crimes, The Royal Gazette has learned.

And Foreign Office and Treasury officials insist that UK Government-set money laundering and tax evasion laws would apply to all British Overseas Territories -- which would mean Bermuda would not lose out to other offshore financial centres.

And they said last year's Proceeds of Crime Act, designed to target money-laundering, did not go far enough for the UK.

The Foreign Office also warned that failure to toe the UK line could damage Bermuda's squeaky-clean financial image.

The news came in a letter to the Bermuda Government obtained from business sources by The Royal Gazette .

And yesterday Bermuda business leaders warned the UK proposals could seriously damage the Island's massive offshore industry.

Chairman of the Chamber of Commerce's International Companies Division David Ezekiel said he had yet to be briefed on the latest letter from the Foreign Office.

But he added: "One thing which will certainly cause concern, depending on how different countries involved in the same field as we are act, is a level playing field.

"Places like Barbados and the Bahamas can do their own thing and will -- this might create a level playing field between the Overseas Territories, but that doesn't speak to where the competition for overseas business lies.

"One of our major concerns is it will affect the business from a competitive viewpoint in relation to other territories -- not necessarily UK Overseas Territories.'' Britain wants to see the doctrine of dual criminality adopted in Bermuda.

That would make it a crime in Bermuda for someone to commit a tax offence under the law of the UK or other countries -- "fiscal offences.'' It is also feared proposed new laws would open up the Island's books to "fishing expeditions''.

Finance Minister Grant Gibbons said: "Our initial reaction was that this will be very bad news, but we have to be very cautious.

"We will make sure Bermuda maintains its high credibility -- but we don't want to seriously undercut our financial industry on the Island, either.'' The letter from UK civil servant Nicholas Westcott to the Bermuda Government outlined the UK's stand after he made a flying visit to Bermuda last month to discuss the controversial proposals with business leaders.

Mr. Westcott said: "We believe that for this money laundering legislation to be fully effective it needs to cover all serious offences, including fiscal, and to be based on the principle of dual criminality.'' He added that the UK's aim was to have equivalent legislation in other UK Overseas Territories with a booming offshore business -- like the Cayman Islands.

UK holds line on white collar crime financial watchdogs to introduce "legislation on these lines in all jurisdictions''.

Mr. Westcott insisted: "This would establish a level playing field not only between Overseas Territories but internationally.'' And he warned: "Bermuda's financial services industry was built largely on its reputation as an exemplary jurisdiction.

"The exclusion of fiscal offences from their money laundering legislation could weaken this reputation as much as comfort certain clients.'' Mr. Westcott added: "While in all other respects the Proceeds of Crime Act meets the international standards set by the UK, the exclusion of fiscal offences does create a gap which needs to be plugged.'' He said: "Her Majesty's Government, and other governments concerned in setting the international standards, regarded fiscal offences such as tax evasion or tax fraud as serious crimes...these should therefore be covered in money-laundering legislation in all jurisdictions.'' And he warned that excluding tax fraud laws would create a loophole which could be used by crooks.

Mr. Westcott added that it would also create a precedent if the UK "was willing to allow the Territories to pick and choose the areas the legislation applied to''.

He said: "This would significantly undermine the effectiveness of international action against money laundering.'' And he insisted: "To retain a fiscal exclusion might also give Bermuda an unwarranted competitive advantage over jurisdictions which included it.'' Mr. Westcott admitted the private sector "might have some residual nervousness'' about the tax and fraud offences going on the law books.

But he said: "The balance of advantage -- both for them and for Bermuda -- lies in completing the legislation as we suggested.'' CRIME CRM