Bahamas: Minister slams G-20's 'unprecedented assault' on financial industry

By added on 30/01/2013

The Minister of Foreign Affairs has used a regional summit with the European Union (EU) to hit out at “the unprecedented assault” on the Bahamas’ financial services industry, arguing that the sector was subject to regulatory standards that matched those in developed countries, reports the Bahamas Tribune.

Speaking on Sunday at the summit hosted by the Community of Latin American and Caribbean States (CELAC), Fred Mitchell implied that the decade-long G-20/OECD attack on the Bahamas and other international financial centres (IFCs) ran contrary to “free trade and [fair] competition”.

He described IFCs as “misunderstood” by G-20 nations, given that the Bahamas and others acted as ‘pass through’ or value-added jurisdictions, where wealth accumulated in them was ultimately reinvested in developed nations for their benefit.

Contrasting the different attitudes adopted towards tourism and financial services, Mr Mitchell told EU and Latin American/Caribbean heads of state and foreign ministers that the Bahamas - and IFCs in general - were having to cope with developed nations constantly changing ‘the rules of the game’.

Describing the Bahamian economy, and those of the region, as largely being services-driven. Mr Mitchell noted that tourism and financial services were the two main industries.

While tourism was “widely recognised and accepted as appropriate to the region”, he added: “I fear that the second is misunderstood, and there has been an unprecedented assault upon that sector, with rules often changing and the impression being given that there is an environment of loose regulation and a haven for the unsavoury.

“Further, some often suggest that there is some negative moral element to the maintenance of a financial service sector.”

The G-20/OECD offensive to clamp down on IFCs began in the mid-1990s, reaching a crescendo in 2000 when the Bahamas was ‘blacklisted’ by the Financial Action Task Force (FATF) for allegedly being ‘uncooperative’ in the fight against money laundering.

That resulted in the Government having to totally transform the financial services regulatory landscape by passing an 11-strong package of Bills, while the Bahamas was also assailed by the OECD for providing ‘harmful tax practices’ and the Financial Stability Forum (FSF) for weak regulatory oversight.

Since then, the Bahamas has had to consistently ‘tweak’ its legislative and regulatory environment, now having signed 30 Tax Information Exchange Agreements (TIEAs) to conform with the G-20 push for greater international tax co-operation and transparency.

There are signs, though, that the ‘rules of the game’ will shift once again, with the G-20/OECD likely to push for the automatic exchange of tax information, and European states ultimately following the example set by the US with the Foreign Account Tax Compliance Act (FATCA).

Refuting the ‘negative moral’ argument, Mr Mitchell told the regional summit with the EU: “If the world at large believes in free trade and in private wealth accumulation, then the financial services sector is just another aspect of free trade and honest competition.

“You cannot believe on the one hand in free trade, and then reject financial services as anathema.

“Our argument is that people who have wealth have a lawful right to secure that wealth, and to protect it in privacy in a transparent and well-regulated jurisdiction that is not a criminalised environment. That is what is offered in our region, and certainly in the Bahamas.”

Mr Mitchell pointed out that most of the banks and trust companies domiciled in the Bahamas were subsidiaries of institutions headquartered in G-20 and OECD member states.

He added that there Bahamian offices were subject to the same regulatory standards, and laws, as their parents, with this nation participating actively in all international bodies and training exercises.

“The governments of the countries in the region [the Caribbean] seek to ensure that the rules are followed, and we participate in all of the regulatory activities to ensure the existence of the latest and up to date regulatory environment,” Mr Mitchell added

“But there needs to be an understanding that these accumulations of wealth in our sub-region ultimately help the developed world. The money does not disappear down a hole, and in fact forms pools of capital for lending around the world, and to facilitate the developments around the world and in the developed world itself. There is no down side. This is a win-win situation.”