Blacklisting – a potential catastrophe for Barbados’ economy

by Marlon Madden

Already hit by the COVID-19 pandemic, the Barbados economy could suffer catastrophic loss as a result of being “blacklisted” by the European Union (EU) Council and by any perception of fraud or money laundering taking place.

This sober warning has come from public sector reform expert Matt Gokhool, Chief Executive Officer and Founder of the London-based International Centre for
Parliamentary Studies (ICPS).

Cautioning that a mere perception of any wrongdoing could easily damage a country’s reputation and lead to a number of developmental issues, Gokhool told Barbados TODAY that an insufficient regulatory regime could lead to more hardship as a result of various sanctions.

“If governments are engaging in multi-year foreign direct investment (FDI) strategies, then being placed on warnings or blacklists by international regulatory or monetary agencies will seriously damage FDI,” said Gokhool.

“You will see fire sales of assets and flights to quality of capital which will derail major projects, business and employment – it can have a significant negative impact on the domestic economy. Given the huge damage COVID-19 has done to the region’s tourism industry, having attempts to diversify economies damaged by regulatory action in relation to money laundering could be catastrophic. In short, insufficient anti-money laundering (AML) and countering the financing of terrorism (CFT) [measures] lead
to job losses for the person on the street,” he further explained.

Gokhool was responding to the news that Barbados has remained on the EU Council’s list of non-cooperative jurisdictions for tax purposes.
His comments also come on the heels of recent reports that more than 50 transactions between Barbados and several other countries, involving millions of dollars, were flagged by US authorities as potentially suspicious.

Gokhool said the case of a country being identified as a location where money laundering is possibly taking place could be perception and not reality.
“It is very easy to point the finger at a case or a number of cases and assume it is endemic. On the other hand, for a regulator one case is too many, as of course there is no smoke without fire,” he added.

ICPS, a capacity building organization, has been engaged in work in the Caribbean for more than a decade, providing support in a range of areas including public finance, anti-money laundering, police and security reforms, telecommunication policies, management of electoral affairs and disaster recovery.

Gokhool said his organisation was seeing increasing sophistication among criminals globally in moving funds using cryptocurrency and blockchain derived fintech.

“The criminals are very much on the cutting edge of the technology curve, one of the reasons domestic stakeholders need up-to-date training and retraining to keep pace,” he said, adding that the biggest challenge for lawmakers was “keeping up with the international AML/CFT regulators who are acting at scale and at pace”.

He said while it was understandable that greater scrutiny from international bodies and other countries could be “frustrating and disempowering”, staying ahead of the issues and “being seen to be over delivering leads to huge benefits in international reputational growth”.

“Being a regional outlier in a positive sense makes you likely to be a winner. You’re going to be the economy that benefits from FDI and other financial interests,” the public sector reform expert added.

Stressing the need for continuous education and training at all levels among government workers, key institutions and stakeholders, Gokhool said best practices could be found within some private sector organisations and some countries, including Singapore.

He said while the Caribbean Financial Action Task Force (CFATF), Central Banks and various government ministries in the region were doing “great work”, he believed “what we need to work on is making sure the good work at the very top is pushed down through ministries and institutions”.

“The only direction for regulation since the 2007 banking crisis has been more [training]. All markets have to keep pace with international benchmarking or else they will fall foul of increasingly activistic enforcement regimes in key markets such as the USA, UK and EU,” he warned.

“We would recommend horizon scanning by institutions to identify regulatory trends and aim to have training in place well in advance of the start date so that processes can be established ahead of time.

“Similarly, countries that have been blacklisted will need to be seen to over comply and exceed baseline standards to requalify.”

Gokhool said enacting laws through the end of 2019 was clearly not enough for Barbados to escape the EU’s list of non-cooperative jurisdictions for tax purposes which was
released this week, adding that “it seems that legislation and membership of regulatory and enforcement agencies like CFATF are not
enough to prevent reprisals”.

The EU Council first added Barbados to its blacklist in May, following the OECD’s Global Forum decision to name Barbados as a “partially complaint” jurisdiction, due to the country not meeting several requirements between the specified period of July 2015 and June 2018. When the latest list was released on Tuesday, Barbados remained on it.
marlonmadden@barbadostoday.bb