactions.

But the volume of work is certainly remarkable. First came the National Audit Office report in November which had many words of praise for Bermuda as well as some criticism.

Then Overseas Territories Minister Meg Munn visited Bermuda in March as did MPs from the Foreign Affairs Committee (FAC) to gather material for their forthcoming report in this summer.

But they were beaten to the punch by colleagues on Britain's Committee of Public Accounts (CPA) which released a report urging the UK Government to get more involved to avoid being held responsible for wayward financial regulation offshore.

They didn't mince their words. Report chairman Edward Leigh MP said: "The Foreign and Commonwealth Office is not doing enough to manage the risks arising from the UK's liability for the 14 Overseas Territories choosing to remain under British sovereignty.

"In most of the Territories, the standards of regulation across areas such as banking, money laundering, insurance and securities are not as good as those in the Crown Dependencies."

He said the FCO, and other arms of the British Government had to do more to help the Territories, especially the smaller ones, strengthen regulation.

"Where necessary, this should include bringing in more UK investigators and prosecutors."

The report conceded Bermuda had hired more regulators since 2000 but concerns were raised that some public bodies had accounts up to six years in arrears while there were delays to the public pension and insurance fund which controls approximately $1 billion of assets.

Government was urged to increase capacity for oversight of Territories' financial services industries as MPs claimed standards were not up to those in the Crown Dependencies of Jersey, Guernsey and the Isle of Man.

And the rhetoric used by MPs in the grilling of top Foreign and Commonwealth civil servant Sir Peter Ricketts went further as Mr. Leigh accused him of being asleep at the job while describing Bermuda's record as "appalling" as he attacked its record on money laundering and insurance regulation.

The frank exchanges as legislators grilled the executive also revealed a suspicion of the colonies and an apparent frustration Britain was still responsible.

At one point Mr. Leigh wondered openly why Bermuda was still a colony in a session where he pointed out that Bermuda was "fabulously rich" with a per capita that was the highest in the world.

Labour MP Ian Davidson accused Sir Peter of condoning the development of tax havens with Sir Peter pointing out the OTs had autonomy to develop their own economies.

However, exchanges on Bermuda in the FAC in March revealed little that was new.

During a grilling of Ms Munn MPs passed on concerns about Bermuda opting to go independent on the basis of winning a general election by a narrow margin.

Conservative MP Malcolm Moss said: "If you look at the results of the last Bermuda election, the percentage difference in votes was tiny.

"If there is a low turnout, there would be a move towards independence on less than 50 percent of the popular vote. Are you suggesting that would be acceptable?"

Ms Munn replied: "No, which is why I was saying that if a Territory wanted to go for independence on the basis of something other than a referendum, it would entirely depend on the circumstances.

"If a political party went into an election saying that it wanted independence and received 90 percent of the vote, that would be a different situation from the scenario that you have described. We would want to consider that matter."

Labour MP Andrew Mackinlay raised the issue of the arrest and holding in custody of Auditor-General Larry Dennis, something Ms Munn admitted she was unaware of and the point was brushed aside by Overseas Territories director Leigh Turner.

And with time running out in the Q and A session Mr. Mackinlay again raised the subject of the Bermuda Regiment which he said had a conscription policy which discriminated on gender which he said was unacceptable.

He also raised the question of bawling out and suggested sending a UK military attache to give a review but Ms Munn said if there were real concerns about treatment of conscripts the Governor could request a second look from the UK.

The PAC has yet to issue its report but the remarks of the CPA about Bermuda's "appalling" reputation certainly have caused ripples across the Atlantic.

The attacks sparked a detailed response from Finance Minister Paula Cox and Attorney General Kim Wilson who defended Bermuda's reputation on money laundering citing the long-held policy of 'know your customer'.

And further work is promised on what Ms Cox said was a moving target.

Bermuda got a better showing in The National Audit Office report, published last November, where it was among the four larger offshore financial centres which was said to be leaving smaller territories in their wake.

And the report said Bermuda was in a group of Territories which had reduced the risk to the UK government due to vigorous economic growth and/or sound financial management.

This island was also praised for important achievements in the area of disaster management while the recommendations section said Governors should follow the Bermuda example by encouraging and participating in modern risk management practices.

While some take Britain's increasing interest as implicit criticism it's clear the UK recognises it has to put its own house in order in several areas including training of Governors.

The report notes that several Governors and other officials based in the Territories reported feeling relatively unprepared when they took up the post, "noting initial learning curves with varying degrees of steepness according to the relevance of their prior experience",

However a footnote in the CPA hearing noted Bermuda's Governor Sir Richard Gozney had done much before arriving last December including calling on a range of financial services-related departments, agencies, associations and companies in the UK.

Sir Richard also visited relevant experts in Washington and the Cayman Islands and had extensive consultations with his predecessor and with the FCO.

The National Audit Office report also noted that the FCO spends $11 million a year on Overseas Territories work but it notes relatively few bids for good governance initiatives, despite it being of great interest to the UK.

It defines good governance as transparency of decisions by the executive and legislature in line with rules and regulations and the accountability of Government to the public and legislature.

However it admits good governance is inherently difficult to sustain in small communities and this weakens the UK's ability to identify potential risks.

The challenge was to manage complex and modern Government in close communities with personal or extended family relationships between officials and citizens, said the report.

It noted the concerns of Bermuda's Auditor General Larry Dennis about preserving his independence, something Mr. Dennis told the review was "fragile privilege" not ensured by legislation alone.

The report notes that many legislatures are too small to provide enough backbenchers to staff scrutiny committees and the report admits solutions are not easy to find, although appointing ex officio experts to Public Accounts Committees are one option - a practice taking off in UK local government.

The problem of Governing MPs not wanting to appear disloyal is also mentioned.

In a separate section devoted to Bermuda, the National Audit Office notes that it is one of the most prosperous Territories in the world and faces mainly risks arising from its background of commercial success.

Over a period of years this Island could become less attractive to expatriate workers and foreign companies and less competitive as a financial centre, due to the rising cost of living and doing business there, said the report.

Restrictions on entry by expatriate workers, who can take a year to receive work permits, can lead to protracted vacancies in key and specialist posts, in both the public and private sectors, it said.

The NAO concluded: "Sustained efforts will be needed to ensure that the jurisdiction maintains its positive international reputation and its competitive edge through which such notable success has been achieved, recognising that other centres are becoming increasingly attractive business locations and increasingly positioned to compete directly with Bermuda."

So where does Bermuda stand amid the barrage of information gathering?

For Association of Bermuda Insurers and Reinsurers' Brad Kading there should be little to worry about.

"Bermuda is excelling - it's completely unique amongst the British Overseas Territories," he said.

"Within the Commonwealth structure there has got to be supervision of the Governmental functions and this report is a normal exercise of that supervisory role."

And Mr. Kading is anxious to have the latest IMF report released which he believes is positive.

"The US treasury and the OECD have both cited Bermuda as a cooperative jurisdiction in terms of exchange of information and tax law compliance," added Mr. Kading

While the rhetoric of some of the British MPs can appear alarmist those fearing an increasingly interventionist approach from Britain need to remember the CPA and the PAC are not Government but are cross-party bodies which can recommend action but not enforce it. The FCO can ignore every word if it wishes.

Opposition politician Trevor Moniz said he didn't think Bermuda should have too much to fear from what he gathered from meeting Ms Munn.

"She was on top of it, she was very well briefed and obviously a very bright woman and she certainly didn't impose her political views on Bermuda," he said.

"She seemed to be very open-minded and listened to our points of view and that was reflected in her evidence to the Foreign Affairs Committee."

Mr. Moniz said the British were clearly aware the Overseas Territories were all very different and no single approach would suit all.

"I don't see any evidence of them trying to force anything on us at all. If anything they indicated they had quite a lot of flexibility."

What the National Audit Office said on natural disaster risk

In a section on Hurricane or Tsunami Risk, Britain's National Audit Office report released late last year notes Bermuda's exposure to natural disaster risks is amplified by its isolation.

"Disaster plans must assume no significant external assistance for at least the first 24 hours. Bermuda is extremely densely occupied and many disaster scenarios would quickly affect thousands of people.

"Bermuda's topography raises a number of vulnerabilities; for example the international airport is linked to the main island by a single causeway which has been repeatedly breached, latterly by Hurricane Fabian in 2003.

"Fabian was the most severe storm to hit the Islands in 50 years.

"The risk of a Tsunami, caused by lateral collapse of Cumbre Viejo volcano in Cape Verde Islands is considered to be extremely remote. Though potentially cataclysmic, impact would be lessened by the surrounding reefs and sea shelf."

However it noted the Governor had played a leading role in disaster planning and in tests against a diverse range of scenarios, including natural disasters, transportation emergencies, pollution incidents and civil or terrorist events.

Tests have included scenarios on key vulnerabilities, such as the airport causeway.