The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An author of the report that placed the Bahamas among eight nations with a 100 per cent perfect Know Your Customer (KYC) compliance record yesterday told Tribune Business that the findings “should be an important defence” against further G-20/OECD attacks on this nation.

But, while agreeing that the ‘Global Shell Games’ findings were”a very strong endorsement” of the Bahamas’ anti-money laundering and due diligence regime, and its application in practice, Jason Sharman expressed scepticism that it would relieve the G-20/OECD pressure on this nation - and international financial centres in general.

Mr Sharman, a professor at an Australian university, who compiled and wrote the report together with two US academics, told Tribune Business: “You can see from the Bahamas’ position on the country-by-country table that it’s a very strong endorsement of practices in the Bahamas.

“The Bahamas had one of the world’s best rates of compliance. If the G-20/OECD care about evidence, then the report should be an important defence, but that’s a big if.”

And he added: “The finding that offshore does a better job than onshore is something that I’ve been saying for a while, but obviously it directly contradicts what passes for conventional wisdom on the subject.

“I challenge anyone thatwants to stick to the conventional story of bad tax havens and good OECD states to produce anything like the amount of evidence we have compiled.”

As reported by Tribune Business on Monday, the ‘Global Shell Games’ report revealed that the Bahamas is among just eight nations whose financial services providers achieved a 100 per cent Know Your Customer (KYC) compliance score in establishing ‘shell companies’, giving the jurisdiction’s regulatory and integrity reputation a major boost.

It placed the Bahamas among the eight countries that scored best on its ‘Dodgy Shopping Count’ ranking, meaning it was among the jurisdictions least likely to allow money launderers, terror financiers and the like to incorporate companies for nefarious purposes.

Thus Bahamian financial services providers were always demanding KYC information on beneficial owners, and doing the necessary due diligence as required by Bahamian and international law.

“One of the biggest surprises of the project was the relative performance of rich, developed states compared with poorer, developing countries and tax havens,” the ‘Global Shell Games’ authors wrote.

“The overwhelming policy consensus, strongly articulated in G-20 communiques and by many non-governmental organisations, is that tax havens provide strict secrecy and lax regulations, especially when it comes to shell companies.

“This consensus is wrong. The ‘Dodgy Shopping Count’ for tax havens is 25.2, which is in fact much higher than the score for rich, developed countries at 7.8 - meaning it is more than three times’ harder to obtain an untraceable shell company in tax havens than in developed countries,” the authors added.

“Some of the top-ranked countries in the world are tax havens such as Jersey, the Cayman Islands and the Bahamas, while some developed countries like the UK, Australia, Canada and the US rank near the bottom of the list. It is easier to obtain an untraceable shell company from incorporation services (though not law firms) in the US than in any other country save Kenya.”

To obtain their findings, the ‘Global Shell Games’ authors sent out 7,466 e-mail solicitations to 3,773 different financial and corporate services providers in some 182 countries, seeking to establish ‘shell companies’. As a control, some e-mails were sent by persons purporting to come from so-called low-risk countries, such as Denmark and Austria, while others ‘came’ from higher risk jurisdictions such as Pakistan and Tajikistan, hot-beds of corruption and terror financing.

The ‘Dodgy Shopping Count’ referred to how many providers in a particular country an individual would have to approach before obtaining a non-compliant ‘shell company’. The more providers that had to be approached, the higher a country’s ‘Dodgy Shopping Count’ ranking.

The ‘Global Shell Games’ report noted that at least 25 different approaches were made to Bahamas-based financial providers, but not once did any fail to meet local and international KYC/due diligence requirements.

“Firms in none of the top eight countries were ever found non-compliant,” the report added. “Because there is no natural upper bound on the Dodgy Shopping Count, we set it to 100 for these. But they should be interpreted as having a record without any non-compliance.”

Joining the Bahamas in the select eight were the Cayman Islands, Israel, United Arab Emirates, Seychelles, Jordan, Jersey and Denmark.