The Bahamas remains under scrutiny from the powerful Financial Action Task Force and failure to enforce key pieces of financial legislation could be “catastrophic”, Attorney General Alfred Sears warned yesterday.
Minister Sears, while speaking in the House of Assembly, indicated that the government continues to be concerned that powerful industrialized nations are threatening the country’s competitive edge by requiring that The Bahamas adhere to certain requirements that first world countries making up the FATF have not themselves put in place.
He said the FATF continues to increase pressures on The Bahamas, even though the country passed a package of financial bills two years ago, putting in place anti-money laundering measures that are more comprehensive that what exists in other jurisdictions, including the United States.
Minister Sears intimated that if the legislation passed in December 2000, is not strictly enforced, the country risks being replaced on another blacklist.
The Attorney General said that, “Because we’re being monitored, if a determination is made by the FATF that we are not complying, then the results can be catastrophic. Therefore, it ought not be a partisan issue because the very national stability of our economy is dependent on how careful we can balance complying with our international obligations on one hand and maintaining a competitive financial services industry on the other hand.”
Minister Sears, who is also Chairman of the Caribbean Financial Action Task Force (CFATF), was responding to Montagu Member of Parliament Brent Symonette who urged the government to review the Financial Transactions Reporting Act.
However, the Attorney General assured Mr. Symonette that the review is underway. But Minister Sears said unlike the Free National movement Administration, the government does not want to repeat the mistake of “rushing” through legislation to appease the world’s superpowers.
It was June 2000, when The Bahamas was included on a list of 15 countries labeled as non-cooperative in the fight against money laundering by the FATF.
Although claiming that it was unfairly treated by the FATF, the government set out to remedy the deficiencies listed in the report by introducing new and amended laws and regulations.
The discussion regarding the review of the package of financial legislation by the Progressive Liberal Party Administration, arose during debate on the Investment Funds Bill, which is expected to supervise Bahamian-based mutual funds.
However, Mr. Symonette reminded that the bill alone would not result in a transformation of the nation’s second largest sector.
Acknowledging that the Opposition supports the bill and appreciates that there are certain provisions which are innovative, Mr. Symonette said, from discussions with professionals in the financial services sector, there needs to be an amendment to numerous other acts.
Among them he noted, are amendments to the International Business Company Act and a review of the Financial Transactions and Reporting Act. He also suggested that the government moves speedily and bring a Foundations Bill, an Anti-Terrorism Bill and a Protected Cell Act to parliament.
“Recently, the financial services industry has seen such firms as Lloyds Bank close and Fortis merge, with the resultant down sizing. There is no question that the financial services sector requires legislative assistance,” Mr. Symonette said.
The Investments Fund Bill, which will repeal the Mutual Funds Act 1995, would ensure that there is appropriate supervision in relation to the affairs of Bahamas-based mutual funds, according to the government.
The existing legislation recognized a category of funds called, ‘exempt funds,’ that were private in nature and therefore were not subject to regulatory oversight. However, this category, according to Financial Services and Investments Minister, Allyson Maynard-Gibson, was abused and facilitated the establishment of entities that effected fraudulent schemes.
Now that the government is proposing to eradicate ‘exempt funds’ through the Investments Fund Bill, former Prime Minister and North Abaco M.P., Hubert Ingraham, raised questions regarding the prestigious Templeton Fund which is an ‘exempt fund.’
“The Templeton Fund will have to continue to be an exempted fund,” he advised.
“It’s a major employer in the Bahamas. It’s a $90 billion fund, so I just wanted to correct the statement that all exempted funds will be eradicated,” Mr. Ingraham said.
Under the new bill, mutual funds would be categorized either as Professional, SMART, Standard or Recognized Foreign Funds.
Minister Maynard-Gibson said perhaps the Templeton Fund would be placed in the Professional category. She said it would be up to the Securities Commission of The Bahamas to determine the classification of the Templeton Fund.
“I was pointing out the various categories into which the Templeton Fund might fall should administrators of the Templeton Fund seeks to obtain the view – and I’m sure they would – of the Securities Commission,” she said. “But I’m sure that the member for North Abaco would agree, it would be entirely improper for me to express any view at all as to how the Securities Commission might exercise its jurisdiction or an authoritative view. I don’t have that power.”
Meanwhile, the present legislation only provides minimal administrative authority to the Commission. With the new legislation, the Commission’s authority has been expanded.
The courts found that the Mutual Funds Act does not empower the Commission to file petitions where funds are operating without being licensed. The proposed legislation would give the Commission authority to petition the courts to wind up an unregulated fund operating in the Bahamas.
The bill is expected to encourage further growth of the sector, to ensure that The Bahamas remains at the cutting edge as a major international center for mutual funds, according to Minister Maynard-Gibson.
By Hadassah Hall, The Bahama Journal
