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Bahamas Will Not Tolerate Abuse Of Banking Secrecy Laws

Mandy Robinson, Tax-news.com, London

01 August 2000


Acting Prime Minister Janet Bostwick has declared that the Bahamas is unlikely to dispose of its bank secrecy laws but remains firm in its intolerance of money-laundering, as the island is determined to regain its international reputation as a "recognized and respected" financial centre.

Prime Minister Hubert Ingraham is away on a trip to the US and Canada in a bid to redeem the island's reputation after a damaging report by the OECD, which resulted in a US Treasury advisory and raised the concerns of the G7 countries in a recent summit

Bank confidentiality will apply only where legitimate customers hold accounts: 'We are not going to use bank secrecy laws to shield and protect criminals,' Ms Bostwick emphasized. 'Criminality in any form will not be protected by any secrecy laws in the Bahamas.'

Ms Bostwick's comments come after the Prime Minister once again reaffirmed the stance of the Bahamas as far as recent attacks on its integrity are concerned. He said 'My government has clearly stated that the Bahamas is not willing or interested to import the proceeds of crime and that the Bahamas does not and will not permit its strict bank secrecy laws to assist criminals in escaping the reach of the law in their own countries … We wish and seek to operate our financial services sector entirely in accordance with acceptable international best practices. Our well-established commitment to confidentiality in banking matters is grounded in legal tradition which is part of the heritage of all common law jurisdictions.'

Amid local business fear of the potential devaluation of the currency as a consequence of this financial crisis, Bostwick stated 'it has absolutely nothing to do with the devaluation of our currency … it has never been in a stronger position, absolutely strong.' However, the crisis is set to transform banking laws in order to meet the standards set out by the members of the OECD. The major powers have voiced concerns over the blacklisted jurisdictions which have the ability to erode their tax bases.

With regard to the changing banking laws, Bostwick has drawn attention to the International Business Companies Act. The international financial sector has voiced particular concerns over IBCs, which are allowed to be activated overnight in the Bahamas. There is no legal measure to force the banks to reveal the owner of an IBC, thus the potential for abuse is widespread. The Acting Prime Minister also spoke of her concern and pledged to focus Government attention upon this loophole: 'Our banking laws themselves have got to be amended to answer some of the inquires that are legitimately raised … the law that permitted the establishment of IBCs was a law introduced and passed in Parliament by the former PLP administration, and the present government permitted it to remain in the Bahamas'.

Another major legal loophole to be addressed by the government will be the aspect of banking that permits a lawyer to act as an intermediary by opening and holding client accounts without disclosing their details. It is particularly this behaviour that has allowed lawyers to protect funds owned by drug barons and money launderers.

Bills to amend both these key deficiencies were tabled at the end of last week. Ms Bostwick claims that once pushed through, these new laws would make it easier for international governments to obtain knowledge of secret bank accounts.

Opposition leader Mr. Perry Christie has been critical of Prime Minister Ingraham's delegation to the US: 'He is wasting valuable time and effort', claimed the PLP Leader. Mr. Christie supposed that the emergency legislation was implemented by the Prime Minister in order to placate the United States. In a request, with the opposition in mind, the Government Leader of business in the House of Assembly, Housing and Social Development Minister Algernon Allen, said, 'We are in a position of crisis in which we are forced now to take this exceptional course. It is straight from the very critical bargaining tables of Washington and that is why I have asked for the unanimous consent of the House. I do hope that the Opposition can accede to this request as the Bahamas struggles through a very critical time in its existence. So its really the laying of this Bill for the debate which will ensue on the ninth of August.'

Financial analysts predict that the Bill will result in some banks leaving the Bahamas - it has even been suggested that IBCs will disappear: 'It won't make sense having them anymore.' Furthermore, a leading offshore banker said 'big money never remains in those IBCs … the money is in today and gone by a day or two.' The estimated figure of money leaving the island could run into hundreds of millions, perhaps billions of dollars. Janet Bostwick is not phased by this - she claims it would not have a significant effect upon the Bahamas financial sector. In fact, she remarked, 'we will not be displeased to lose some of them.'

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