Bermuda runs the risk of losing its reputation of being tough against criminals and terrorists seeking to wash dirty money says departing Governor Sir John Vereker.

He spoke out after leaks of a critical report by the International Monetary Fund but said there was no need for alarm as Government was on the case.

Last month Finance Minister Paula Cox said the still-classified IMF report on Bermuda's ability to tackle money laundering and combat terrorist funding did not conclude that Bermuda is a jurisdiction at risk.

But she hinted the problem for the Island may lie with both regulated and private financial institutes not meeting responsibilities on stamping out illegal financial practices.

And Sir John Vereker told The Royal Gazette: "We should be concerned but not alarmed because the IMF has told us what I think we already knew - that much of our formal systems now fall behind established best practice and that we don't yet have a track record of implementing those systems and putting them into practice properly.

"It means we stand at risk of losing our reputation for being a place where it is difficult and unwise to launder the proceeds of crime or to fund terrorism.

"We don't need to be alarmed because Bermuda does have an excellent reputation for being a place where it is rather silly to try and launder money and that reputation will stand us in good stead while we make the necessary changes.

"But we do have to make the changes. I know the Minister of Finance recognises that."

Asked how Bermuda had got to this state of affairs Sir John said work had been done in the last year including the establishment of the Financial Intelligence Agency which itself is not up and running as staffing was sorted out.

He said an anti-money laundering seminar had been held here about 18 months ago with an expert from London.

"He pointed out then that we were in danger of slipping back."

Sir John said it was possible to become complacement if you had a good reputation.

"If you had a clean bill of health, as we did have, from the IMF the last time around, it is quite possible to tick the boxes and say we are OK. But ticking boxes is not the same as being fully proactive supervision of all the transactions that go on. That is what we need."

The IMF carried out a review of the Island in May and has sent a draft copy of its report to the Finance Ministry.

The contents of the draft remain out of the public realm and Government has requested further details be considered before the final report is released.