The beautiful beaches of The Bahamas make it one of the hottest tourist spots in the world, but its banking and off-shore financial services is also a major attraction to international citizens. However, that industry is now landing the nation in hot water.
The United Kingdoms has recently added the Bahamas to their money laundering watchlist. Firms are now required to have special procedures in place when dealing with Bahamian resident entities and clients. The British government’s decision comes from a recommendation made by the international Financial Action Task Force (FATF).
The Bahamas now joins Botswana, Trinidad and Tobago, Ethiopia, Pakistan, Ghana, Tunisia, Serbia, Sri Lanka, and Yemen on the FATF “deficient” list. North Korea and Iran are classified as “high-risk”.
The UK’s Money Laundering, Terrorist Financing and Transfer of Funds law state that British regulated businesses are obligated to “take into account geographical risk factors” when assessing the extent anti-money laundering measures.
The FATF ranked the Bahamas’ money laundering regime as having “strategic deficiencies” that potentially pose a risk to the international financial system. The Bahamas has made a commitment to addressing these issues in the past but has yet to do so. The FATF’s actions are a warning of more severe consequences to come, such as blacklisting, if the Bahamas does not begin to address the concerns.
Peter Turnquest, Deputy Prime Minister of The Bahamas, remained confident that the country could address the issues raised by the FATF. While Turnquest says some may not acknowledge the “validity” of the concerns raised, the demands being made means the Bahamas as “no option” but to comply.
The Bahamas is looking to make a few changes to address these issues such as creating a beneficial ownership registry and pass legislation to comply with these organizations.
Turnquest did express frustration at the situation though stating that the Bahamas was “chasing so many balls”. The Organization for Economic Cooperation and Development (OECD) and the European Union (EU) have also launched separate initiatives. Turnquest stated that “We have been working on this matter, and are going to be doing some institutional strengthening which will become evident in short order.”
International financial services are the second most important sector to The Bahamas’ economy after tourism. It accounts for around 15% of the country’s GDP. But the nation’s days as a tax haven may soon be over.