Communication by Prime Minister the Rt. Hon. Hubert A. Ingraham
on The Rating and Listing of The Bahamas by the Financial Stability Forum (FSF);Financial Action Task Force (FATF); and the Organization for Cooperation and Development

Madam Speaker,

I returned to Nassau on Thursday last following a ten day visit to North America during which I, together with a delegation comprising the Hon. Sir William Allen, Member for Montagu and Minister of Finance, Mr. Julian Francis, Governor of the Central Bank, Ms. Rhonda Bain, Director of Legal Affairs and Ms. M. Teresa Butler, Permanent Secretary in the Office of the Prime Minister, called on Government and private sector representatives in the United States of America and Canada in relation to the adverse rating and listing of The Bahamas’ financial services sector by Committees and Sub-Committees of the G7 – the Financial Stability Forum (FSF), the Financial Action Task Force (FATF), and the Organization for Cooperation and Development (OECD).

This visit followed upon meetings held in London between the Minister of Finance and the British Representatives to OECD and FATF and meetings chaired by myself with representatives of institutions and professions involved in the delivery of financial services in The Bahamas.

It is proposed that similar visits be paid, in the near future, to additional member states of the OECD involved in the FSF, FATF and OECD processes, to bring The Bahamas’ unambiguous commitment to provide enhanced banks regulation and supervision, improved anti-money laundering processes, and more efficient cooperation in legal assistance and in exchange of information in criminal matters.

In Washington, D.C. I met with representatives of the US Administration including Mr. Larry Summers, Treasury Secretary, Ms. Janet Reno, Attorney General and Mr. Thomas Pickering, Acting Secretary of State, and with a number of US Congressional representatives concerned with anti-money laundering initiatives in the US House of Representatives and in the Senate. I also wrote to other members of the US Congress setting out action taken by The Bahamas to counter money laundering and outlining contemplated action to address the deficiencies identified by the FATF in our anti money laundering processes.

The United States Administration’s representatives were unequivocal in conveying the determination of the G-7 to eliminate tax havens. Further, it was made clear that the United States would only support the continuation of The Bahamas as an international financial centre if The Bahamas complied fully with the new internationally acceptable practices now current in major financial centres in the developed world.

In addition to the countering of money laundering, the United States Government also holds tremendous interest in the exchange of information in both civil and criminal matters and continues to have an interest in the conclusion of a Tax Information Exchange Agreement (TIEA) with The Bahamas. It is to be noted that The Bahamas is the only independent English speaking country that has not concluded such an Agreement with the United States, notwithstanding the latter’s pursuit of a TIEA for some twenty years. The Bahamas has signaled an interest in pursuing an Agreement subject to the financial services sector of The Bahamas receiving similar treatment under such a treaty as that accorded to the insurance industry of Bermuda under its Agreement with the United States.

Honourable Members are advised that the US Attorney General expressed tremendous satisfaction with the new increased speed and efficiency with which US requests for assistance in criminal matters are being processed by the Office of the Attorney General in The Bahamas, particularly since June of this year. Honourable Members will be aware that delays associated with applications for assistance under the Mutual Legal Assistance Treaty (MLAT) and through Letters Rogatory had figured prominently among deficiencies identified in the FATF Report on The Bahamas.

In Montreal, I met with Mr. Paul Martin, Minister of Finance.

I am pleased to advise that The Bahamas’ stated position to amendment and/or adoption of new legislation was well received in both the United States and Canada. These include, but are not limited to commitments:

* to require the observance of “Know your Customer” (KYC) rules as observed by financial services centres in major developed countries;

* to expand and enhance the Supervision Division of the Central Bank;

* to permit cross-border supervision and on-site inspection of banks and of other financial institutions;

* to enhance administrative capacity and capability as regards responses to MLAT and other requests for assistance and cooperation;

* to permit cooperation and exchange of information between The Bahamas and its international partners in the area of criminal tax matters, fraud and bribery;

* to the establishment of a Financial Intelligence Unit (FIU); and

* to abolish bearer shares.

The US Treasury Department confirmed its offer of technical assistance to support The Bahamas in addressing identified deficiencies in its counter money laundering processes, with particular regard to the establishment of the FIU, the identification and training of regulatory and supervisory personnel for the expanded Banks Supervision Unit of the Central Bank and in the review of draft legislation vis-a-vis the satisfaction of FSF/FATF/OECD concerns.

Both the United States and Canada agreed that the process of evaluation and listing of countries by the G-7 Committees was flawed, particularly in that it did not contain an “exit strategy” for listed countries which act to meet identified deficiencies in their anti-money laundering processes. Further, there was recognition that concerns listed by the FSF and the FATF are not exhaustive and that some OECD member states do not themselves meet standards which are intended for imposition on blacklisted countries.

The Canadian Government, which has been critical of the FSF, the FATF and the OECD processes, has undertaken to lobby its G-7 partners with regard to the importance of the establishment of both “an exit strategy” and of a time limit for removal, from the list, of jurisdictions which satisfactorily address identified weaknesses.

Madam Speaker,

My delegation and I also took advantage of our presence in the United States and Canada to meet with Heads and Senior Staff of major international banking institutions operating in The Bahamas and headquartered in those two countries. I apprised them of The Bahamas’ position and of our intention to ensure that reputable banks continue to operate comfortably in The Bahamas, free from any taint of association with financial impropriety or illegality.

I am pleased to advise that all of the banks confirm that their operations in The Bahamas currently observe the industry’s best practices as required by their home jurisdictions. We confirmed to Bank Heads The Bahamas’ interest and intention to respond positively to identified deficiencies in our financial services legislative and supervisory capacities which may be abused by criminal elements; and we invited their participation in our initiatives. It is generally believed that the interests of large reputable institutions operating in The Bahamas will be enhanced by our contemplated action to enhance regulation and supervision of the Bahamian financial services sector.

Madam Speaker,

Honourable Members are aware that as a direct result of The Bahamas’ participation in the Caribbean Financial Action Task Force (CFATF) and subsequently by our interaction with the OECD and the FATF, as both organizations evaluated the regulation and supervision of The Bahamas’ financial services sector during the past year, my Government commenced the drafting of new legislation and initiated a number of administrative initiatives to bring the country’s financial services sector in line with evolving international best practices for financial services centres as observed in the major financial centres of the world.

This exercise has included amendment, this year, to the Reciprocal Enforcement of Judgement Act, which permits, on a reciprocal basis, the enforcement of the judgements of other jurisdictions in The Bahamas. A further contemplated amendment to the Act will remove a remaining prohibition, legislated in 1924, on the registration of foreign judgements in respect of a cause of action which for reasons of public policy or for some other similar reason could not have been entertained by the registering Court (in The Bahamas). And, the Currency Declaration Act, 2000 which makes mandatory the declaration of cash and/or negotiable instrument in the amount of $10,000 or more by persons entering or leaving The Bahamas, will be passed into law and brought into effect.

We are today debating the enactment of an amendment to the new Evidence (Proceedings in Other Jurisdictions) Act to permit evidence to be obtained in The Bahamas for use in proceedings in other jurisdictions whether pending before a court or in an investigative stage.

An amendment to the Money Laundering (Proceeds of Crime) Act has strengthened the requirement for the reporting by financial institutions and others of suspicious transactions to include the necessary reporting of unusual transactions. Still to be determined is whether this Act may not be repealed and replaced with a new Proceeds of Crime Act. Additional amendments are likely to be adopted to a number of other pieces of legislation including the following:

* The International Business Companies Act
* The Trustee Ac
* The Bank and Trust Companies Regulations Act
* The Central Bank Act
* The Mutual Legal Assistance Act
* The Banks Act

Further, so as to provide for comprehensive regulation and supervision of the delivery of financial services by individuals and institutions doing business in or from The Bahamas consideration is being given to the enactment of additional new legislation as follows:

* The Criminal Justice (International Cooperation) Act;

* The Financial Services Providers Regulation Act, (in respect of
financial service providers not now regulated or inadequately regulated);

* The Financial Transactions Reporting Act; and

* The Criminal Justice (International Cooperation) Enforcement of Overseas Forfeiture Orders Act

Madam Speaker,

The subject of Financial Services will continue to be high on The Bahamas’ agenda for some time. As is my custom, I shall keep Honourable Members informed of all steps being taken to ensure The Bahamas’ compliance with existing and evolving best practices for international Financial Services Centres of which The Bahamas has been a member for more than fifty years.

9 August, 2000