The Tribune

By MORGAN ADDERLEY

Tribune Staff Reporter

madderley@tribunemedia.net

UNDER the updated Financial Transactions Reporting Act (FTRA) lawyers will be treated as "financial institutions", Attorney General Carl Bethel told the Bahamas Bar Association yesterday.

During his speech, Mr Bethel reiterated that in an evaluation the country received last summer, The Bahamas was found to be deficient in 22 out of the 40 recommendations of the Financial Action Task Force (FATF).

One requirement for The Bahamas was to bring into effect an updated FTRA. According to Mr Bethel, the FATF breaks its recommendations down to "almost microscopic suggestions that are called methodologies".

"To comply with the recommendation, you have to show that you have the methodology in place and are implementing it," he said.

"Now, how do you get the methodology in place? You have to craft laws almost with microscopic attention to these methodologies.

"That is… the process we've been at. And so today we now have an FTRA and by this evening, God willing, the House would have accepted the Senate's amendments which will…close the circle and we will have a fully compliant and acceptable [FTRA] that will meet all of the deficiencies that were identified in respect of our compliance in these aspects."

Mr Bethel explained the FTRA is based in system of compliance and due diligence, and thus will "henceforth" be the standard of conduct for all participants in financial services.

"Lawyers, accountants and other sort of professionals were never treated as financial institutions before," Mr Bethel said.

"They merely had duties of customer due diligence, making STR, Suspicious Transaction Reports, possibly. But they were never given the duties of being a financial institution. That's all changed. They are now in a category of financial institutions."

This is one "basic innovation" of the act. Mr Bethel explained to the Bar Association that as attorneys, they are "designated non-financial businesses and professions". As such, he noted that "verification is now the standard" for their field.

"Obtain and verify," he said. "Don't just give me your utility bill. I require you to go to counsel attorney in your home country, and have them say, 'I have compared this with the original and this is a genuine bill, [I've] notarised it'. That's an item of verification. You have to go that extra step."

Mr Bethel described this as "enhanced" due diligence.

Additionally, as financial institutions, lawyers are now expected to "comply and be regulated", Mr Bethel said.

"I know that there has been an issue between the Bar Association and the Compliance Commission. But unfortunately, under the new law, this must be resolved in favour of a cooperative relationship between the profession and the commission."

In this regard, major law firms will be expected to hire compliance officers. In smaller law firms, a senior partner can be nominated for this role. And in one-person law firms, the sole attorney can serve as the compliance officer.

The Attorney General also discussed the issue of lawyer-client privilege, emphatically stating that "privilege does not extend to…. facilitating the commission of a crime by a client."

"Of course, privilege can extend to, 'okay, you're in trouble, let me see how I can best frame your defence', that's a different issue."

However, "there are limits to privilege".

Mr Bethel referred to the fact Canada does not adhere to this regulation, as its Supreme Court has ruled lawyer-client privilege as "akin to an absolute right" and that "any intromission into this sacred territory violated certain articles of the Canadian Charter of Rights".

However, Mr Bethel suggested that Canada itself was "embarrassed" by the breadth of ruling, as a member of the the FATF. He added the country also is given negative ratings in this area in its mutual evaluations.

Despite this precedent, Mr Bethel underscored the reasons why The Bahamas cannot follow in Canada's footsteps.

"The Bahamas, however, I don't think we amount to a…sub-borrower in Toronto. Canada is a country with enormous natural resources, 40-50 million people, standing army, navy, Air Force; they don't need the world as much as we do.

"We have an entirely open economy. We are an integrated part of the world. And we're very small. We don't have the luxury that a Canada can enjoy.

"So we are not going to legislate, have not legislated any exemption, and it is expected that lawyer-client privilege will be kept within due bounds."

"And I hope I am well understood that anytime counsel is aware of anything untoward, it is mandated by law, and we always follow the law as lawyers, that SDRs be generated."

Mr Bethel ended his remarks by expressing "full confidence" in the legal profession in The Bahamas, and praised it for piloting this "ship of state" through "many such storms".

He added: "We get through hurricanes…. we know how to pilot the ship. Let us remember that it's not survival of the fittest, it's survival of the smartest."