The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must “act in a manner consistent” with protecting its reputation and integrity as an international financial centre (IFC) on Russian sanctions, an ex-attorney general says.

John Delaney, who held the post under the last Ingraham administration, told Tribune Business that The Bahamas should stay abreast of “international consensus” on financial/economic penalties that are imposed in response to the Ukraine invasion.

Speaking after the US embassy urged The Bahamas to limit Russian access to its financial system, he voiced doubts that business from the latter nation “represents a major segment” of the international financial services sector given that it was already deemed high-risk.

While no sanctions have been levied on Russia via the United Nations (UN), which would trigger international obligations on The Bahamas and all other countries to follow suit in imposing such measures, Mr Delaney said The Bahamas’ relationships with key “allies” and trading partners such as the US also have to be considered.

“I would say that we ought to act in a manner that is consistent with being a responsible IFC,” he told this newspaper. “I think that we should take responsible measures that are consistent with that of the international community of which we are part.....

“Otherwise there’s a real risk we’ll be considered as a jurisdiction that plays fast and loose, and takes risky business, and is not prepared to a responsible jurisdiction. I would say we should act consistently with the international consensus.”

Western nations, such as the US, Canada, UK and European Union (EU) have already cut Russia off from Swift, the main secure messaging system that banks use to make rapid and secure cross-border payments.

They have also sanctioned key Russian government figures, and many so-called oligarchs - billionaires and millionaires considered close to Vladimir Putin and the Kremlin - by seizing and freezing their purported assets and interests in Western countries. The Russian central bank, too, has seen its foreign assets frozen in a bid to isolate that nation from the world’s economic and financial systems.

Mr Delaney said that, when it came to the Russia/Ukraine situation and associated sanctions, The Bahamas has potentially more at stake than “any short-term international business issues”. He added: “There are other drivers for The Bahamas, our international relations with our allies and friends, of whom we have such substantial relations on many levels.”

Pointing to The Bahamas’ strong trading and commercial links with the US, in particular, the Delaney Partners principal said “it would be a curious thing to sit on our hands and do nothing” if the international community was demanding further action.

“The impact of the jurisdiction not taking steps will outweigh the taking of those steps,” he explained. “Not to do so can have a prejudicial impact for the country, the industry.” However, Mr Delaney said it was unlikely that the imposition of sanctions will have a widespread negative impact on the financial services industry.

“I do not know the extent of our Russian business, but I would not guess that it represents a major segment of activity in The Bahamas,” he asserted. “In any event, I don’t think there’s likely to be any adverse impact from sanctions because it has to be a global measure.

“I think there’s a consensus in the west that measures should be taken against Russian business at this time, and to the extent there’s some adverse impact here that would be limited to individual institutions or niches that have portfolios from that country.

“Doing business with that jurisdiction [Russia] for some time has been suspect for one reason or another, whether it’s the oligarchs and anti-money laundering and so forth. I would say the higher tier and blue chip providers wouldn’t touch that business in the first place. The impact will not be widespread.”

Russian oligarchs have had assets in, and conducted financial services business with, The Bahamas in the past. Tribune Business previously reported on a Bahamian court case involving Arkadi and Sacha Gaydamak, former owners of Portsmouth Football Club in England, who had a legal dispute involving a local financial institution.

However, most high net worth Russians are likely to conduct their financial business through London and other major financial centres, plus the likes of Cyprus and the British Virgin Islands (BVI).

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, yesterday said Russian access to the Bahamian financial system was already likely to have been cut-off or severely limited because the correspondent banks that this nation’s institutions use to conduct international transactions reside in nations that have imposed sanctions.

And, with The Bahamas’ Register of Beneficial Ownership Act enabling the authorities, regulators and financial services industry to know who owns every corporate entity domiciled in this nation, he added that there should be no difficulty identifying Russian sanctions targets.

Disclosing that Fidelity and other institutions have already been warned by their correspondents to “scrub your database and advise if you have any of them” as clients, Mr Bowe said Bahamians will “feel it more in our day-to-day lives than we are in the financial services sector” when it comes to the economic fall-out from the Ukraine invasion due to higher gasoline and energy prices.

“If persons understand our financial services system, they would know we are inextricably linked to the US in terms of correspondent banks, and Europe and the UK in terms of custodians,” he added.

“The fact these countries made unilateral sanctions means Bahamian institutions have to comply with them. We have to comply with our main business partners who are operating in jurisdictions that have imposed sanctions.”

Asserting that Russia has not featured prominently in the Bahamian financial services industry’s client base, Mr Bowe said that nation’s oligarchs would already have been subject to “much greater scrutiny” due to concerns about the source of their wealth.

“We’re in a very strong position because of the Register of Beneficial Ownership legislation,” the Fidelity chief added. “The Register of Beneficial Ownership, although criticised and a work in progress, has proven to be useful. If any of them are behind it, the Government will also have clear sight of it.”

Mr Bowe, though, said The Bahamas will have to be on its guard over “any new money running” to this nation to ensure no Russian oligarchs and politically exposed persons (PEPs) are behind it.