In our latest Caribbean DevTrends blog Economics Senior Specialist in The Bahamas Dr. Allan Wright discusses his recent co-authored IDB publication titled The EU AML/CFT List of High-Risk Third Jurisdictions: Implications and Options for The Bahamas.
This Policy Brief has argued that inclusion on any future adopted European Union (EU) Anti-Money Laundering/Combating Financial Terrorism (AML/CFT) list of high-risk third jurisdictions would be problematic for The Bahamas for three main reasons. Firstly, EU obliged entities will be required to conduct Enhanced Customer Due Diligence (ECDD) on transactions involving Bahamian clients and on transactions involving Bahamian intermediaries. Secondly, while no sanctions are involved, noncompliance for an International Financial Center (IFC) like The Bahamas might entail reputational fallout at a time when Caribbean countries are facing the loss of Correspondent Banking Relationships (CBRs) due to the de-risking practices of large global banks, with the attendant implications for the ease of doing business, cross-border trade, and financial transaction flows. Thirdly, The Bahamas will now be expected to comply with another set of rules defined by a body of which it is not a Member and where it has little or no opportunity to influence the methodology by which it is being assessed. It may be important to highlight the importance of focusing on effectiveness, which is connected with institutional strengthening of supervisory and regulatory agencies of Designated Non-Financial Businesses and Professionals (DNFBPs).
Going forward, to avoid being included on the Commission’s revised list, The Bahamas should prioritize addressing the outstanding issues highlighted by the (Caribbean Financial Action Task Force) CFATF in order to be de-listed from the Financial Action Task Force (FATF) list of High-Risk and Other Monitored Jurisdictions. Bahamian authorities should also continue their public awareness and outreach activities to local stakeholders, as well as to external stakeholders, such as regulators, financial institutions, and banks in the EU and third States to ensure that they are kept aware of The Bahamas’ commitment and progress toward FATF compliance.