OECD's FATF Publishes Its Long-Awaited Black-List

Jeremy Hetherington-Gore, Tax-news.com, London

23 June 2000

The OECD's Financial Action Task Force (FATF) yesterday announced the names of the winners of its 'best tax haven' competition. Having studied laws, banking secrecy and tax levels, the organisation has nominated a short-list of fifteen jurisdictions which is says offer the least co-operation to international investigators - and therefore have the best level of protection for those who wish to keep their assets away from prying eyes.

The list is: The Bahamas, Cayman Islands, Cook Islands, Dominica, Israel, Lebanon, Liechtenstein, the Marshall Islands, Nauru, Niue, Panama, the Philippines, Russia, St Kitts and Nevis, and St Vincent and the Grenadines.

Although almost all of the named jurisdictions have been seen to make efforts to stay off the list, or have promised to do so in future, and some have expressed outrage at being included; but the list will no doubt act as a magnet for investors looking for truly safe havens for their money. Said FATF President Gil Galvao in Paris, after unveiling the list: 'I'm not sure they will be happy...But at least some have promised to act and some are keen to get out of the list as fast as possible'.

The Cayman Islands government said in a statement in Paris that it was 'astonished' and that repeated requests for FATF representatives to visit the British Caribbean territory had been ignored. Financial Secretary George McCarthy said: 'While no one can claim to be perfect, we are entitled to be accorded a reasonable opportunity to make our case and to consider the validity of any concerns which the FATF may harbor.' Many other jurisdictions, however, visited Paris to put their cases before the 'tax police' at the OECD, some with success. Last week witnessed the ignominious spectacle of six jurisdictions grovelling before the FATF as they wrote 'commitment letters' agreeing to conform to international standards of transparency and mutual assistance - the price exacted by the FATF for leaving them off the list.

Everyone agrees that money laundering must be stopped, but the OECD's own task list is well understood by the jurisdictions to go far beyond such unimpeachable goals. While wrapping itself sanctimoniously in the pristine robes of the world's moral financial policeman, the organisation is eagerly pursuing a separate tax-protection agenda set up by rich country finance ministers. Hence the appearance on the list of such strange bed-fellows as Russia and the Cayman Islands. No-one in their right mind would think of putting their money into a Russian bank, while the Cayman Islands, host to $600bn of offshore assets, insists with some justice that its banking supervisory regime is stricter than that of most OECD member countries.

Calvin Wilson, the Caribbean region's chief anti-money laundering officer, in Paris this week to try to keep some Caribbean countries off the black-list, spoke for many when he said:

'Caribbean countries feel there is a second agenda ... to claw back revenues coming to the offshore centers because of their competitiveness.' Like Peter Crook, Director-General of Guernsey's Financial Services Commission, Calvin Wilson feels that the workings of the OECD and the FATF in arriving at the list have been far from transparent themselves. Peter Crook thinks the French were calling many of the shots, while Wilson says: 'Assessments by the FATF go far beyond the standard benchmark in determining whether a country is helping to fight international crime . . . . the FATF kept introducing new regulations and moving the goalposts.'

Some months ago, the FATF backed off from a threat to apply ill-defined 'sanctions' to the jurisdictions on the black-list. The jurisdictions which have been 'named and shamed' now have a year to remove themselves from the list by coming into line, and then a final list will be issued next year of those countries which will face action by OECD member states - although it is very unclear just what those actions might be. The nearest approach to a definition of possible counter-measures is to be found in the US anti-money laundering bill now going through the Congress, which will give sweeping powers to the US administration to prevent US financial institutions from dealing directly with errant jurisdictions or with specificied institutions in those jurisdictions.

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