Pressure on B’dos offshore banking sector

Barbados’ international financial services sector, which brings in some $200 million annually, is under pressure again to show its transactions are above board. This time the pressure is from the Financial Action Task Force (FATF), an international regulatory body fighting money laundering and terrorist financing.

Barbados, which boasts of being a low-tax jurisdiction for off-shore, business successfully battled with the Organisation for Economic Cooperation and Development (OECD) in 2000 to remove its name from a “blacklist” of nations deemed to be involved in harmful tax practices. The OECD-linked Financial Action Task Force (FATF) has now introduced for off-shore business domiciles a Revised List of 40 Recommendations which could have serious implications for the sector and the several professionals involved such as attorneys-at-law, realtors and accountants. Furthermore, the recommendations which the FATF expects nations to implement as a matter of urgency, could also be attached to future financing from the World Bank and International Monetary Fund (IMF). The revised recommendations, which seek to enhance guidelines for tackling money laundering and terrorist financing, will result in government going to Parliament again to revise its legislation on the issues, if it is prepared to accept these new FATF standards. In its most far-reaching declaration, the FATF has outlawed shell banks, some of which operate in Barbados and other Caribbean off-shore domiciles.

The international regulatory body has called on governments to shut down these entities that are usually registered off-shore to help companies in places like the United States reduce the level of corporate taxes they pay back home. Furthermore, financial institutions in Barbados would be prevented from doing business with any shell bank anywhere in the world. Some of the most controversial recommendations, released two weeks ago, will affect the current relationship between lawyers and their clients. Attorneys will now be obligated to question clients about the source of their money when transacting business involving large sums. The island has a threshold of $10,000. If government agrees to implement these new FATF rules, an attorney who suspects that a client’s funds came from an illegal source or that the money could be used to finance terrorism, will be obligated to make a suspicious transaction report to the local Financial Intelligence Unit (FIU).

Further, attorneys-at-law, accountants and real estate agents would be required to maintain records which clients use for identification such as identification cards and passports, as well as account files and business correspondence, for at least five years after the business relationship has ended, in the event they are needed by a competent investigative body. Prior to the FATF revised rules, only financial institutions were mandated to carry out such due diligence. Back in 2001 when government amended the 1998 Money Laundering (Prevention and Control) Act, Attorney General Mia Mottley warned her colleagues in the legal profession that their professional privilege will be removed if there was evidence that they were using client accounts in commercial banks to “hide money” for persons. Now, the matter may be out of her hands, as the FATF seeks to rein in those professionals whom it has identified are being used by money launderers and terrorist financiers to escape detection. If Barbados is prepared to accept the FATF new guidelines, other professionals including accountants and auditors would be legally obligated to make “suspicious transactions reports” also. The new international standards will apply to those involved in “non-financial businesses” including casino operators and those offering Internet gambling, real estate agents, dealers in precious metals and stones, accountants, lawyers, notaries and independent legal professions, trust and company service providers.

When contacted over the weekend, Minister of Industry and International Business Dale Marshall said his ministry was aware of the FATF revised recommendations and was examining them to determine their impact on Barbados. The international regulatory body has called on governments to shut down these entities that are usually registered off-shore to help companies in places like the United States reduce the level of corporate taxes they pay back home. Furthermore, financial institutions in Barbados would be prevented from doing business with any shell bank anywhere in the world. Some of the most controversial recommendations, released two weeks ago, will affect the current relationship between lawyers and their clients. Attorneys will now be obligated to question clients about the source of their money when transacting business involving large sums. The island has a threshold of $10, 000. If government agrees to implement these new FATF rules, an attorney who suspects that a client’s funds came from an illegal source or that the money could be used to finance terrorism, will be obligated to make a suspicious transaction report to the local Financial Intelligence Unit (FIU). Further, attorneys-at-law, accountants and real estate agents would be required to maintain records which clients use for identification such as identification cards and passports, as well as account files and business correspondence, for at least five years after the business relationship has ended, in the event they are needed by a competent investigative body. Prior to the FATF revised rules, only financial institutions were mandated to carry out such due diligence. 

Back in 2001 when Government amended the 1998 Money Laundering (Prevention and Control) Act, Attorney-General Mia Mottley warned her colleagues in the legal profession that their professional privilege will be removed if there was evidence that they were using client accounts in commercial banks to “hide money” for persons.  Now, the matter may be out of her hands, as the FATF seeks to rein in those professionals whom it has identified as being used by money launderers and terrorist financiers to escape detection. If Barbados is prepared to accept the FATF guidelines, other professionals including accountants and auditors would be legally obligated to make “suspicious transactions reports” also. The new international standards will apply to those involved in “non-financial businesses” including casino operators and those offering Internet gambling, real estate agents, dealers in precious metals and stones, accountants, lawyers, notaries and independent legal professions, trust and company service providers.

Minister of Industry and International Business Dale Marshall said his ministry was aware of the FATF  revised recommendations and was examining them to determine their impact on Barbados.