The NAO report on the Crown Protectorates is an almost never ending horror story. Take this on Bermuda, one of the best regulated of these shambolic places:
The Auditor General of Bermuda reported in 2006 that though in this Territory, central government departments were up to date, other public bodies had not produced accounts since 2002 and 2003. Most serious were delays in the public pension and insurance funds which controlled assets of some $1 billion.
Or this on Cayman:
In the Cayman Islands, a legitimate initiative to implement modern resource accounting has overstretched local capacity, and this, combined with the after-effects of Hurricane Ivan, has severely affected the timely delivery of accounts.
And this is the BVI:
Though there are examples of good practice in most Territories, a capable external audit function is not seen as a priority by all Territory governments. A common factor, found in most Territories, is an acute shortage of capability in bookkeeping and basic accounting skills, coupled with inertia or complacency on the part of responsible officials. The Acting Auditor General of the British Virgin Islands estimates her staffing levels are one third below complement; the accounts for 2006 were still being audited at the time of our report. The audited financial statements and audit reports for 2004 had not been laid before the Assembly by the Government.
It's perfectly obvious that these places cannot manage their own affairs. What sort of joke then is it that we pretend they can regulate the 30% - 50% of the world's wealth that is nominally located in their territories?
And they can't audit their own accounts, and place no importance on it. So what chance is there that they place any importance on holding others to account?
Why don't we stop this farce? Putting as many pieces of paper in place as you like is not going to make this system work. As the report says of the Turks and Caicos Islands:
In 2006, constitutional changes in the Turks and Caicos Islands devolved public sector appointments to a new Public Service Commission. The Audit Office there has expressed concern with the candidates imposed on it through these arrangements. None, except the Chief Auditor, are qualified in accountancy.
And what about this complete disaster from the Turks & Caicos which shows just how bad things are:
In 2006-07, the Department consented to up to $10 million of further borrowing by the Turks and Caicos Islands Government, given stated liquid reserves of $14.6 million. When the audited 2004-05 Accounts were published in July 2006, it was found that cash reserves had been overstated by $6.6 million due to failures to reconcile the government bank account. The Department has agreed with the Territory Government to obtain independent verification of their reserves in the future.
And where does the buck stop for this? Well, the report tells us:
Offshore financial services are the most significant contributor to the economy of four Territories, and are significant secondary industries in Anguilla and the Turks and Caicos Islands. Damage to this sector, either through negative reputation or regulatory failure, could lead to increased UK liabilities.
We in the UK carry the responsibility for this. And let's be clear, this failure is not occasional, it is systemic. In which case we have a duty, and a very clear duty to shut these places down, now. Because there is no way we can bear this risk, or impose it on the rest of the world.
And we'd go a long way to raising $255 billion of tax revenues if we did shut them down. What is the down side in that?