The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Attorney General yesterday expressed hope that the US and UK will “withdraw or soften their advisories” against The Bahamas after its “great leap forward” in fighting financial crime.

Carl Bethel QC told Tribune Business that the Caribbean Financial Action Task Force’s (CFATF) re-evaluation, which upgraded this nation’s compliance with almost one-third of global anti-money laundering and counter-terror financing standards, will enhance The Bahamas’ ability to retain vital correspondent banking links.

He added that the findings will also “greatly strengthen the hand of the Central Bank in defending The Bahamas as a low-risk and blue chip financial centre”, providing a significant boost to this nation’s reputation in the eyes of both legitimate investors and the international financial services community.

The CFATF, the Caribbean affiliate of the Paris-based Financial Action Task Force (FATF), the international financial crime-fighting standard-setter, yesterday concluded that The Bahamas had made “good progress” in addressing the technical deficiencies exposed by its May 2017 evaluation.

Its latest report, the first “follow-up” to that work, upgraded The Bahamas’ compliance with 13 of the FATF’s 40 anti-money laundering/counter terror financing standards. This nation was found to have “fully addressed” weaknesses with five recommendations, with only “minor shortcomings” left on a further seven.

More importantly, The Bahamas is now non-compliant with none of the FATF’s recommendations as a result of being upgraded to “partially compliant” with United Nations (UN) anti-terrorism financing resolutions and the ability to freeze assets upon the request of another nation.

However, The Bahamas remains only “partially compliant” with ten or one-quarter of the FATF’s 40 standards, although the Attorney General’s Office in a statement yesterday said this put the country “on the same level as the US”. The Bahamas’ northern neighbour is only “technically compliant” with 30 standards itself, and sources suggested its adherence is actually worse because it is non-compliant in four areas.

Still, despite The Bahamas’ improvement, it remains under the CFATF’s “enhanced follow-up” programme for countries with major deficiencies in their financial crime defences. This is because it has “a low or moderate level of effectiveness” in actually implementing the FATF’s standards, with deficiencies identified in seven of the 11 areas assessed.

And The Bahamas also stays on the FATF’s ‘watch list of countries with “structural deficiencies” relating to the same implementation issues, even though some in the financial services industry believe the country should be given credit as a result of its Caribbean affiliate’s latest assessment.

Mr Bethel yesterday said The Bahamas was “the first country in the region” to request a re-evaluation, and be upgraded, within a year of an unfavourable CFATF assessment. He argued that this achievement “marks The Bahamas as a very important and special member of the international financial community”.

“It’s very important. There are thousands of Bahamians who depend on the financial services sector for high-paying and middle class jobs. It’s a vital sector of our economy,” Mr Bethel told Tribune Business of the CFATF report. “What you see today is a great leap forward for The Bahamas.

“I cannot recall a time in the last decade when we’ve been upgraded on any aspect of our financial services industry; it’s always been threats of ‘blacklisting’ or ‘grey listing’. We are well on our way to getting off this compliance [CFATF] programme.......”

The Attorney General expressed optimism that the favourable CFATF review would persuade the US Treasury Department and UK Treasury to either remove or moderate advisories warning their financial institutions to apply extra scrutiny to customer relationships and dealings with The Bahamas.

“The importance of this is that the Central Bank will be able to reach out to the US Treasury and the UK Treasury to see whether or not it can get them to withdraw or soften their advisories against The Bahamas,” Mr Bethel said, adding that the upgrades will also strengthen this nation’s correspondent banking ties.

“The Central Bank is engaged in an ongoing programme of consultation and correspondence with correspondent banks around the world,” he continued. “This greatly strengthens the hand of the Central Bank in defending The Bahamas as a low-risk, blue chip financial centre; one that the correspondent banks can take comfort in that The Bahamas has achieved a high level of compliance.”

It is uncertain whether the US and UK will relax their advisories on The Bahamas, given that these were sparked by this nation’s inclusion on the separate FATF ‘watch list’ - not the CFATF’s initial evaluation findings.

However, the latter’s upgrading of The Bahamas’ could boost this nation’s correspondent banking relationships, which are vital to this nation’s standing as an international business centre as they enable local companies to conduct global commerce and transactions overseas.

Correspondent banks often base decisions to maintain these relationships on risk perceptions, particularly the quality of anti-financial crime defences in the foreign bank’s home country, so the CFATF re-evaluation may help The Bahamas in this area.

Mr Bethel, meanwhile, argued yesterday that The Bahamas had scored a Caribbean first by being upgraded so quickly by the CFATF following last May’s evaluation. “We are working aggressively, sometimes too aggressively for some, but with good intent for all,” he told Tribune Business.

“We have to continue to do our very best. We are fighting on many fronts. It was this drive that led The Bahamas to be the first country in the region to do this in one year. No other country had the courage to ask for a re-evaluation in that time.

“The Bahamas has clearly shown the world that when we put our minds to it, we do the job and do it well. That marks The Bahamas as a very important and special member of the international financial community. We finalised our National Risk Assessment in record time.”

Mr Bethel said The Bahamas’ passage of the new Financial Transactions Reporting Act and Proceeds of Crime Act, together with changes to the Anti-Terrorism Act and publication of this nation’s National Risk Assessment (NRA) on money laundering and other financial crimes, had resulted in the CFATF’s re-evaluation upgrade.

A parliamentary resolution is now required to bring the Anti-Terrorism Act’s regulations into effect, and Mr Bethel reiterated that passage of the Non-Profit Organisations Bill would have brought The Bahamas into compliance with two more of the FATF’s standards.

However, he confirmed that the Government’s focus was now switching from legal reforms to implementation, and doing what was necessary to meet its “Action Plan” commitments to the FATF and escaping that group’s ‘watch list’ by September 2019.

That requires meeting the FATF’s 11 implementation “outcomes”, with The Bahamas’ progress in this area due to be assessed at meetings of the Paris-based organisation in February and June next year.

“It’s now not a question of any further legal reforms per se,” Mr Bethel said. “It’s all about implementation of what we have, not just passing the law. We have to prove, show implementation, show results. We have taken a great leap forward; it’s now merely a question of making sure the system works.”

This means The Bahamas has to provide evidence of a sufficient number of money laundering prosecutions for a financial centre of its size, as well as showing it is aware of risks posed by crimes such as human trafficking, corruption and the proliferation of weapons of mass destruction.

Mr Bethel said case management software had been installed in the Attorney General’s Office last week to enable staff to better track the progress of cases, and see what needed to be done next, while similar technology is in the process of being obtained by the Financial Intelligence Unit (FIU). Both issues are key demands of the FATF.

“Together, if we can all continue to work, we will eventually be successful in removing any blemish on the quality of our legal and supervisory framework, and preserve the reputation of The Bahamas as a clean, effective, low-risk and compliant international financial services jurisdiction for the benefit of global commerce and every Bahamian,” the Attorney General’s Office said.