Caribbean Goes Into the Ring Over Blacklists

Lisa Ugur, Tax-news.com, London

28 June 2000

This past week has not been a good one for the Caribbean. First the Caribbean financial community fumed at finding their nations on a money laundering blacklist compiled by the Financial Action Task Force (FATF), accusing the OECD agency of bullying and ignoring genuine progress. The Cayman Islands, Dominica, St Kitts and Nevis, St Vincent and the Grenadines and the Bahamas all made the list. Now the Caribbean islands have been taken to task by the Organization for Economic Cooperation and Development (OECD) in a second contentious list of so-called harmful tax regimes, which has threatened sanctions within a year unless they mend their ways.

The Barbados-based Caribbean Development Bank took up arms on Monday, slamming the latest OECD list and saying that the OECD had no right to impose sanctions on offshore banking centres it deemed "tax havens". It urged the fifteen Caribbean islands and territories named in the list to make a legal challenge against what it called "economic blackmail."

Sir Neville Nicholls, president of the Caribbean Development Bank, said 'The OECD does not have the legal authority to impose sanctions on any state. I would, therefore urge that the governments of the Caribbean collectively pursue the matter at the level of the World Trade Organization and consider all legal and other options open to them for exposing this form of economic blackmail against small states by the OECD.' Nicholls also branded the blacklist a "patently unfair" attempt by the rich and powerful G7 countries to recoup business they have lost to offshore.

Naturally the CDB, as a development finance institution, is keen to preserve the reputation of the Caribbean and make sure that investment keeps flooding in. The Caribbean has long claimed that a thriving financial services sector is crucial to its economies and it is often argued that without the jobs and income generated by the financial sector, the islands would be prey to drug traffickers and other crime syndicates.

It is hardly any wonder that money laundering and tax haven blacklists so rankle the Caribbean. As a Barbados government worker apparently put it: 'We are not a tax haven. Barbados is a low-tax regime'. The Bahamas have also expressed anger at the lists. Inclusion on a list of offshore jurisdictions considered to facilitate money laundering certainly surprised Central Bank Governor Julian Francis who said 'There has been so comprehensive a program and effort in the Bahamas over the years, going back to 1987 really, when we introduced a law against money laundering in the Bahamas.' Referring to the OECD campaign he said 'It reflects a kind of determination to be unreasonably precipitous and severe with Caribbean jurisdictions.'

Charles Intriago, publisher of the Money Laundering Alert Newsletter is in total agreement. He said 'Some of the little, tiny Caribbean island nations they've picked - although I'm not denying that money laundering exists there - in comparison to the bigger money laundering centres, it just doesn't make sense.'

The storm over these latest attacks on offshore financial centres shows little sign of abating. Jurisdictions included on the lists are seething, some more quietly than others. Yet one never knows exactly what the upshot will be. Could it possibly be that all the brouhaha over the offshore way of doing business will end up being the best publicity offshore financial centres ever had?

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