Depositors in IoM shafted by UK Govt over money frozen in KSFUK

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2009-01-23 (All day)

MANX FOR NOTHING
Depositors in the Isle of Man branch of bust Icelandic bank Kaupthing Singer Friedlander may not elicit huge public sympathy, but there are non-tax dodgers among them who have been well and truly hung out to dry by a British government that has long encouraged banking in the crown dependencies.

Just before Kaupthing went under in October, the Isle of Man branch forwarded £530m of its customer deposits to the bank’s London branch. This did not give the depositors any protection under the UK financial services compensation scheme, because their cash had been deposited on the Isle of Man; and the money is now available to pay off the banks’ UK, rather than Manx, depositors and creditors instead.
The £530m transaction followed discussions, which remain shrouded in mystery, between the British and Manx regulators. Soon afterwards, Kaupthing collapsed and the Treasury froze its assets here in the UK, insisting that none of the deposits by then over here should be returned to the Isle of Man.

When it comes to negotiating compensation from the Icelandic government, the depositors are now reliant on the British government, a task that the Whitehall department responsible, the Ministry of Justice, has palmed off to a Treasury notoriously dismissive of the depositors’ plight.

Last month MoJ minister Lord Bach nonetheless insisted everything was fine. Asked at a parliamentary committee hearing whether he was sure “those [Isle of Man] depositors’ interests are now safeguarded, insofar as any depositors’ interests are safeguarded in the UK?” he replied categorically: “Yes I am.” But a swift bollocking from the Treasury must have followed, for by the time the transcript of the hearing appeared a footnote had been added: “Note by witness: I am satisfied by the steps taken by the UK government in the interests of the people whose deposits the UK regulatory authorities are responsible for.” In other words, not those in the Isle of Man. For IoM depositors who might have got their hopes up, this translates as: you’re still shafted.