Official Claims Bahamas Promoting Its Offshore Sector At Bermuda's Expense

Lisa Ugur, Tax-news.com, London

06 July 2000

The Bahamas and Bermuda are apparently sparring as a direct result of the OECD's recent report on harmful tax practices. If local reports are to be believed, the Bahamas has taken to warning potential offshore business clients away from Bermuda, telling them to expect greater levels of scrutiny and investigation now that Bermuda has committed itself to working towards international standards of transparency and regulation under the OECD's watchful eye.

Bermuda was one of six offshore financial centres which wrote to the OECD prior to the publication of its blacklist of tax havens, pledging to meet OECD requirements by 2000. But now Peter Hardy, who recently retired as Bermuda's Financial Secretary, has spoken out about the Bahamas' new tactic in self-promotion. 'This is not a Bahamas Government policy but a marketing ploy in the private sector' said Peter Hardy. 'They were also using the fact that we are going to be reviewed according to financial standards set in the United Kingdom White Paper on Dependent Territories to promote themselves against Bermuda and the Cayman Islands.'

Admittedly, most of the world's offshore financial centres, from the Pacific to the Caribbean, feel they have been hit hard by a recent swathe of reports from the Financial Stability Forum, Financial Action Task Force (FATF) and OECD and it is probably natural for them to endeavour to repair any damage to their reputations, and by whatever means.

However, Mr Hardy is clearly unhappy. He said ' The Bahamas was telling their international business clients, "Look what is happening to Bermuda. They will have to do certain things under this Dependent Territories review, but the Bahamas - as an independent country - is outside this. Your business there will be under high scrutiny". They were saying "In Bermuda and the Cayman Islands you will be expected to be much more open and transparent and you may find that isn't necessarily what you want in the kind of international business you are doing. Sometimes people are doing legitimate transactions, but they don't necessarily want to do it publicly. This information has been relayed to us by our own clients."'

Could it simply be a case of sour grapes? Not only did Bermuda evade the OECD hit list but was also omitted from the FATF list of jurisdictions considered to facilitate money laundering through banking secrecy and lack of transparency. Mr Hardy is quick to blow Bermuda's trumpet, saying 'The FATF drew up 25 criteria to identify which countries which were not co-operating. With respect to Bermuda it says, "Bermuda appears to have effective regulations and supervision for financial institutions operating in its territory as well as an efficient mandatory system for reporting, monitoring and sanctioning for the failure to comply with the obligation to report suspicious or unusual transactions".'

However, he also commented that he was somewhat taken aback at the inclusion of the Bahamas on the FATF list: 'The Bahamas was a bit of a surprise. But you may have heard that the Bahamas is now going to extend its legislative programme through the summer in order to enact stronger anti-money laundering legislation. That is because it was named as an unco-operative jurisdiction.'

Whatever tactics the Bahamas might be employing to grapple with its naming and shaming, Mr Hardy is just as keen to promote Bermuda. Endorsement from the FATF and OECD, he said, 'enables those major companies that want to set up in Bermuda to demonstrate they are, in fact, able to move to juristictions where international standards are upheld. We are able to say Bermuda is an upstanding and clean jurisdiction.'

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