The independence and integrity of the judiciary system in The Bahamas has not only played an essential role in establishing the country’s credentials as an international financial centre but is a vital contributor to the **AML environment** that continues to evolve in the jurisdiction.

At the apex of the country’s judicial system is the Privy Council in London which in December 2007 chose to sit in The Bahamas for the second consecutive year — the only occasions in which it has sat outside of London –- reflecting the high regard in which the country’s independent judiciary is held.

During its sitting in The Bahamas, Prime Minister of The Bahamas, the Rt. Hon. Hubert Ingraham, reaffirmed to the Privy Council The Bahamas’ commitment to maintain judicial independence. He noted that Bahamian political institutions are modeled after Westminster, and the country’s legal and judicial institutions are based on English tradition, which he credited for the stability and prosperity The Bahamas has enjoyed through the years.

The judiciary not only enforces AML laws in The Bahamas but also recognizes that law abiding persons have a right to privacy with respect to the conduct of their affairs. This position is not unique to The Bahamas as many countries including the United Kingdom, the United States of America, Austria and Canada, recognize and enforce respect for financial privacy.

The importance of privacy and confidentiality was recently reinforced by the Hon. Desmond Bannister, Minister of State in the Ministry of Legal Affairs, during parliamentary discussions on an amendment to The Bahamas’ Criminal Justice (International Cooperation) Act which is expected to be passed early this year.

*“The banking industry is critical to our country,”* said the Minister, *“and our law has long recognised the importance of bank confidentiality so that disclosure of banking information can only be successful in certain specified circumstances such as where a court lawfully requires a bank to make such disclosure.”*

The amendment to the Criminal Justice (International Cooperation) Act will enable The Bahamas to comply with certain Financial Action Task Force (FATF) recommendations concerning international cooperation in criminal investigations.

Attorney General Claire Hepburn said criminal prosecutions in jurisdictions with which The Bahamas has Mutual Legal Assistance Treaties in regards to criminal investigations – like the United States, the United Kingdom and Canada – are being held up by a legal wrinkle in The Bahamas that the amendment is aimed at ironing out.

The need for this amendment arises directly out a decision of the Supreme Court, the *Attorney-General v Rene Walter Rivkin, Trevor John Kennedy, Graham Frederick Richardson et al*E/GEN/00727/2005, handed down on the 16th March 2007 arising out of a legal challenge launched in February of 2006 to a letter of request under the Act.

The challenge followed a decision of the Irish Supreme Court in July, 2005 which determined that the procedure in the Irish Act to facilitate the provision of assistance to foreign countries was purely administrative in nature. The Irish Supreme Court determined that the very foundation of the Irish Act which was used for evidence to be secured for use in criminal matters in foreign courts was taken away. The Supreme Court of The Bahamas delivered a ruling which accepted the analysis of the law which was provided by the Irish Supreme Court, resulting in the proposed amendment to enable The Bahamas to continue to live up to its commitment to provide the highest levels of cooperation in international criminal investigations.

The amendment to the Criminal Justice Act is further recognition by The Bahamas that it operates in a globally integrated market for financial services and its sole interest is legitimate international business. As a result the country’s counter-money laundering legislation is as advanced as any OECD country, meeting global best practices and standards.

In fact, counter money laundering vigilance and measures have been a priority in The Bahamas for a number of years. The Bahamas’ excellent track record in the fight against money laundering dates back to 1987 when it criminalized the proceeds of drug trafficking through legislation. Two years later The Bahamas became the first country to ratify a UN Convention against the illicit trafficking of narcotic drugs. This was followed by its comprehensive Money Laundering Act in 1996 which expanded the offenses covered to encompass proceeds of other crimes besides drugs. Since this time, efforts have continued with the establishment of the Financial Intelligence Unit, a member of the Egmont Group, a comprehensive assessment of all bank, trust, and brokerage facilities for compliance with the FATF 40 recommendations and many other developments.

Formed in 2000, the Financial Intelligence Unit (FIU) is The Bahamas’ administrative arm to prevent and detect money laundering and the financing of terrorism. It is one of a number of agencies charged with the responsibility for policing of financial services. However, while each of the regulatory agencies is responsible for a specific sub-sector within financial services, the FIU’s mandate empowers the agency to deal with all financial institutions. The agency is responsible for receiving, analyzing, obtaining and, in defined circumstances, the dissemination of information which relates to or may relate to the proceeds of offences specified in the Proceeds of Crime Act.

In its intelligence role, the agency is fully committed to the 100 member Egmont Group’s *“statement of purpose”* which incorporates *“principles for information exchange between financial intelligence units for money laundering and terrorism financing cases.”* Indicative of the agency’s commitment was the appointment of The Bahamas’ Deputy Director to chair the Implementation Committee, tasked with the responsibility of overseeing the transition of Egmont into a permanent international organization. It is also responsible for successfully sponsoring Egmont membership of the majority of the Caribbean FIUs.

In 2001 the FATF noted The Bahamas environment was *”in accordance with its 40 Recommendations”.* The United States, through its Treasury Department, arrived at similar conclusions as it *”recognized the efforts on the part of The Bahamas to ensure that the same financial standards apply in The Bahamas as apply in other recognized international financial centers.”* This independent assessment proved useful as Bahamian based financial institutions saw the adoption of the USA PATRIOT Act with minimal impact on their internal procedures. The IMF also commended the Bahamas’ implementation of an effective regulatory regime in the Fund’s offshore financial centre (“OFC”) assessment.

The government however remains conscious of the need to be ever vigilant of evolving issues surrounding the international financial services. This commitment was reaffirmed by the Bahamas Attorney General in the closing days of 2007 in outlining the government’s five point strategy for the sector, which is designed to:

• protect the reputation of The Bahamas as both a responsible and reputable international financial centre;

• prevent the use of the banking system for criminal purposes;

• prevent de-stabilization of the domestic economy while promoting legitimate economic activity;

• anticipate and implement effective counter measures to new/emerging trends in money laundering, terrorism financing and related activities; and

• assist relevant authorities in other countries in fighting money laundering and terrorism financing through the timely sharing of information.

**Legal Assistance**

Another significant initiative in 2000 was the establishment of the International Legal Cooperation Unit (ILCU) in the Attorney General’s office which is responsible for dealing with all requests for legal assistance from foreign jurisdictions. Several pieces of legislation allow the ILCU to deal with requests.

• The Mutual Legal Assistance (Criminal Matters) Act 1988, governs requests for legal assistance in criminal matters from the United States of America, Canada and the United Kingdom, all of whom have entered into Mutual Legal Assistance Treaties (MLATS) with The Bahamas.

• The Criminal Justice (International Cooperation) Act allows the Attorney-General to render assistance to courts or tribunals exercising criminal jurisdiction, prosecuting authorities, or any other authority, which carries out such functions in countries that do not have a Mutual Legal Assistance Treaty with The Bahamas.

• The Proceeds of Crime Act criminalizes the concealment of the sources and ownership of ill-gotten gains, provided for its forfeiture and for international cooperation in the prevention of money laundering. The Supreme Court of The Bahamas is empowered by the Act to make restraint orders and forfeiture orders in respect of the proceeds of crime, which may have been found within The Bahamas. As a result, financial institutions are now required to strictly apply their KYC provisions, in order to ensure that undesirable persons do not have access to the country’s financial services sector.

• Financial Transaction Reporting Act imposes obligations on banking officials and other financial operators, to make reports of suspicious transactions to a special investigative body set up for the purpose of receiving such reports, the Financial Intelligence Unit. As a statutory body, the FIU is empowered to conduct its own investigations and to take certain actions as a result, including the pro-tem freezing of accounts to enable it to complete its investigation.

• The International Obligations (Economic and Ancillary Measures) Act allows The Bahamas to give effect in domestic law to economic sanctions such as those required by the Security Council. For example, an order pursuant to this Act was executed in 2001, which resulted in the freezing of US$32 million in The Bahamas, though the money was later released as no suspected links to terrorism were found. This example illustrates the fact that The Bahamas has put in place the legal infrastructure that allows it to respond to its international obligations, but in a way that does not prejudice the rule of law.

**Complying with International Standards**

What is clear is that The Bahamas along with other centres have moved quite far along the regulatory landscape. So much so that the IMF acknowledged in its 2005 report that compliance levels for OFCs are, on average, better than in other jurisdictions assessed under the Financial Services Assessment Programme.

Following the IMF review which confirmed the existence of a banking and securities market regulatory environment in compliance with international standards, The Bahamas has turned its attention to ensuring that the jurisdiction secures the benefits of its regulatory regime.

Plans are now well underway to consolidate regulation and supervision of the country’s financial services industry. This regulatory reform is designed to achieve both efficiency and cost gains while simultaneously adhering to international standards in the area of financial services regulation.