The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Attorney General yesterday said it was "especially distressing" that Europe appears to have ignored The Bahamas' "herculean efforts" in preparing to again blacklist this nation.

Carl Bethel QC told Tribune Business it was "especially questionable" that the European Commission, the civil service for the 27-nation European Union (EU), is targeting the country for alleged deficiencies in its anti-financial crime regime when the global standard-setter on these issues had earlier this year placed The Bahamas on the path to "exit" its own oversight process.

Speaking after reports emerged yesterday that the European Commission intends to again formally blacklist The Bahamas this Thursday, Mr Bethel said the bloc seemed to be ignoring its own guidelines that a country's standing with the Financial Action Task Force (FATF) would weigh heavily in determining whether it is included on the list.

The FATF earlier this year determined The Bahamas had made sufficient progress in eliminating weaknesses in its anti-money laundering and counter-terror financing regime to warrant a "site visit" to Nassau, during which its representatives will assess how effectively this nation has implemented the necessary regulatory and legal upgrades.

That is the final stage in exiting the enhanced surveillance applied by the FATF’s International Co-operation Review Group (ICRG), and removal from its 'grey list'. Mr Bethel yesterday said the EU, which is well represented on the FATF, would have been fully aware of both The Bahamas' progress and the fact that the planned "site visit" has been postponed to a undetermined date due to COVID-19.

Voicing hope that there could be "meaningful dialogue" with the European Commission before The Bahamas is placed on any new blacklist, the attorney general added that it also appeared to have strayed from previous pledges in this regard.

Mr Bethel said the Commission, which effectively acts as the EU's civil service, had previously signalled its intent to hold "bilateral discussions" with impacted nations before they were placed on any blacklist. While he was still "double checking" with the Ministry of Foreign Affairs, he added that no formal warning or communication of Brussels' intent had been received.

The attorney general declined to describe the European Commission's reported blacklisting plan as a low blow to The Bahamas at the worst possible time, given that it threatens to further undermine the financial services industry - the economy's second largest industry - at a time when the country is taking the full brunt of COVID-19.

Arguing that The Bahamas' "good faith" efforts to enhance its anti-financial crime defences appear not to have been recognised, Mr Bethel told Tribune Business: "We must signal our disappointment that they [the EU] would indicate this intent......

"Having regard to the status of The Bahamas, which has reached such a level of compliance to warrant us beginning the exit process from this FATF ICRG review, it is especially distressing and especially questionable - in our view - that we should be placed on a blacklist in these circumstances."

He was responding after the Reuters news agency yesterday reported that The Bahamas was among 12 countries set to be named on a European Commission blacklist to be formally unveiled on Thursday.

Others set for inclusion, according to Reuters which was given an advance look at the relevant documents, include Panama, Barbados, Jamaica, Mauritius, Botswana, Cambodia, Ghana, Mongolia, Myanmar, Nicaragua and Zimbabwe.

All were said to "pose significant threats to the financial system of the [EU}", and the 27-nation bloc's financial institutions are being called upon to apply greater scrutiny and due diligence to transactions involving The Bahamas, its businesses and residents, as well as those in the other nations.

Reuters frequently appears to be given advance notice of such EU moves - possibly as part of a strategy to unnerve the nations being targeted. The blacklisting, if it comes to fruition, will threaten to increase the time and costs involved in conducting business between The Bahamas and Europe, again undermining the country's competitiveness in those markets.

While the impact on The Bahamas' vital correspondent banking relationships may not be as pronounced, given that most of this nation's international transactions clear through the US, a non-EU-member, the Commission's action will also cut across the recent changes The Bahamas made to its Investment Funds Act to secure that sector's access to European markets.

Above all, the reported European Commission action will again place an unwanted stain on The Bahamas' reputation at a time when it can least afford it. Tanya McCartney, the Bahamas Financial Services Board's (BFSB) chief executive, yesterday said she backed the attorney general's response in setting out the country's position.

In truth, the European Commission's latest blacklist represents a revised version of a similar initiative it tried to launch last year. Mandated by the EU parliament to maintain such a listing, it was forced to swiftly withdraw the previous 23-nation effort after coming under fire from its own nation-state members who challenged the criteria used to determine who should be included.

It also received a blistering riposte from the Trump administration's US Treasury Department over the inclusion of four US territories - American Samoa, Guam, Puerto Rico, and the US Virgin Islands. None of those states feature on the list shown to Reuters, but the European Commission has seemingly found the courage to come again at small independent states amid a global pandemic.

While acknowledging that the European Commission was free to determine its own conduct, Mr Bethel said yesterday: "First of all, they had indicated that they intended to have meaningful bilateral discussions with countries that they proposed to add on to their blacklist.

"I'm double checking with Foreign Affairs right now whether they'd formally informed us of this situation, and whether we'd be engaged as to what the peculiar concerns of the EU might be. The Commission had formally indicated that would be their method of approach, as opposed to throwing countries on a list. That's what they said, and what we expected would be the case."

Mr Bethel added that the European Commission had also signalled that a country's status with the FATF would be a "predicate" and key ingredient in determining whether it was included on its own list.

"Before this listing, as the EU was aware, while The Bahamas was in the process for the last two years, at the FATF plenary held in Paris earlier this year it was agreed for The Bahamas to be in the exit process," he said.

"The EU would be well aware that, if not for the COVID-19 pandemic, a site visit - including people from the EU - had been previously scheduled by the FATF to come here and assure themselves that things done over the last year to year-and-a-half were in place in The Bahamas. Unfortunately the pandemic has forced that visit to be postponed to a date that has not been fixed."

That visit was due to have taken place this month and, with the FATF's June plenary no longer being held, Mr Bethel said The Bahamas' hoped-for-confirmation of its exit from that group's monitoring will have to wait until later in 2020.

"We trust that there will be the dialogue that the European Commission themselves have suggested before this list is finalised, and the position of The Bahamas in the FATF exit process - and, in our view, on the verge of exiting - that special status should have factored into this determination," Mr Bethel told Tribune Business.

"A country like The Bahamas, which in my view has shown the utmost good faith in this process and diligently sought to address every concern about the quality of financial services and the quality of supervision, should not be placed in this position.

"It is unfortunate, and we trust respectful dialogue will take due consideration of this difference between The Bahamas and every other country on that list. That's the most diplomatic way I can frame it. It is our wish that good faith and dialogue should take the place of what could be unfair 'name calling'," he continued.

"We are merely hoping the dialogue will take place before The Bahamas is placed on any blacklist, and that dialogue will take into account the Herculean effort made over the past two years with diligence and efficiency to address any concerns from the 2017 CFATF Mutual Evaluation Report. We are satisfied we have no problems and have made enormous changes. We only wish to be engaged on the same terms."

The European Commission has yet to specify its particular concerns regarding The Bahamas' anti-financial crime regime. The 27-nation EU previously gave the country a clean bill of health for its co-operation on tax matters, which involved the elimination of so-called 'ring fencing' and requiring companies to have substance and do real business from this jurisdiction.