government says is part of due diligence in its banking sector.

Keith Mitchell, Grenada's prime minister, said: "We have an image problem to correct and we will correct it. We will make sure that we have a viable, clean offshore centre that can bring good business to the country and bring people here that we all can be proud of.'' One of the first banks to close was the First International Bank. Local regulators accused the bank of diverting around $150 million of clients' funds. The Grenada government has appointed accountancy firm PricewaterhouseCoopers to conduct a forensic audit on the bank to trace and recover the money.

The government denies this move is a reaction to any pressure from the OECD or other agencies and claims it is just conducting its business as normal. But Grenada is one of the islands that has come under extreme pressure, including the threat of sanctions, from the OECD.

Although a group of offshore islands are fighting criticism and threats from the OECD, Grenada's latest move follows similar moves by other offshore jurisdictions to comply with international regulatory expectations.

Dominica closed its British Trade and Commerce Bank, claiming it was not happy with its operations, and the Bahamas has tightened regulation which it expects to lead to loss of many of its 17,000 international business companies-IBCs.

The Cayman Islands Monetary Authority took over the MA Bank, owned by Mercado Abierto of Argentina, after the US reported it had been used to launder $7.7 million Mexican drugs money. Cayman has also moved to close or restructure its 62 shell banks.

A group of Caribbean jurisdictions rejects the OECD's charges that their tax status provides harmful tax competition. Through a joint working group they are in discussions with the OECD to resolve the issue without the imposition of sanctions which could be very damaging to the offshore jurisdictions.