Offshore

Bahamas ponders overhaul of offshore laws

A staff reporter, 10 May 2002

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The newly elected Bahamian government has spoken to Complinet about its proposals to review its anti-laundering procedures. A spokesman for ...

The newly elected Bahamian government has spoken to Complinet about its proposals to review its anti-laundering procedures. A spokesman for the Bahamian Financial Services Board, whose job it is to promote the islands' financial sector, said that the way in which the laws were implemented could need 'streamlining' and that some of them could clash with the islands' constitution.

"The Progressive Liberal Party won the recent elections and part of its election platform was to review the laws. All 11 pieces of legislation that were needed to update our financial services laws were passed in January 2001, including the 'know your customer' law which received support from the Financial Action Task Force. This law, which dealt with financial crime as one of the four principle objectives of the legislation, also formalised our suspicious transaction reporting regime.

"At the outset it was obvious to us that some tweaking had to be done. When the laws were modified in mid-2001, we decided to revisit them later to see what more had to be done. Most of them have now been implemented and of course we were removed from the FATF blacklist in June 2001."

The spokesman would not be drawn on the nature of the constitutional problem, but late last year a Bahamian court ruled that it was unconstitutional for regulators to freeze suspicious bank accounts. Financial Clearing Corporation had its assets frozen in January by a financial unit of the police. Lawyers representing the firm argued that the courts alone had the power to freeze accounts. They went on to say that the seizure was against constitutional articles which stopped people from being deprived of their property without compensation.

The Bahamian 'man of the moment' is James Smith, a former governor of the central bank who is to be the islands' de facto minister of finance. He will not be allowed to take up the job officially because he is not an elected representative, so the new prime minister, Perry Christie, will become minister as a front for him. Smith recently told reporters that the AML laws had to be reviewed because the financial sector was complaining about the burdens it faced in terms of bureaucracy and delays. There has been a sharp fall-off in the registration of international business companies in the Bahamas since the government enacted nine anti-money laundering laws in January 2001.

The BSFB spokesman also explained the workings of the islands' transaction reporting regime.

"Our new financial intelligence unit is up and running, set up by one of the 11 Acts that were passed in January 2001. It was accepted into the Egmont group of FIUs in June of that year. We don't have threshold reporting of any kind in the Bahamas; we merely require suspicious transaction reports. Strictly speaking, this means that they only apply to existing customers of financial institutions when they conduct transactions rather than prospective customers who contact a financial institution and then break contact in a suspicious manner, but we hope that the institution will send an STR to the FIU anyway."

Complinet asked the spokesman whether the government was planning to overhaul the tax laws as well, but he made it clear that pressure from the Organisation for Economic Cooperation and Development, which strongly influences the FATF, had abated for the time being.

"On 15 March we sent out a combined policy statement to the OECD. We promised that we would only make adjustments vis-à-vis the OECD's harmful tax policy. We said that only when all OECD members, such as our direct competitors in Hong Kong and Singapore, do the same thing will we make adjustments in our tax regime."

Complinet pointed out that nobody who read the OECD literature would ever have guessed that this was the way things stood at present, but the spokesman said that the organisation was 'a master of propaganda' and that the impression that offshore states had capitulated to all its demands was a misleading one. He added that it was now the OECD's job to "come up with the timelines" by which all offshore states should curb their harmful tax practices and that nothing would change until it did so. Tax planners may have a long wait before they see the outcome of this tussle.

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