The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Attorney General yesterday said The Bahamas must "ride out the storm and soldier on" after the European Union (EU) branded it a "high risk" jurisdiction for financial crime.

Carl Bethel, QC, told Tribune Business that he had sought to persuade the 28-nation bloc as late as last week that The Bahamas' "outstanding progress" in addressing previously-identified regulatory deficiencies meant it should not be labelled as such.

He suggested that The Bahamas, and its financial institutions, will now have to "reach out" to foreign regulators and correspondent banks to ensure that they "don't overreact" to this nation's inclusion among 23 nations deemed to have "weak anti-money laundering and [counter] terrorist financing regimes".

The Bahamas, the only major international financial centre (IFC) named by the EU besides Panama, appears to have been grouped with multiple war-torn countries and international pariahs solely on the basis that it is among those nations currently being monitored by the Financial Action Task Force (FATF) for "deficiencies" in its anti-financial crime defences.

The EU is now following the lead established last year by both the US and UK, requiring all its banks, financial institutions and entities covered by anti-money laundering regulations "to apply increased checks" and scrutiny to transactions and clients connected to The Bahamas and the 22 other nations.

Besides threatening to delay commerce between The Bahamas and EU, and further complicate the "ease of doing business", the bloc's actions pose a further reputational threat for this nation's financial services industry. It may also add to strains in the correspondent banking relationships Bahamian institutions have with their overseas counterparts, and which are vital to facilitating the cross-border trade and international transactions this economy relies on.

The EU's move also raises questions over whether the late January trip to Brussels by Dr Hubert Minnis, the prime minister, and his delegation in which they met with senior Commission officials accomplished anything that advanced The Bahamas' cause.

Mr Bethel yesterday said the EU appeared to have totally ignored The Bahamas' efforts to address its weaknesses in accordance with the "action plan" agreed with the Paris-based FATF, the acknowledged global standard-setter for combating money laundering and terror financing.

In particular, it appears to have taken no account of the December 2018 re-evaluation by the CFATF, the FATF's Caribbean affiliate, which upgraded The Bahamas’ compliance with 13 of the FATF’s 40 anti-money laundering/counter terror financing standards.

"It's just one of a number of challenges that face us right now, and we will have to - how do you say it - ride out the storm and solider on," Mr Bethel told Tribune Business of the EU's action. "We have been doing our very best to change the perception of The Bahamas in terms of the anti-money laundering and counter terror financing framework.

"We have made significant progress with the CFATF and FATF in having our rating re-evaluated, and they've confirmed we're in compliance with 30 of the 40 FATF recommendations. We are in the top tier of countries in terms of the level of compliance; not at the absolute top, but are there in the same category with the US."

Mr Bethel said The Bahamas' inclusion on the list by the European Commission, which is the EU's civil service, still has to be ratified by the European parliament and council of ministers - something that is due to happen within the next 30 days.

"All we can do is point to those areas where we've made outstanding progress, and reach out to foreign regulators and foreign correspondent banking institutions so that they don't overreact to what the Europeans are doing," the Attorney General said.

He said there was "no question" that the EU's decision failed to account for The Bahamas' progress in addressing deficiencies in its anti-financial crime regime, both legislation and implementation-related, especially the favourable review by the CFATF.

"I went to Brussels last week to do precisely that," Mr Bethel confirmed, "but I guess it fell on deaf ears.... I sent them the legislation we've passed, I explained to them the [CFATF] re-rating, I communicated to them all the positive things we're doing, but apparently it was for nought. That's where we are."

The Government, in an official statement, pledged that it will "seek all ways" to minimise the impact of the EU's actions "and, if possible, encourage" the EU to reverse The Bahamas' inclusion on its list.

Given the positive CFATF re-evaluation, it argued that the EU's action was a "disproportionate" response that ran counter to principals enshrined in the bloc's own laws.

"To list a country such as The Bahamas that has made outstanding progress, in just over one year, in addressing the anti-money laundering/counter terror financing deficiencies identified in May 2017, together with wholly non-compliant, war-torn or even rogue states is disproportionate," the Government said.

"[It] inflicts harm and punishment on a people with no regard for their important reforms and improvements in their anti-money laundering/ counter terror financing framework. Such a 'one size fits all' approach is unworthy of established democracies, and is an affront to their own legal principles."

The EU Commission yesterday confirmed that The Bahamas' inclusion on the FATF's monitoring list drove its action, saying: "The Commission concluded that 23 countries have strategic deficiencies in their anti-money laundering/ counter terrorist financing regimes. This includes 12 countries listed by the Financial Action Task Force, and 11 additional jurisdictions."

It added: "The Commission will continue its engagement with the countries identified as having strategic deficiencies in the present delegated regulation, and will further engage especially on the delisting criteria. This list enables the countries concerned to better identify the areas for improvement in order to pave the way for a possible delisting once strategic deficiencies are addressed.

"The Commission will follow up on progress made by listed countries, continue monitoring those reviewed and start assessing additional countries, in line with its published methodology. The Commission will update this list accordingly."

Besides continuing to lobby the Brussels-based EU Commission it is unclear what more The Bahamas can do to escape its "high risk" list other than rapidly address the deficiencies identified by the FATF, complete its agreed "action plan" and secure removal from the latter's monitoring programme.

The timing of The Bahamas' inclusion on the EU "high risk" list was full of irony. It comes just days after the Central Bank and other financial services regulators unveiled their first-ever national anti-money laundering and terror financing annual report, designed to educate and inform the global community on the steps this nation is taking to fight financial crime.

And it occurred on the very day that the Government sought to further ensure The Bahamas' total compliance with the EU's anti-tax evasion demands by tabling further legislative changes in the House of Assembly.

Europe's tax transparency initiatives are separate from the "high risk" list, which means that at the same time The Bahamas was seeking to comply with the former its financial services industry was struck by another blow inflicted by the very same EU.

Besides The Bahamas, the other countries on the EU list are Afghanistan; American Samoa; Botswana; Democratic People's Republic of Korea (North Korea); Ethiopia; Ghana; Guam; Iran; Iraq; Libya; Nigeria; Pakistan; Panama; Puerto Rico; Samoa; Saudi Arabia; Sri Lanka; Syria; Trinidad and Tobago; Tunisia; the US Virgin Islands; Yemen.

This is not company that The Bahamas, with its status as an IFC and international business centre, should want to keep given that many of the others are either war-torn, rogue states, suffer from corruption and other ills, or have little economic track record to speak of.

The Government yesterday made much of the US Treasury Department's blistering attack on the EU listing, which was likely sparked by the inclusion of four US territories - American Samoa, Guam, Puerto Rico, and the US Virgin Islands.

The Trump administration's attack on the EU listing, criticising its "flawed process" and integrity, was likely music to the Minnis administration's ears, although it is unclear how it strengthens The Bahamas' case.

"The European Commission’s process for developing its list contrasts starkly with FATF’s thorough methodology," the US Treasury argued. "First, the Commission’s process did not include a sufficiently in-depth review necessary to conduct an assessment related to such a serious and consequential issue.

"Second, the Commission provided affected jurisdictions with only a cursory basis for its determination. Third, the Commission notified affected jurisdictions that they would be included on the list only days before issuance.

"Fourth, the Commission failed to provide affected jurisdictions with any meaningful opportunity to challenge their inclusion or otherwise address issues identified by the Commission. As a result, the European Commission produced a list that diverges from the FATF list without reasonable support."