The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian financial services industry could be "decimated" if global regulators ever wake-up to how the web shop industry was legalised, a businessman said yesterday.

Paul Moss, Dominion Management Services' president, told Tribune Business that the sector's overnight legalisation by the Christie administration had created "a glaring deficiency in our system".

Pointing out that the then-government failed to address web shop operators' illegal profits from pre-legalisation days, Mr Moss described the current situation as "a recipe for disaster" with the industry acting as unlicensed money transmission providers and banks in Family Island communities.

He accused the Minnis administration of "going along with the programme" left by its predecessor, and failing to address the ongoing risks and issues presented by web shop gaming.

"When we look at gaming, the Bahamas is in a real problem here," Mr Moss told Tribune Business. "The Bahamas legalised an illegal operation, and overnight those operators who could not previously get licenses got them.

"This is a glaring deficiency in our system, and we're not going to address it. We're going to address it when it brings the whole country down. Right now, we have these web shops acting as banks in the Family Islands. It's a recipe for disaster.

"They gave licenses to people who were operating illegally. That's a no-no from a money laundering perspective. They granted them, and this administration is going along with the programme. It's a glaring deficiency, and has the potential to decimate the whole [financial services] industry if that is ever called into question."

Dionisio D'Aguilar, the Cabinet minister responsible for gaming, recently acknowledged that numerous issues surrounding the web shop industry remained to be addressed, including the 10-year moratorium on new entrants and the proliferation of locations throughout the Bahamas.

However, neither the current government, nor the Christie administration, ever appeared to address the fate of web shop operators' pre-legalisation profits, which were used to invest in legitimate sectors of the Bahamian economy, make mortgage loans and enter into a wide range of investment activities.

The web shop sector barely rated a mention in the Caribbean Financial Action Task Force's (CFATF) recent assessment of the Bahamas' anti-money laundering and counter terror financing regimes; possibly because the examiners were only looking at the period when it had just been legalised.

The industry's legalisation, though, was driven in part because it represented a money laundering 'high risk' if it remained illegal, with millions of dollars being transacted outside the formal banking system and economy. And web shop operators are generally recognised as having strict Know Your Customer (KYC) procedures in place.

Mr Moss, meanwhile, said the Bahamas was "failing to read the tea leaves" over its response to deficiencies identified in the CFATF report and other global regulatory pressures.

He argued that while this nation could pass all the laws it wants, "the goalposts will continue to move" with international bodies frequently finding fault with the Bahamas and its response "going over and above" global standards.

Mr Moss said the main problem was the Bahamas' failure to change its business model from a 'no tax' to 'low tax' jurisdiction, through implementing a low-rate corporate or income tax, and shedding its 'tax haven' label.

"We know the goal posts will continue to move," he told Tribune Business. "Even if the Bahamas passes all the changes they want, in a year they will come back and say something else is deficient. We go over and above what is required of us, and still somebody is not satisfied.

"We fail to recognise what the real issue is. The real issue is transparency, and have the Bahamas put in a new form of taxation. This why we're always playing catch up, and are in a sense of panic. This will be hurting us until we're proactive."

Mr Moss slammed the "dismissal out of hand" of the IMF's suggestion that the Bahamas implement a low-rate corporate income tax in the medium term, blasting the Government, "power brokers and those that strive to be in government" for rejecting it "without any consideration".

"We want to fight battles without reading the tea leaves," he said. "The tea leaves have been quite clear over the last several years that this form of taxation, a 'tax haven', is being frowned upon and not acceptable.

"We really have to have a conversation about the future of the Bahamas in financial services. It cannot be business as usual. We have to respond in a manner that is holistic, and stop the piecemeal approach over the last several years.

"They [overseas regulatory bodies] will find something because we don't see what they're getting at. We define ourselves as a 'tax haven' because we're not changing our form of taxation. We continue to stick our head in the sand and pass laws without addressing the big elephant in the room."

Mr Moss said the Bahamas' tendency to go beyond what was demanded of it had resulted in "incredible" bureaucracy and 'red tape', which stifled both the private sector and conduct of business by individual Bahamians.

"I went to Bank of the Bahamas to open an account last week, and it's not open yet," he told Tribune Business. "We talk about the ease of doing business, but we seem to get caught up in not understanding the spirit of what we're doing."

Mr Moss said a 'common sense' approach to implementation was what the Bahamas was lacking, and he added: "The ease of doing business will continue to escape us because we have bureaucrats that don't understand some of the things don't make sense in practical terms.

"Because we don't understand the industry, and have leaders that don't understand the industry, we have to go along with the programme. It doesn't raise my blood pressure any more."