The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The attorney general will today unveil “the first positive news for financial services in a decade” by revealing that The Bahamas’ compliance with global anti-financial crime standards has been upgraded.

Carl Bethel QC told Tribune Business he will inform the Senate that the Financial Action Task Force’s (FATF) Caribbean affiliate has positively re-evaluated this nation’s adherence to its 40 “recommendations” - or technical standards - for combating money laundering and terrorism financing.

He added, though, that the re-rating again highlighted the “urgency” for regulating Bahamian non-profit organisations (NPOs), describing the sector as “an enormous black hole” that had prevented this nation from receiving an even higher upgrade due to the failure to-date to pass legislation for its oversight.

The Non-Profit Organisations Bill, which was supposed to be passed by the Senate today, has now been postponed until January 2019 after Mr Bethel agreed to make substantial revisions to the legislation following meetings with the churches and non-profit/civil society groups on Friday (see other article on Page 1B).

The attorney general subsequently told this newspaper he was confident the two sides were closer to striking the right balance between creating a regulatory regime that would satisfy the Government’s and international concerns, and provide appropriate levels of oversight, without stifling the non-profit sector’s ability to function and grow to the benefit of Bahamian society.

Linking the controversial Bill to the intense scrutiny facing The Bahamas, Mr Bethel said this nation’s efforts to enhance its legal and technical defences against money launderers, terror financiers and other financial criminals since the Minnis administration took office had now started to pay off.

“I assure you, and tried to get them [civil society/non-profits] to see, that this is a major area of non-compliance for The Bahamas,” Mr Bethel told Tribune Business of his Friday meetings.

“On Monday, I’m going to be making a communication about our re-evaluation by the CFATF (Caribbean Financial Action Task Force). I got confirmation from them of our re-rating on technical compliance with the FATF’s 40 recommendations. It’s the first positive news we’ve had in financial services in the last decade.

“The CFATF reassessed us, and that then went to the FATF [the Paris-based parent] for them to check the consistency and quality of the analysis. They signed off without changing anything. The FATF accepted the re-evaluation of our legal system and technical compliance.”

The re-evaluation stemmed from the CFATF’s 2017 Mutual Evaluation Report (MER) on The Bahamas, which uncovered significant deficiencies showing this nation’s anti-money laundering and terror financing defences had actually weakened and regressed over the previous 10 years.

The report found The Bahamas was only ‘partially compliant’ on 21 - more than 50 per cent - of 40 ‘technical’ standards. While it was deemed ‘non-compliant’ with just one standard, and found ‘compliant’ and ‘largely compliant’ on eight and 10, respectively, the CFATF also rated this nation as in either ‘moderate’ or ‘low’ compliance with the 11 implementation ‘effectiveness’ ratings.

Mr Bethel described non-profits as “one critical area where we have an enormous black hole” on anti-financial crime regulation, and added: “We would have been technically compliant with at least two additional FATF recommendations had we been able to address effectively the area of non-profits.

“We were able to raise one area from non-compliant to partially compliant, but would have been fully compliant if we had passed the legislation. We managed to take it up from non-compliant to partially compliant based on our efforts over the past year in terms of enforcing the 2015 regulations and strengthening it. Had we passed the law we would have been largely or fully compliant.”

The Government now plans to reduce the Non-Profit Organisations Bill’s compliance burden while maintaining its regulatory intent, with Mr Bethel arguing that it cannot exempt from supervision any sector that receives potentially substantial injections of funding.

“In our case we cannot have an unregulated sector dealing with cash flows not knowing who gave them money, don’t know what they’re using that money for but, in the interests of a flexible system, we want to bring them [non-profits] to the point where they accept the need for scrutiny,” he told Tribune Business.

“What I tried to get them to understand was the urgency of some form of regulation, so we can be sure non-profits are self-regulating, are aware, and are prepared to make Suspicious Transactions Reports when they receive donations from people who don’t have the means, or do not appear to have the means, to make donations. It’s to have a framework in which to collaborate.”

Mr Bethel added that the Government planned to lessen the scrutiny non-profits must apply to donors, and their source of funding, under the proposed legislation to ensure this “not the same burden imposed” on banks and other designated institutions/industries.

He described this as ‘Aware of Your Customer’ as opposed to the banking industry’s Know Your Customer (KYC) rules, and told non-profits it was “just to be aware of the identified risks and whether any donor raises any suspicions.

“If their source of funding arises from the proceeds of crime and identified risks, they’re able to make a report on that,” Mr Bethel said of the Government’s aims. “The idea is to create a culture of compliance, of adherence, and setting up and being part of a register, doing what has to be done.”

Mr Bethel confirmed previous Tribune Business revelations that the FATF, which recently placed The Bahamas on a monitoring or ‘watch’ list because of “structural deficiencies” in its anti-financial crime defences, was particularly vexed about this nation’s minimal to non-existent regulation of non-profit entities.

That ‘watch’ list deals with The Bahamas’ ‘effectiveness’ in implementing the FATF’s 40 recommendations, which are considered the global standard in combating money laundering and terror financing, as opposed to CFATF’s evaluation of whether this country’s legal and regulatory system is in compliance.