Front Matter Page
© 2007 International Monetary Fund
IMF Country Report No. 07/154
Gibraltar: Assessment of Financial Sector Supervision and Regulation including Reports on the Observance of Standards and Codes on the following topics: Banking Supervision, Insurance Supervision, and Anti-Money Laundering and Combating the Financing of Terrorism
This Assessment of Financial Sector Supervision and Regulation for Gibraltar was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed on May 2, 2007. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of Gibraltar or the Executive Board of the IMF.
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International Monetary Fund
Front Matter Page
International Monetary Fund
Assessment of Financial Sector Supervision and Regulation
Prepared by the Monetary and Capital Markets Department
(In consultation with other Departments)
Approved by Jaime Caruana
May 2, 2007
This report is based primarily on work undertaken during a visit to Gibraltar during March 1–17, 2006.
The assessment team comprised Mr. R. Barry Johnston (Head), Mr. Salim M. Darbar, Ms. Tanya Smith, Ms. Mariela Moreno (all MCM), Mr. Joseph Myers, Mr. Andrews Gors, and Ms. Joy Smallwood (all LEG), Mr. Peter Hayward (consultant, for banking), Mr. Jorge Mogrovejo (consultant, Superintendency of Banks and Insurance, Peru, for banking), and Mr. William McCullough (consultant, for insurance). The assessment team received excellent cooperation from the authorities and market participants. The main findings of the assessment are:
Gibraltar has a well-regulated financial sector and the authorities have taken a number of steps to implement recommendations of the last IMF assessment in 2001.
The assessment found a high standard of compliance with the Basel Core Principles and the Insurance Core Principles.
While Gibraltar has done a good job of improving its AML/CFT regime to keep abreast of evolving standards, it needs to take a number of steps to update its legal and regulatory regime to reflect the revised FATF 40+9 Recommendations.
The reputation of Gibraltar as a financial center will depend on maintaining the independence of the Financial Services Commission (FSC).
The main authors of this report are R. Barry Johnston and Salim M. Darbar with contributions from the rest of the team.
The AFSSR is a summary report on implementation of the indicated financial sector regulatory standards. It has been developed to help jurisdictions identify and remedy weaknesses in financial sector supervision and regulation. The reviews do not directly assess risks such as those associated with asset quality, markets, or fraud that could affect the soundness of financial systems or individual institutions.
A. Political and Economic Background
II. Financial System Overview
A. Overview of the Legal and Institutional Framework
B. Financial Institutions and Market
C. Findings from Earlier Assessments and Authorities Response
III. Main Findings and Recommendations
A. Cross-Sector Issues
B. Sectoral Assessments
Financial Action Task Force Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism
1. Gibraltar: Financial System, 2001–06
1. Priority Recommendations
I. Reports on the Observance of Standards and Codes
2. Recommended Action Plan to Improve Compliance of the Basel Core Principles
3. Recommended Action Plan to Improve Observance of IAIS Insurance Core
4. Ratings of Compliance with FATF Recommendations
5. Recommended Action Plan to Improve the AML/CFT System
Anti-Money Laundering Guidance Notes
Approved Persons Regime
Basel Committee on Banking Supervision
Basel Core Principles
Customer Due Diligence
Combating the Financing of Terrorism
Collective Investment Schemes
Criminal Justice Ordinance
Designated Nonfinancial Businesses and Professions
Drug Trafficking Offence Ordinance
European Economic Area
Financial Action Task Force
Financial Intelligence Unit
Financial Services Authority
Financial Services Commission
Financial Services Commission Ordinance
Gibraltar Criminal Intelligence Division
Gibraltar Financial Intelligence Unit
Gibraltar Regulatory Authority
International Association of Insurance Supervisors
IAIS Insurance Core Principles
International Convention for the Suppression of the Financing of Terrorism
International Financial Reporting Standards
International Organization of Securities Commissions
International Monetary Fund
Legal Department, IMF
Monetary and Capital Markets Department, IMF
Mutual Legal Assistance
Multilateral Memorandum of Understanding
Memorandum of Understanding
Offshore Financial Center
Offshore Group of Banking Supervisors
Politically Exposed Person
Public Information Notice
Report on Observance of Standards and Codes
Suspicious Transaction Reporting
Trust and Company Service Provider
Undertakings for Collective Investment in Transferable Securities
UN Security Council Resolution
Gibraltar has a well-regulated financial sector. The Gibraltar authorities are concerned with protecting the reputation and integrity of Gibraltar as a financial center, and are cognizant of the importance of adopting and applying international regulatory standards and best supervisory practices. Gibraltar has a good reputation internationally for cooperation and information sharing.
The authorities have taken a number of steps to implement the recommendations of the last IMF assessment in 2001. In particular, the Financial Services Commission (FSC) has been assigned significant additional resources and has developed a well structured approach to the management of its resources that includes a risk-based approach to supervision.
The reputation of Gibraltar as a financial center will depend on maintaining the independence of the FSC. Steps taken to implement a governance structure of the FSC that would bring it into line with best international practice should be helpful in this regard.
The assessment found a high standard of compliance with the Basel Core Principles for banking supervision. Prudential requirements are based on EU requirements and U.K. prudential rules and practices as required by the Banking Ordinance. The risk-based supervision system introduced in 2001, and recently enhanced, is well-designed.
The assessment found that the insurance supervision was compliant with the majority of the Insurance Core Principles. On site inspections are being undertaken on a risk-based approach. The FSC has confirmed that attention is being given to increasing the number of supervisors to achieve a higher rate of on-site inspections in a growing sector.
The Gibraltar authorities have done a good job of improving their AML/CFT regime to keep abreast of evolving standards. Gibraltar authorities take a practical approach to implementing AML/CFT controls, and they have focused much of their resources and attention on providing effective international cooperation. Nevertheless, Gibraltar needs to take a number of steps to move its legal and regulatory regime forward to reflect the revised FATF 40 + 9 Recommendations:
The criminal laws on money laundering should be consolidated, and proposed legislation on mutual legal assistance should be enacted.
The FSC’s Anti-Money Laundering Guidance Notes need to be updated to cover terrorist financing, and some of the key provisions currently in the guidance notes need to be reflected in law or regulation.
Bureaux de change and money transmitters should be supervised for AML/CFT compliance, and the Government needs to conduct risk assessments of a number of designated non-financial businesses and professions and, as appropriate, extend AML/CFT supervision to them, as well.