The British Financial Services Compensation Scheme covers some financial firms in Gibraltar and has consequently signed a memorandum of understanding with the Gibraltar Financial Services Commission.

The FSCS was established in accordance with the UK's Financial Services and Markets Act 2000 as the UK's version of depository insurance. It acts as a government-backed compensation scheme for customers of British financial service firms. It covers firms authorised in the UK but also firms that 'passport' into the UK from other jurisdictions in the European Economic Area or Gibraltar. In carrying out its statutory functions the scheme needs access to information and documents from some of these firms, hence the MoU.

The GFSC's main worth to the FSCS is that it can act as its eyes and ears in Gibraltar. It has statutory powers to require the production of documents or information under the Financial Services (Investment and Fiduciary Services) Act 1989, the Financial Services (Information Gathering and Co-operation) Act 2013 and a number of other supervisory Acts.

In accordance with the MoU, the parties may provide information, or arrange for information to be provided, either on a voluntary basis or on request. Whenever the GFSC regulates any firm covered by the FSCS, it promises to tell the FSCS about any significant findings that could help the compensation process along. If the GFSC suddenly realises that a firm that it regulates is facing (or experiencing) insolvency or is in need of a 'workout,' it will tell the FSCS.

Both parties have agreed to help each other assess risks (and divulge information to one another) for the following purposes.

• Offsetting the risks of financial default. In exchanging information about this, they will both try to minimise the risk of fraud or other criminality including terrorism; identify the risk of financial failure; and minimise the risk to clients.
• Alleged criminality, misconduct, financial unsoundness, or other failures. Here, it is hoped that the transfer of information will allow them to investigate these things properly.
• The proper processing of applications for authorisation; or the approval of a financial institution; or the admission/approval of an individual by the GFSC.
• The FSCS's ability to prepare and plan for the failure of firms.
• The proper processing of claims or applications for redress or compensation of any description.
• Enforcement or discipline.
• The development and testing of contingency plans at firms covered by both bodies.
• The sharing of lessons learnt from dealings with firms covered by both bodies.
• "Contact and liaison by one party with third parties operating in the other party's jurisdiction," whatever that might mean.

All information exchanged between the two parties should be passed through nominated "single points of contact." The one for the FSCS is its director of operations and the one for the GFSC is the technical advisor for international affairs. The parties also agree to meet quarterly, with their CEOs meeting at least annually.

The parties have agreed only to use data for the purposes for which they have received it. They have also agreed to store data securely; ensure that only people who have a genuine business need to see data will have access to it; report data losses or wrongful disclore to each other; only hold data while there is a business need to keep it; destroy data in line with applicable guidelines and the parties' own retention and disposal policies; and provide assurance that they have complied with these points, upon request. On the subject of freedom of information, if one of the parties receives a request in relation to the other party's information, the receiving party will inform the other party and invite representations on the potential effect of disclosure.

As is well known, MoUs create no legal obligations. There is a passage in the agreement that states that it does not create any legal or procedural obligation which is enforceable by either party against the other. It also does not create any legal obligation that is enforceable by any third party against either of the parties, or against any other third party. It does not prevent either party from complying with any law that applies to them, or fetter any discretion that the law requires or allows the parties to exercise.