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Offshore financial
centres operate in the international arena, outside their licensing
jurisdiction. Offshore financial centres become vehicles for illicit purposes
due to have significantly less incentive supervisory agencies and the anonymity
guaranteed by their banking, tax and company regulations provides an effective
shield against requests for information by law enforcement agencies. In recent
years, the number of assets and activities of offshore banks have expanded, the
administrative bodies has expressed increasing concerns about the illegitimate
usages or financial crimes relating to offshore financial centres.

Financial crime in
offshore financial centres can refer to any non-violent crime that generally
results in a financial loss, including financial fraud. It also includes a
range of illegal activities such as fraud, money laundering and terrorist
financing, corruption, tax evasion, asset shifting, improper insider dealings
and other criminal financial schemes. It also included misrepresentation of
financial information, embezzlement, check and credit card fraud, securities
fraud, insurance fraud, and pension fraud. (Financial System Abuse, Financial Crime and
Money Laundering Background Paper, 2001)

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Money Laundering is described as the
procedure that aims to convert illegally money (dirty money) in order to create
the impression that such money comes from a legitimate source. Money Laundering
is used worldwide to obscure criminal activities that are related with drug or
arms trafficking, terrorism, extortion, bribery, insider trading, illicit tax
practices, market manipulation and other criminal offences. (OECD, 2001) Next, tax evasion is the
illegal evasion of tax that reduces taxpayer tax liabilities such as declaring
less income than amounts actual generated. Terrorist financing is defined as
the financial institution that carries out a transaction, knowing that the
funds or property involved are owned or controlled by terrorist or terrorist
organisations, or that the transaction is likely to be use in terrorist activity. (PIETH, 2002)
Corruption is giving or accepting, a bribe or any other undue advantage which
is illegal.

There is a growing
perception in many key jurisdictions that the most rapidly growing category of
predicate crimes are financial centres. The illegal financial activities will
harm the financial system.

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