Bahamas Finance Minister Says Government Will Shut More Offshore Banks To Protect Reputation

Robert Lee, Tax-news.com, London

23 February 2001

Tax-news.com reported at the beginning of the week that Governor of the Bahamas Central Bank, Julian Francis, has slapped suspension orders on two offshore banks - the British Bank of Latin America Ltd (BBLA) and the Federal Bank Ltd - for a three-month period, citing the inability of the banks to fulfill certain requirements. According to local newspaper the Bahama Journal, the government is now saying that it will close the door on any banks in the Bahamas which are deemed to "threaten the integrity of the international financial system" and, more importantly, the reputation of the Bahamas as a major offshore financial centre.

In an address to the House of Assembly this week, Finance Minister Sir William Allen reportedly declared that the government will suspend and shut down any banking institution conducting itself in a questionable manner, saying that such institutions do not add anything significant to the financial system of the island.

Sir William was quoted as saying: 'There is an ongoing review by the Central Bank which in due course will lead to the suspension and the closure of a number of institutions. These are institutions which in our view are not adding anything significant to our financial system but indeed they threaten the integrity of the international financial system so we will be moving briskly to deal with these."

British Bank of Latin America and Federal Bank were shut down following the publication of a US Senate report which criticised them (and others) for accepting hefty amounts of highly dubious money. Although the investigation chiefly chastised American banks who use the correspondent banking system, which allows banks with no physical presence in the US to open accounts for clients at US banks, it did highlight the role of banks in various offshore jurisdictions (not just the Bahamas).

Sir William continued: 'May I say in this connection that the Bahamas has moved resolutely to respond to what it recognizes as a legitimate concern in international finance about the conduct of financial institutions and quasi institutions operating on the margins of finance and financial activity. Banks have been used by persons for activities related to money laundering, or so the report alleges. I might say that even before this report, the Bahamas had already begun to review its financial institutions in relation to the concerns of money laundering and the Bahamas had already begun to deal with these two particular institutions before this report. We were concerned before this report.'

The Finance Minister made it plain this week that the government's stance on offshore banks bore no connection whatsoever to the OECD's harmful tax competition intitiative. He said: 'In moving resolutely to deal with what we see is a legitimate concern of the international financial system, we need to make it quite clear that this action is separated from any action connected with taxes. This is not a tax issue. This is not an OECD issue. We have not concluded the OECD issue which is a tax issue. The issue which we have dealt with is a money laundering issue which is an issue dealing with the behaviour of financial institutions in relation to money laundering and in relation to their proper supervision.'

.

Recommended

Write a comment