SUNS4503 Monday 6 September 1999

Caribbean: Speaking with one voice on money laundering

Kingston, Sep 2 (IPS/Richard Samuel) -- Preparing to counter an offensive from the industrialised countries on their often profitable offshore financial services, Caribbean countries have agreed to work together to reduce the incidence of money laundering in the offshore sector.

They have also started talking with their critics - the Paris- based Organisation for Economic Cooperation and Development (OECD) - a group of leading industrialised countries.

"In opening a dialogue with the OECD, we are not acknowledging any authority by the OECD either to compile a list of tax havens or to determine the tax regimes of other countries," said Ron Sanders, Antigua's High Commissioner (ambassador) to London.

"However, in a spirit of international co-operation, we decided to open a dialogue with the OECD to try to understand exactly what they are after."

The meetings follow the start to a study by Caribbean countries of the likely impact on offshore financial services of charges by developed countries that "tax havens" offer "unfair" tax competition.

"It is important for all states to maintain acceptable international regulatory standards," the leaders of the Caribbean Community (Caricom), the region's trade group, said after a recent meeting.

"This will minimise and, to the extent possible, eliminate opportunities for the laundering of money derived from corrupt action, drug trafficking and other criminal activity."

The Caribbean's concerns about the integrity of the region's financial services jurisdictions have increased following the recent report from the OECD charging that several offshore locations offered opportunities for financial crimes.

The OECD identified 47 countries, including 21 in the Caribbean region, which it says provides "unfair tax competition".

The OECD is targeting jurisdictions which allow non-residents to escape tax in their country of residence.

It is also concerned about jurisdictions which are not keen on exchanging information on taxpayers benefiting from low taxes or no taxes, and which attempt to attract investment or transactions that are purely tax driven.

The attack is aimed at both the larger, more established jurisdictions such as the Cayman Islands and The Bahamas, as well as smaller centres including Barbados, the Turks and Caicos and the British Virgin Islands.

These jurisdictions offer a range of financial services to non- residents, including banking, mutual funds, insurance and re- insurance, international business company registration and ship registries.

Several countries have been frequently criticised for weak oversight of their financial services operations, and poor regulation which provides opportunities for abuse by international financial criminals.

Caribbean countries, with assistance from the United States and the United Kingdom, have been battling the smuggling of drugs through the region.

"The islands are on the major trade route for narcotics between South America and North America, and between South America and Europe," said a spokesman for the Community's secretariat.

With drug trafficking, it is likely that the region's many offshore financial centres are being used to launder money, the spokesman said.

"It is in the interest of all the countries that the region is not labelled as a place which harbours money from corruption and drug trafficking," said Hubert Ingraham, Prime Minister of The Bahamas.

The government of Belize recently passed legislation to keep out "dirty money," so the administration does not have a problem with the concerns about increased regulation, said Belize Prime Minister Said Muza.

"But we know what will eventually happen. These matters will eventually find themselves in the rules of the World Trade Organization."

The Caribbean's own investigation of its financial services sector is being led by David Simmons, attorney general of Barbados.

Caribbean leaders will be given a report on the investigations when they meet in early March.

Some Caribbean countries have already participated in "consultations" with the OECD, and others are expected to do so by this week, said Sanders.

"None of us from the Caribbean is meeting the OECD because we accept their approach to this matter," the diplomat said.

"We have met them in a spirit of international co-operation, but we continue to reserve the right to set and manage our own tax regimes."

"We are arguing strongly against OECD unilateral action which could be seen as bullying."