Bermuda may have to cut its links with Britain to protect its prosperity, the Island's smallest political party warned yesterday.

The National Liberal Party's Graeme Outerbridge spoke out amid fears over the UK's insistence on tough new laws in its Overseas Territories to combat money laundering and white-collar crime.

He said Britain was caught between its colonial past and its future in an increasingly united Europe.

Mr. Outerbridge added: "Bermuda has always done best when we rally to our own purpose.

"We cannot expect the British to look out for our best interests for they are too busy looking out for their own best interests.

"They are charting the best approach for Britain and Bermuda should do the same for itself.'' UK Foreign Secretary Robin Cook announced a new deal for its last outposts of Empire in February.

He told Overseas Territories leaders at a conference in London that the UK was considering full British passports for almost 200,000 holders of British Dependent Territories Citizens' passports.

But he said that international treaty obligations on money-laundering and tax fraud would mean that the Territories would have to get into line with the UK's legal framework on the hot issue.

Business chiefs, however, fear that tough new rules would cripple Bermuda's financial sector, especially when independent countries might refuse to be bound by the same rules.

The UK wants Bermuda to accept "dual criminality,'' which 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.'' But offshore business leaders warned that the proposed changes could open up the books of Island-based firms to "fishing expeditions'' by overseas authorities.

The UK, however, insist that failure to toe the line on new international standards could damage Bermuda's honest image and pledged that the UK would work with international financial watchdogs to build a common set of standards worldwide.

But Mr. Outerbridge claimed that larger countries had noticed the prosperity generated by the Island's offshore industry -- and wanted to snatch as much as possible back.

He said: "They have lost significant tax dollars and those governments would like to get their hands on that offshore revenue.'' And he added Bermuda should ignore any UK suggestions for new laws if they would place the Island's business empire at risk.

Mr. Outerbridge said: "The NLP would like to state clearly that it sees the present situation with the UK as a unilateral one.

"The Foreign Office can make their suggestions and then we can ignore them if the suggested changes would damage our fragile economy.

"They might then try to force the changes they want down our throats and then Bermuda could have to go Independent in an act of economic self-preservation.

"We could then ratify the standing treaties and join world economic bodies to suit our own interests.''