The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Two former attorneys general yesterday agreed that the global fight against financial crime has been misused to undermine The Bahamas' competitiveness and drive it out of financial services.

Alfred Sears QC and John Delaney QC, both of whom had to deal with the Financial Action Task Force (FATF) while holding ministerial office, told Tribune Business that its global anti-money laundering standards had been implemented in a way that was "prejudicial" to The Bahamas and other international financial centres (IFCs).

Mr Sears, who chaired the FATF's Caribbean affiliate (CFATF) from 2003-2004, recalled a meeting where some of the Paris-based body's own members were shown to have deficiencies in their anti-money laundering regimes that were as bad - or worse - than those it had supposedly identified in The Bahamas.

Yet whereas The Bahamas was "blacklisted" in 2000, and threatened with similar action on several subsequent occasions, the same FATF members - who include some of the world's largest and most powerful economies - were subjected to no such pressure.

Mr Sears, asserting that this showed how anti-money laundering standards had been unfairly applied, said The Bahamas' consistent "reactive" response to such initiatives had undermined both "good governance" and this nation's financial services industry.

Speaking after the FATF included The Bahamas on an 11-strong list of countries with "structural deficiencies" in their anti-money laundering and counter-terror financing regimes, the ex-attorney general renewed his call for these issues to be dealt with through a global treaty overseen by the United Nations (UN) to ensure their fair application.

"The Bahamas government has consistently dealt with anti-money laundering in a defensive and reactive fashion, which I believe does not serve the preservation of order and good government in the Commonwealth of The Bahamas," Mr Sears told Tribune Business.

"As I proposed when I served as chairman of the CFATF from 2003-2004, there needs to be a global forum, and The Bahamas should advocate for money laundering and terror financing to be taken out of the exclusive control of the FATF and Organisation for Economic Co-Operation and Development (OECD), which are dominated by countries which have onshore financial centres competing with The Bahamas."

Pointing out that The Bahamas is not an FATF member, Mr Sears added: "Over the past 15 years the application of these rules has been inconsistent and in favour of these onshore financial centres. Their inconsistent, unreasonable application has been to their benefit.

"Our refusal to address this issue in a proactive manner, rather than a defensive manner, which leads to over-reaction, has not served us well. The anti-money laundering regime, and way it has been applied, has been used as an anti-competitive measure by the member countries of the OECD.

"This ad-hoc reaction to external threats is not a rationale way to conduct the affairs of a nation state. I expect they'll [the FATF and OECD] be at it again until The Bahamas is out of the financial services business. I know from my own observations and experience that these rules are not uniformly applied."

Mr Delaney told Tribune Business that while the FATF was viewed as the global standard setter for combating money laundering and terror financing, it "often applies them in an onerous and prejudicial fashion against smaller and more vulnerable countries like The Bahamas".

Now a principal at the Delaney Partners law firm, he questioned whether the same standards were applied evenly to major OECD and FATF members, and said these nations posed "a much greater level of risk to the financial system than The Bahamas".

"Unfortunately, it has long been the case that when it comes to these supranational institutions the rules have not been evenly applied, and they have simply been onerous and prejudicial for jurisdictions that operate in financial services such as The Bahamas," Mr Delaney added.

"It's unfortunate, and obviously they're able to do that to certain countries and not others because of the relative influence some have. Maybe that's a fact of life, but it doesn't make it right." He said this left the impression that anti-financial crime rules were being applied in an uneven manner "for competitive purposes" only.

Mr Sears, meanwhile, urged The Bahamas to form an alliance with other international financial centres (IFCs) and develop "a common strategy to lobby for the convening of a global forum for a treaty, just as we have done in the fight against terrorism, under the auspices of the United Nations (UN)".

This, he argued, would ensure anti-money laundering and counter-terror financing standards were developed with input from all nations, including The Bahamas, and written and applied in the interest of all countries.

"It is in the national interest of The Bahamas that we challenge the legitimacy of an ad-hoc body prescribing the rules," Mr Sears said. "The position that we ought to be under the UN is not inconsistent with a firm commitment to anti-money laundering. We're talking about the prescription and application."

The former attorney general added that it was "ironic" that the FATF had received more resistance from the UK's Crown territories, such as the Cayman Islands, and said: "That, to me as a Bahamian, is embarrassing."

Mr Sears said the University of The Bahamas (UoB) should be hired to conduct a study of The Bahamas' past responses to these initiatives, and benchmark them against other countries, so public policy will be better informed by empirical data when the next threat occurs.