FATF Visit To The Bahamas A Success But Financial Sector Complains About Administrative Burden

by Amanda Banks, Tax-news.com, London

21 May 2001

The Financial Action Task Force (FATF) concluded a visit to the Bahamas last week during which it reviewed the government's recently implemented anti-money laundering initiatives. According to news reports from the Bahamas, the response from the FATF was of a positive nature.

Chief executive officer and executive director of the Bahamas Financial Services Board (BFSB), Wendy Warren, told the Nassau Guardian that the FATF praised the Bahamas' efforts to comply with the multilateral's demands.

The Bahamas was included on a list of 15 countries labelled as 'non-cooperative in the fight against money laundering' in a report published by the FATF in June last year. As a result of the report, all 15 countries incurred advisories by the UK and US treasuries which warned financial institutions against conducting business in those jurisdictions. The Bahamas set to work to remedy the specific deficiencies listed in the report by introducing a comprehensive range of new and amended laws and regulations in accordance with the FATF's demands.

However, many financial institutions on the islands, as members of the BFSB, have complained over some of the new rules which have become a burden for them. Their concerns have been compiled in a BFSB report from which Ms Warren outlined the main points at a financial seminar held in the Bahamas last week. She said: 'A number of these concerns can be addressed without changing the core document. It is mostly about the clarification of the laws and how to actually implement them.' Of major concern is the Financial Transaction Reporting Act, which calls for comprehensive written documents and has become an administrative burden on the financial sector. Ms Warren explained: 'Instead of transactions that in the past were handled electronically in merely seconds, the process can now take days. It's a nightmare, and it causes business to come to a halt.'

The report, while recognising the need for written confirmation documents, requested more clarity on the definition of such a term and recommended that with some transfers, i.e. when account holders transfer their funds into another account or institution, it should not be necessary to 'go back and verify the transfer again.' For example, the process of validating transactions with the Cayman Islands has become a complex one. Ms Warren said: 'It is almost amusing to consider that it's easier to do business with on-shore countries now than the neighbouring offshore jurisdictions. It has had a significant impact on the way we do business and it has come down to us almost competing with each other.'

The headache gets worse for transactions involving funds in excess of ten thousand dollars, particularly when conducted through intermediaries, because they require 'double verification', said Ms Warren.

The BFSB members have argued that accounts with relatively small amounts of cash that appear to have no overseas connections should not have such stringent verification processes. Both the FATF and the Bahamian government say they recognise these concerns but argue that strict controls must be in place to deter money launderers - and no account is free from such activity without the proper regulations.

According to the Nassau Guardian, on-site examinations are also a thorn in the side of the BFSB members. The report called for the rule to be scrapped that forces them to conduct such examinations on an annual basis as well as at certain times of the year. It also requested that the five-day rule preventing institutions from informing their customers of a freezing order be lifted. 'It is extremely difficult for a person to, as they say in the Bahamas, duck someone for five days, especially if that person is involved in some type of criminal behaviour, they are not exactly someone you would want to irritate,' said Ms Warren.

The Nassau Guardian says the BFSB's concerns have now been delivered to the Ministry of Finance and the Board is awaiting a response.

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