AML/CFT 5TH ANNUAL CONFERENCE Data leaks seen as turning away investment
DATA LEAKS and account closures by overseas banks are tainting the Caribbean as a viable place for international business, according to attorney and former banking executive Cheryl Bazard.
These leaks, including the ‘Panama Papers’ and the ‘Bahamas leaks’, are increasingly revealing confidential information, while account closures linked to derisking channel funds underground.
“It scares those who wish to come to the Caribbean to do business. Because it portrays our countries as places that are not safe, especially when one looks at data security and client confidentiality,” said Bazard via video link in an address to the 5th annual Anti-Money Laundering/Counter-Financing of Terrorism conference held in Kingston.
“We are under attack for the hacking of our information,” she said.
The Panama Papers led to revelations that some world leaders held undisclosed offshore accounts. While such accounts may be legally permissible, they were deemed problematic in some jurisdictions. The information contained in the leak led to the resignation of Sigmundur David Gunnlaugsson, Iceland’s prime minister, for example.
“On all of these leaked data there is no evidence of illegality,” said Bazard. “Tax avoidance is legal but tax evasion is illegal. But there is a tendency to blur the two by those who advocate against low tax or no tax jurisdictions claiming there are tax havens,” she charged.
The Bahamas leak was developed into a free database of directors and shareholders of offshore companies set up in Bahamas. It would obviate the “US$10 search” charge to retrieve the data from the Bahamian government, said Bazard.
“There was nothing here in this leak, just another piece of sensational journalism,” she added.
The leaked data was made available to the International Consortium of Investigative Journalists, a US-based group with a global network of more than 190 investigative journalists in more than 65 countries. Bazard said the untold fallout from the leaks was not the politicians based in Europe but rather the regional economies and lives of the professionals working in these sectors.
“The fallout from Panama Papers as it affects every Caribbean country and every financial centre is that we go back on some list,” stated Bazard, who up to recently held the position of director of compliance at Scotiabank Bahamas.
Derisking has been affecting Jamaica for at least five years. Since 2011, the former RBC Jamaica reportedly cut ties with local money-services businesses citing pressure from its overseas correspondent banks. Then in 2014 National Commercial Bank of Jamaica followed suit for similar reasons.
Other Caribbean countries also face the same pressures.
For customers, these manifest in the form of the terminated credit cards services or the closure of money-service operations across the region.
“The Caribbean needs to band together and have a united voice,” said Bazard, adding that the closure of correspondent bank accounts for money services is directing funds to unregulated spaces.
Sixteen years ago, the world’s most powerful bankers met in Wolfsberg, Switzerland, to formulate rules to deal with corruption and money laundering. They became known as the Wolfsberg Group.
Since the publication of The Wolfsberg Anti-Money Laundering Principles for Private Banking in October 2000, a series of rules governing global banking continues to evolve. Industries such as money services, digital currency providers, charities/nonprofits and real estate agents remain under the spotlight.