NASSAU, The Bahamas – Prime Minister
the Rt. Hon. Hubert A. Ingraham met
Wednesday with representatives of
the financial services sector in his
and his government’s continuing
consultation with the sector as the
government formulates and implements
The Bahamas’ response to the
unfavourable listing of its financial
services sector by the G-7 Financial
Stability Forum (FSF), the Financial
Action Task Force (FATF), and the
Organization for Economic
Co-operation and Development(OECD).

The Prime Minister was accompanied
by Sir William Allen, the Minister
of Finance, and by the Governor of
the Central Bank, Mr. Julian

The Prime Minister first met
representatives of the financial
services community early in July
prior to his departure for
consultations in Washington, D.C.,
and Montreal, Canada, with
representatives of the American
and Canadian governments involved
in the various G-7 initiatives.

These consultations included
meetings with members of the
Association of International Banks
and Trust Companies (AIBT) on July
12, followed by meetings with
members of the Association of
Chartered Accounts on July 14, The
Bahamas Bar Association on July 17,
the Clearing Banks Association on
July 18, and with members of the
Opposition Progressive Liberal
Party and the Coalition for
Democratic Reform on July 19.

While in North America, the Prime
Minister met with heads and senior
officers of the major American and
Canadian banking and trust
companies operating in The Bahamas
and responsible for the employment
of more than 47 per cent of
Bahamians directly engaged in
banking and trust business in The

Following on the Prime Minister’s
return from North America on August
03, he briefed members of the
financial services sector at a
joint meeting on Monday, August 07,
and met again with the leaders of
the two opposition parties in
parliament on Wednesday, August 09.

The Prime Minister and his
financial advisers continue to
explore with practitioners in the
financial services sector the most
efficient and effective means of
responding to legitimate concerns
with deficiencies in The Bahamas’
regulation and supervision of its
financial services sector while
preserving for The Bahamas an
efficient and profitable financial
services sector.

Following his meeting on Wednesday,
the Prime Minister expressed the
view that throughout the
development of the financial
services industry in The Bahamas,
the government has sought to
provide the necessary legal
framework for the efficient
operation of the sector without
burdening the sector with
excessive government regulation
and reporting requirements, a
perennial complaint of private
sector businesses internationally.

In 1985, the Association of
International Banks and Trust
Companies developed a code of
conduct, which member institutions
were expected to observe in the
conduct of their business. This
code has been particularly
important and relied on by
successive Bahamian governments,
especially as regards the reporting
of cash deposits in excess of
$10,000, in the reporting of
suspicious banking transactions,
and in the enforcement of “know
your customer” policies, the Prime
Minister said.

He said that as drug-trafficking
and drug money-laundering became
larger international problems
during the late 1980s, the
government of The Bahamas began to
address the inadequacies of its
legislative framework with the
adoption of the Confiscation and
Forfeiture of the Proceeds of
Crime Act, 1986. However, as that
act had not specifically
criminalized money laundering, its
effectiveness was limited, as is
demonstrated by the few successful
prosecutions resulting under the

The Prime Minister noted that
notwithstanding a stated
commitment to combat international
crime, and specifically drug-
related crime, by the government of
The Bahamas, there was, and
remains, among many, a reluctance
to support an enhanced legislative
regulatory and supervisory system
so as to ensure The Bahamas’
compliance with international best
practices and standards.

He noted that this is reflected by
the fact that notwithstanding The
Bahamas’ acceptance of all the
international anti-drug conventions
up to and including the 1988
Convention Against the Trafficking
of Narcotic Drugs and Psychotropic
Substances, which clearly prohibits
members-party from using bank
secrecy as a reason to deny legal
assistance, The Bahamas has never
taken steps to implement the
provisions of the conventions in
Bahamian statute law.

Similarly, commitments to counter
money laundering, whether at the
level of the United Nations,
the Organization of American States
or CARICOM, have not resulted
in adequate legislative action.
The Bahamas did not enact a modern
Extradition Act until 1994, and
finally criminalized money
laundering in 1996, ahead, however,
of most other offshore
jurisdictions, said the Prime

He said that spurred by drug crime,
a groundswell of support has grown
internationally against crime and
criminality during the past 10
years. This has included increased
attention to the promotion of
democracy and good governance, and
the launch of a widespread campaign
against corruption in both the
public and private sectors.

Over time, the forces fighting drug
trafficking and abuse and its
corrupting impact on societies have
combined with forces fighting
political and financial corruption.
And both groups have recognized
that financial institutions play an
important role in integrating the
proceeds of crime into the
legitimate economy. The present
action by the various committees
and sub-committees of the G-7 is,
he said he believes, a case of the
developed countries saying to The
Bahamas “I hear what you say, but
I’m watching you.” He said: “They
have found our action to prevent
the abuse of our financial services
system inadequate.”

He continued: “What I have sought
to impress upon representatives of
the financial services sector
operating in The Bahamas is that it
is important for us to recognize
and accept where identified
deficiencies are legitimate, and
correct them. I am satisfied, and
my consultations with our major
bankers have not convinced me
otherwise, that action required to
remedy identified deficiencies will
not hamper legitimate business.”

Indeed, with specific regard to tax
matters, the Prime Minister said
that all major banks and trust
companies with which he has met
have reiterated their longstanding
position to the government that
they have no U.S. clients who have
not signed waivers permitting
disclosures to authorities of the
Internal Revenue Service (IRS), and
that their “know your customer”
policies are those dictated by
their parent institutions in OECD
countries that fully meet OECD

“My government,” the Prime Minister
said, “has no interest and no
intention of burdening our
financial services sector with
requirements which will put it at a
disadvantage vis-à-vis other
international financial centres,
be they offshore or onshore.” For
example, The Bahamas will not seek
to implement standards that are not
implemented in OECD financial
centres, and will continue to
resist any attempt by the OECD and
the FATF to that end, he said.

The Prime Minister added: “My
government is in the process of
doing some preparatory work to
bring itself into compliance with
what clearly we must do. This
includes administrative actions
and supervisory preparations for
the enhanced supervisory regime
that will have to exist in The
Bahamas, and changes to a number of
laws to accommodate the new and
evolving regulatory and supervisory
regime for financial services.” He
stressed that his government is not
seeking to cut new ground, and
would not implement rules and
regulations different to those in
place in financial centres around
the world.

“We have begun to recruit new
persons to assist in the
supervision and regulation of
financial institutions in The
Bahamas because we acknowledge that
we have inadequacy of human
resources to do so,” the Prime
Minister said. “The IMF
(International Monetary Fund) and
the Canadian government and a
number of the financial
institutions with which we have
met, have been most helpful in
identifying such suitable persons
to join the supervisory division of
the Central Bank.”

He said, “Changes to be effected
will permit, for example, cross-
border supervision as required
under the Basle Committee
Standards on Bank Supervision, a
standard with which The Bahamas
wishes to be fully compliant.” And
he noted that changes would require
that no bank licensed in The
Bahamas would be permitted to avoid
supervision by both The Bahamas and
its home jurisdiction as was
presently the case for a number of
“managed banks.”

The Prime Minister acknowledged
that there is likely to be some
fallout from this change, but
believes that the fallout will not
be significant. “A number of
‘managed banks’ will, we expect,”
he said, “determine to establish a
physical presence in The Bahamas,
making their books available for
local supervision while others will
agree to home-jurisdiction

“Within that context, I have
signaled that The Bahamas has a
national interest in accommodating
the long-standing request by the
United States government with
respect to the exchange of
information on civil tax liability.
Such an agreement would have to
meet Bahamian requirements – that
The Bahamas financial services
sector be accorded similar
treatment granted to the Bermudian
insurance sector when that country
entered into a TIEA with the United
States, that The Bahamas receive
the Convention Tax Deduction
Benefit (a provision which permits
U.S. corporations holding
conferences in The Bahamas to enjoy
certain tax deduction benefits
under certain circumstances), and
that The Bahamas receive the
assistance of the United States
government with regard to customs
fraud, a major drain on The
Bahamas government’s tax revenue.

“Another area receiving early
attention by the government is the
formation of the Financial
Intelligence Unit (FIU), an
initiative with which the
government expects to receive
advice from the United States,
Canadian and United Kingdom

In response to queries regarding
The Bahamas’ application via the
AIBT to become a Qualified
Jurisdiction (QJ) with the
Internal Revenue Service, the
Prime Minister said U.S.
authorities advised him during his
visit to Washington that there is
a high likelihood that the approval
for The Bahamas would be
forthcoming. Due to the large
number of applications, however, it
was likely that the January 01,
2001, deadline would be extended.

Bahamas Information Services
August 17, 2000