The sudden announcement of the visit to Europe this week of a delegation led by the Prime Minister has prompted much comment and speculation. Reportedly, its purpose was to explain to officials of the European Union and the Organisation of Economic Co-operation and Development the recent initiatives taken by the FNM government in the financial services sector in relation to our country’s compliance with international regulations and standards and with global measures to combat financial crime.
Dr Minnis’ presence was presumably designed to show those concerned in Brussels and Paris the strength of The Bahamas’s commitment to these measures. We hope this mission has been successful, but it has called into question whether the head of government of a sovereign state should be entering into direct dialogue with EU and OECD bureaucrats, however senior. If, as the Deputy Prime Minister now claims, this was more of a diplomatic mission, it would have been right for the Prime Minister to have met people at an appropriate political level.
Since the OECD started applying serious pressure on our country in 2000 in an attempt to limit the operations of offshore financial centres, successive governments have complied with standards which gradually became more demanding. Thus, as soon as we took action, the goalposts were moved and new requests were made by the Paris-based Financial Action Task Force (FATF) which sets the global standards for combating money laundering and terrorism funding.
In reaction to continuing pressure to pass suitable legislation, The Bahamas has sought to satisfy these standards so that by the end of last year the Attorney General reported FATF’s affiliate in the Caribbean had judged the nation was complying with almost one third of global anti-money laundering and counter terror financing standards and accordingly had been upgraded as being ‘partially compliant’, putting us on a level with the USA. But further action is being demanded – for example, in relation to International Business Companies and stopping the practice of ring-fencing in favour of overseas investors that makes our country an attractive offshore place for their assets.
Our overall objective as a nation must be to minimize the threat of being cut off from international investment and banking. So we consider the FNM government’s strategy to modernise, deregulate and diversify the economy is sound, as is its policy to take measures to avoid vulnerability to money laundering, corruption, tax evasion, the financing of terrorism and cyber-crime through its collection of financial services bills designed to comply with international standards. These also enhance our ability to retain correspondent banking ties, which are vital to our standing as an international business centre, and the loss of which would be one of the consequences of being blacklisted for non-compliance.
Against this background, however, policy-makers should always be aware a balance has to be struck between meeting international standards and protecting the needs of our civil society and our position as a competitive financial centre. The Non-Profit Organisations Bill, which has now been deferred for further public consultation, may be seen as a case in point.
While co-operation in the fight against financial crime, including the need to prevent funding of terrorism, is important, it is also reasonable for European countries to protect their tax regimes. But it is equally important this should not be at the expense of small Caribbean countries which lack an industrial and manufacturing base and rely for their prosperity on tourism and the provision of financial services as a vital sector of their economy. As sovereign countries, therefore, they need to consider at what stage, if any, they should dig their heels in against international organisations seeking to dictate the terms of their domestic legislation.
This has come to the fore recently following inclusion of The Bahamas on a Dutch ‘blacklist’. If a single European country can now act alone in making more extreme demands than the EU and OECD - and others follow suit - this calls into question the future of our co-operation with these organisations.
We believe the new threat of ‘national blacklists’ should persuade the government to reassess its whole approach to this issue. But we also hope it will acknowledge our own weakness as an individual country in dealing with the uncompromising EU and OECD bureaucracies, so that in order to secure meaningful change small Caribbean countries should come together under the umbrella of CARICOM to strengthen their negotiating hand through regional solidarity.
It might also be necessary to elevate the whole issue to a political level. This would require strong and imaginative leadership. But it might help to bring about change because it is not in the broader interests of the larger and richer countries of the West to impoverish Caribbean countries by completely destroying their financial centres.