The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Bahamas must avoid "shooting itself in the foot" by over-regulating its financial services sector, the Opposition's finance spokesman warned yesterday.

Chester Cooper, during his contribution to the debate on the Financial Transaction Reporting Bill and Proceeds of Crime Bill, pledged his support but expressed concern that over-regulation could further jeopardise the financial services sector's competitiveness.

Mr Cooper, the Exuma and Ragged Island MP, warned against making it more difficult to do business in the Bahamas, and said: "I believe that the Bill would result in the strengthening of anti-money laundering protocols, but I have some concerns. We must not over regulate this sector as we arguably did in 2000.

"We must take care not to over-regulate and put up unnecessary barriers for businesses to do business in the Bahamas. It's already hard enough. We put up barriers to commerce that prohibit the smooth functioning of business. For example, why do I need an NIB card to license a motor vehicle? Why do I need to pay real property tax for individual directors serving on Boards to get a tax compliance certificate?

"Just two examples of government overreach that should be discontinued. These are the kinds of things that I call vexing business issues. With regard to Clause 6 of the bill, regarding customer due diligence by financial institutions, we must not over-regulate the financial services sector, especially when it comes to low-risk accounts."

Mr Cooper added: "We must balance the need for regulation and the need for more ease of doing business to remain a vibrant, competitive jurisdiction. Domestic banks are already applying a sledgehammer in some cases where a fly swat will do. We must strike a balance. We must not fold our tent. We must not just have legislation thrust upon us.

"We must respect that we live in a global village with interconnected systems. However, we must assert our understanding of local context and the realities with respect to the bigger global picture. If we react too harshly, we run the risk of starving to death an already diminished financial services sector."

Mr Cooper said continued attacks on the Bahamas' sovereignty are to be expected, adding that the Government must be prepared to speak up and defend this nation.

He also expressed concern over the penalties for certain infractions under under the proposed legislation, which he argued appear to be quite high. "For example, if a financial institution opens up one single account without KYC, it is subject to a fine of up to $1 million," Mr Cooper added.

"An individual can be fined up to $500,000 for a similar offence, and have the unintended consequence of potentially shuttering a financial institution. I'm not so sure potential insolvency should be the remedy for a possible violation of this legislation. The fines under the existing legislation are high but not unreasonable. Perhaps these should be maintained."

Mr Cooper also expressed concern that the definition of a politically exposed person (PEP) appears "extremely broad". He said: "The Bill should clarify whether directors of state-owned corporations qualify as PEPs. The definitions on page nine of 'senior management' of state-owned corporations, as PEPs, seem to suggest this is so.

"It is my view that every individual serving on a Government Board will be a PEP under this legislation. I am certain that they didn't sign on for that and you will see some resignations effective immediately on implementation of this Bill. These directors would populate an already small pool of people serving in this capacity."

Mr Cooper added: "The Government must take care not to reduce the pool of persons willing to serve in these positions. The Government should also address the very tribal nature of such appointments, keeping in mind that all Bahamians, PLPs, FNMs and everything in between, must be utilised to move the nation forward.

"I would in fact recommend that when a new Government comes in that they consider leaving a few of the competent directors of the previous Boards in place for continuity, especially in highly technical businesses like BPL and Bank of the Bahamas, for example. The pool of suitable directors is decidedly small and we must use the best and brightest in our country to advance our institutions. The political cleansing that we see after a change in Government is not fitting of a modern, progressive society, and I call for more political maturity in this regard."

With regards to the Proceeds of Crime Bill, Mr Cooper said Section V speaks to the seizure of assets without a conviction. "There is a provision where a confiscation order may be had if a person is charged," he added.

"I implore the Government to seriously look into whether this section can stand up to constitutional scrutiny. The threshold for charging someone is not very high, We should not, in our haste, be so quick to leave behind the basic tenet of law that a person is presumed innocent until guilt is proven.

"The provisions in this section could potentially backfire, cause significant hardship if we get it wrong, and lead to costly lawsuits against the Government, for which the Bahamian people will have to ultimately foot the bill. We must take care that this and other provisions of the Bill do not infringe on the constitutional rights of Bahamians."