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Last Updated: Sep 25, 2020 - 7:43:36 AM |
Contribution of Senator the Hon. Carl W. Bethel,
Attorney General and Minister of Legal Affairs
The Senate
Thursday, September 24, 2020
Amendment to the Register of Beneficial Ownership Act
Madam President,
I rise to move for the Second Reading and Committal of the Register of Beneficial Ownership Amendment Bill.
As Bahamians are all aware, The Bahamas faces the immediate imposition of a potentially devastating Blacklisting by the European Union. This Blacklisting was imposed upon the European Commission by a Law passed by the European Parliament.
The Blacklisting was announced in May 2020, in the midst of a global pandemic that has sapped the life-blood out of all but the strongest economies around the world; which has sickened millions of people around the world, and which has killed more than a million persons already. Notwithstanding the dire economic straits imposed on every country, the European Commission, bound to follow the Laws passed by their Parliament, announced its Blacklist in May 2020. The Bahamas is heading up that list, if only because of its place in the alphabet.
The European Commission, having announced its Blacklist in May 2020, based on those Countries or jurisdictions which had been Gray-listed by the FATF, announced that the implementation of the Blacklisting would be delayed until the 1st October 2020. We are now on the cusp of that fell date!
The EU rebuffed all the attempts, led by The Bahamas’ Ambassador to Brussels, Her Excellency Maria O’Brien, in the Organization of African, Caribbean and Pacific States (ACP), to respond on a multi-lateral basis; when we invoked the EU’s Treaty Commitments to engage in constructive dialogue with all Treaty partners before taking unfriendly actions. The EU replied that they will only deal with listed countries on a bi-lateral basis. This was indeed an unfortunate turn of events, and potentially a breach of international Law.
The European Commission also announced at that time that their Blacklist was “FATF Plus”. That means that they reserved the right to demand changes over and above those required by the FATF in its Methodology. The Methodology of the FATF is a detailed statement of what laws and procedures would be required to be implemented in each Country to “meet its standards” of AML/CFT/CPF and CIRs supervision, regulation and oversight of the financial sector. The extent to which the FATF Methodology is applied in each country under review determines the number of the FATF 40 Recommendations, inclusive of the 11 “immediate outcomes” which are met by each Country.
Having reserved the right to demand greater or higher levels of compliance than the FATF, the European Commission, over the past several months has reached out to The Bahamas at the technical and political levels to indicate its concerns (over and above those of the FATF) with the AML/CFT/CPF and CIRs framework, as set forth in the host of new and amending Laws that we have passed and enacted to address FATF concerns.
It must be noted at this point that so successful had The Bahamas been that we had thoroughly erased and addressed the vast majority of the “deficiencies” found in our Laws and Regulatory practices in the 2015 Mutual Evaluation conducted by the CFATF. Indeed, in December 2019 we had improved our compliance with the FATF 40 Recommendations, raising our level from the 18 “Compliant or Largely Compliant” found in 2015, to Thirty (30) “Compliant or largely Compliant” in December 2019! Further in February 2020, the FATF agreed that The Bahamas had “substantially addressed” all matters of concern by the FATF, to the extent that we were granted an On-site visit by the FATF at its Plenary Meeting held in Paris, France,
The granting of an On-site visit is the first necessary step to exit the FATF Gray list. It was an enormous achievement by The Bahamas, which was accomplished in record time!
Madam President,
The view of the EU Commission is that if you are on the FATF Gray List, not matter whether you have actually met the requirements to be de-listed, then you would immediately be placed on their Blacklist. This was applied to all States except Iceland, an EU Member State (who, like The Bahamas, is on the FATF Gray List). The result of this decision being to cripple the economies of friendly countries, most of whom have long and enduring relations with the EU and its member States; and then start to talk to them! That is the effect of what we now face.
Over the months since the announcement that The Bahamas and several other Caribbean countries are on the EU Blacklist, which comes into effect on the 1st October 2020, the EU then reached out to The Bahamas, as indicated.
The EU presented a “Directive” document, which set forth their concerns. This Directive suggested that The Bahamas should apply for re-rating on the remaining 10 of the FATF 40 Recommendations, in which our rating is only “Partially Compliant”. We informed the EU that since October 2019 we had formally requested the CFATF to re-rate The Bahamas’ Compliance with the remaining ten of the FATF 40 Recommendations. In other words, we were already self-motivated to strive for the highest levels of technical compliance with ALL the FATF recommendations! That’s how we do it! We “lean forward”; we Achieve! No one had to “tell” us to do it. We had already done so!
Pursuant to their FATF-Plus Methodology the EU reviewed the Register of Beneficial Ownership Act and identified two (2) areas of concern:
- The fact that regular Companies and IBCs could apply under the provisions of the Segregated Accounts Act to maintain separate Accounts within the Company for the benefit of Third Party beneficiaries who are not necessarily listed as the Shareholders of the SAC. They assert correctly that this could potentially allow persons (from their perspective, European taxpayers) to hold assets in such Companies which would escape scrutiny, because only the “beneficial owners” of the specific Company, and not the individual owners of each segregated account held by the Company, needed to be disclosed.
- The second issue is the ability of Bahamian Companies (including incorporated NPOs) to operate without a Registered Agent. The Law as promulgated only required the Registered Agent to file beneficial ownership information with the Registrar-General. This was considered to be a great loophole, since a Bahamian Company is defined in Law as a Company which could have as much as 40% of its Shareholding or beneficial ownership, held by a Non-Bahamian. Hence, once again, European taxpayers could conceivably hide their interests, assets and money in such a Bahamian Company; and there is no legal framework in the ROBO as enacted which imposed a disclosure requirement on such Companies which do not have a Registered Agent.
The Amending Bill which we are debating today is designed to address these deficiencies. We do so as an act of good faith co-operation with a friendly Power, and because these changes are entirely consistent with the high level political commitments previously given by The Bahamas to the International Community, that we would in all things financial, adhere to the very highest standards of international co-operation and regulation.
This is the only way forward in financial services. The World has become beyond impatient with the many errors made in financial centres, including the major centres in Europe, North America and the Far East. Yet this irritation of civil society, and the political pressures thus brought against Powers such as the EU, tend to be punitively visited, not on their major players, but on small States Like The Bahamas. The opprobrium and scandal is transferred effectively from the ’major league players’ to the ‘minor league players’. And so, applying the maxim that “Caesar’s wife must be beyond reproach” we know that we must strive to attain the very highest standards, so as to attain that laudable goal, of moving “beyond reproach”.
Madam President,
Just to definitively answer several questions raised in the Other Place by the Member for Exuma and Ragged Island:
- Is this a case of the Goal Posts being “shifted”? NO. This is a case of a new Goal Post being set by a new Actor which has emerged. Based on the mandate of its Parliament, the EU Commission has been forced to abandon the multi-lateral approach which was traditionally followed by its Status within the FATF. The approach is now unilateral (to outright Blacklist) and then to engage in Bi-lateral discussions on the way forward. That is where The Bahamas is today.
- Did the Hon. Member fail to attend a second Consultative meeting held by the Office of the Attorney-General? Yes. He and the entire Parliamentary group failed to attend; sending Mrs. Hope Strachan and Mrs. Cheryl Bazard to represent them.
- Did the former Government drop the ball in addressing the Cyber-security threat which emerged when the database of the Registrar-General’s Office was first hacked in 2016? Yes. They did drop the ball! The initial report from the Police investigation after the second hacking exercise confirms this. But it did not end there. We commissioned a further independent study by IBM. Here is the Report. IBM found that: “A data breach occurred in 2016, but we discovered no security actions taken. In 2016 an RGD breach attack occurred. As a result, the Police did a review of security and high level recommendations were made (Report attached at Appendix B). The recommendations were not acted upon…”.
I want to be clear however, this was not a failure by my predecessor. It was a system wide, government-wide failure. Many State agencies access the RGD database, NIB, Passport Office, Inland Revenue and even the Ministry of Tourism, to name a few. There are systematic weaknesses which the Police report highlighted, which required a system wide upgrade and cyber security strengthening. It was a chronic failure by the entire PLP Government; which directly left The Bahamas vulnerable to the second hack of the RGD database.
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