The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading QC has urged the Government to attach a team of law writers to the Ministry of Financial Services, arguing that this would help the Bahamas reform “a whole basket of laws” before the deadline to comply with the US Foreign Account Tax Compliance Act (FATCA) hits.

Warning that complying with Washington’s extra-territorial demands required “a substantial exercise” in amending many of the Bahamas’ financial services laws, Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, said the Government also needed to internally ‘build capacity’ to meet FATCA’s information sharing requirements.

He argued that the Government had little choice but to invest in doing this, especially if it chose the Intergovernmental Agreement (IGA) route to FATCA compliance, as leaving the exchange of information to individual Bahamian financial institutions would make this nation “uncompetitive” against rival financial centres.

Blasting FATCA as “another example of economic imperialism”, Mr Moree told Tribune Business In a recent interview that the US law was “somewhat offensive”, given that it effectively made the Bahamas and other nations – and their financial services industries – agents of the Internal Revenue Service (IRS) in enforcing US federal tax law outside that nation’s borders.

But, given the geopolitical realities, the top QC acknowledged that the Bahamas had little choice but to meet the IRS/US Treasury demands. To achieve this, and meet the December 31, 2013, deadline, Mr Moree urged that the Government second several drafters of Parliamentary legislation from the Attorney General’s Office to the Ministry of Financial Services, given the comprehensive reform effort required.

“FATCA compliance is going to require, in my view, a substantial exercise involving amendments to our existing laws. You’re going to have to look at a whole basket of legislation,” Mr Moree told Tribune Business.

Much of the reforms will involve bringing the Bahamas’ existing information sharing requirements into line with FATCA requirements, and ensuring financial institutions do not run afoul of existing confidentiality statutes.

Mr Moree said among the laws that would have to be reformed are the likes of the Banks and Trust Companies Regulation Act, the Financial and Corporate Services Providers Act and “most of the cross-border co-operation legislation introduced in 2000”.

“You’re going to have to look at all of it to make domestic law FATCA compliant,” Mr Moree told Tribune Business. “That’s going to require considerable resources made available to the Ministry of Financial Services.

“I would strongly recommend that given the tight timelines we have to work in, and the number of domestic laws to be brought into compliance with whatever we decide on FATCA, that the Government seriously consider seconding to the Ministry of Financial Services its own parliamentary draftsmen.

“Two-three lawyers would work with the Minister and director of financial services to manage all the consequences of FATCA in a way that is efficient and allow us to do it extremely quickly.

“There are priorities all the ministries need, and if the Ministry of Financial Services has to compete with them to make all laws FATCA compliant, it will be very difficult to meet the deadlines.”

Despite the “offensive” concept behind FATCA, Mr Moree told Tribune Business the Bahamas had little choice but to comply. It could not afford to be isolated and ‘got it alone’, he added, as this would make the financial services industry uncompetitive.

“I think that FATCA is really another example of economic imperialism, which as a matter of principal is somewhat offensive to many countries, but nevertheless it is a reality,” Mr Moree told Tribune Business.

“It’s a somewhat unprecedented concept in international law, particularly with regard to the collection of taxes. It is basically deputizing foreign governments to collect their taxes. But it seems the Bahamas has to accept the reality and do what is necessary to accommodate it.”

In the absence of any global alliance against FATCA, the top QC added: “We don’t have the luxury of ignoring it or non-complying with it. At the end of the day, we have to address it.”

Mr Moree also warned that the Government would need to invest funds and resources in developing systems/infrastructure to collect the FATCA information sought by the US from Bahamas-based financial institutions, then pass it on to the IRS.

While these demands were coming at a time when the Bahamas could least afford it, the top QC said not making the required investment would be more costly to this country – especially where the competitiveness of its financial services industry was concerned.

“Clearly, we do not have that capacity today,” Mr Moree said of what the Government would need to manage the FATCA process, “but the Government has to develop that capacity.”

“To not do the IGA and leave it at the level of individual financial institutions would only make us uncompetitive to competitors in the international financial community. We are going to have to develop that capacity in the Government to collect the information under the IGA and pass it on.

“Some capacity building is required to fulfill the Government’s responsibilities under the IGA. We’re going to have to accept we have to do it, because not to do so would be more costly in the long-run for the Bahamas.”