The Financial Action Task Force, the body that blacklisted The Bahamas about two years ago, has issued eight new special recommendations regarding terrorist financing.
Moreover, the United Nations and the Organisation of American States (OAS) have required member states to ratify a series of conventions and resolutions aimed at stopping the flow of terrorist funds.
And consistent with this new emphasis, the International Monetary Fund has implemented a methodology on money laundering and terrorist financing as part of its financial sector assessment programme.
Minister of State in the Ministry of Finance, Sen. James Smith pointed out these concerns to the Bahamas Association of Compliance Officers First Awards Dinner on the weekend at the Sheraton Grand Resort, Paradise Island.
He told the watchdogs of the financial services sector they need to be aware that these standards, when fully implemented at the national level, “will impose further obligations on financial institutions to further monitor their operations in order to detect any violations related to terrorist financing and to address these matters in a similar manner to money laundering concerns.”
However, Sen. Smith said he was confident The Bahamas has effectively responded to the challenges imposed by external forces.
The country has been removed from the OECD/FATF blacklist and “we have satisfied the requirements of the qualified intermediary status of the United States Internal Revenue Service,” he said.
As this is a dynamic process, the senator seemed concerned that there are other challenges.
“We are now faced with a new concern arising from the terrorist attacks of Sept. 11,” he said. “Arising from that event, the consequence for the U.S. has called for further refinement of our financial-services regulatory system to provide for preventative and detection measures of terrorist financing.”
Last week, chairman of the Financial Services Consultative Forum Brian Moree called for anti-terrorism laws, which empower law enforcement officials to better crack down on financial counterfeiting, smuggling and money-laundering.
The Ministry of Finance has the responsibility for oversight and regulation of the financial-service sector in The Bahamas, its agencies being The Compliance Commission, the Securities Commission and then Inspector of Financial Corporate Service Providers.
Sen. Smith said it is because of the high regard he has developed for compliance matters, that he was more than happy to stand in for Prime Minister Perry Christie in addressing the awards dinner.
“Your dedicated efforts to enhance the integrity of and public trust in The Bahamas’ Financial Services Industry is most commendable.”
Regarding the financial-services sector, the Organisation for Economic Cooperation and Development (OECD) created FATF to provide general guidelines to its membership on ways and means of fighting drug trafficking.
The FATF promulgated 40 recommendations, which at the end of the day essentially encourage the international community to criminalise money laundering of the proceeds of drug trafficking and to establish procedures to monitor large money transactions, identify customs and share information in and among member states.
The OECD and FATF established a global consensus on the need for international standards to track drug-trafficking proceeds. And, the OECD saw an opportunity to exploit the FATF’s global census. The OECD drafted a report on harmful tax practices that condemned offshore financial centres as engaging in practices that, in their opinion, harmful to the OECD countries, fiscal or tax interest.
“By some means, to date unknown, they were able to persuade the FATF, which was doing an assessment of its own 40 recommendations, but to extend the coverage to include aspects of their definition of harmful tax practices,” Senator Smith said. “The proceeds of drug trafficking and other serious offences a consensus item, was now expanded to include tax avoidance, tax evasion and the U.S. has now included terrorist financing.”
According to the senator, The Bahamas as well as other financial centres in this hemisphere and around the world was caught in this ingenious net and the rest is history.
International think tanks, with no political mandate, produced a “name and shame” list and, with little or no regard for the sovereignty of nation-states, threaten to lean on offshore centres unless they reform their financial centres to provide more transparency and information exchange on both criminal and civil tax matters, he said.
In this vein, he underscored the growing importance of compliance officers to the financial-services sector of The Bahamas.
Additionally, all financial institutions have to appoint a money-laundering reporting officer and a compliance officer; the law allows for the two roles to be combined into one where the size and nature of the financial business warrants one officer as opposed to two.
“The legislation has mandated that financial institutions in The Bahamas must always have on board a professional whose job is to safeguard the integrity of this jurisdiction,” Sen. Smith said. “It seems to me therefore, that your jobs are guaranteed by legislation.”
By Lindsay Thompson, The Nassau Guardian
