#BTEditorial – Over-regulating ourselves out of business

Barbados’ authorities have found themselves in recent months, jumping through hoops and skipping over ropes again to meet the requirements to be removed from the ‘grey list’ of the  Organisation for Economic Cooperation and Development (OECD).

We have become used to the constantly moving standards of compliance that require us to contort ourselves even more with every iteration of the rules from the self-appointed judges and juries of Europe and other Western partners.

In February, Kerrie Symmonds, the country’s Minister of Foreign Affairs and Foreign Trade announced with glee that in the 2023 Harmful Tax Practices Peer-Review Results on Preferential Tax Regimes released in January, the OECD listed Barbados as a “not harmful” jurisdiction.

This upgraded status was based on the fact that “economic substance requirements were introduced taking effect from 1 January 2019” and that Barbados’ domestic legal framework met all aspects of the [OECD] standard.

As we have acknowledged, the celebration is usually short-lived because the rules have been designed in a way that keep the goal posts malleable and the concrete around them soft enough to be uprooted with hardly any notice.

When it was not the OECD, it was the European Union that labelled us a harmful tax domicile even though that grouping had no authority to place Barbados or any Caribbean Community members on any adverse lists.

The OECD, while removing Barbados from the most recent ‘grey list’, recommended the island “substantially improves its exchange of information” processes.

Barbados could face greater challenges if after the next annual monitoring, the Forum on Harmful Tax Practices (FHTP) does not consider overall compliance has occurred where it was recommended that substantial improvements be made.

Our senior minister, who has been in town long, knows small developing countries like Barbados are never far out of the sights of industrialised nations who seem committed to dismantling the highly lucrative international financial services sectors where we have become very competitive.

“I am only prepared to say that Barbados has to continue to be eternally vigilant and dedicated in its efforts to ensure that we maintain all of the criteria set by international oversight and financial supervisory bodies,” Symmonds told BarbadosTODAY.

In the northern Caribbean, the Cayman Islands is facing internal challenges as the British Overseas Territory seeks to be removed from the Financial Action Task Force’s (FATF) ‘grey list’.

The Cayman Islands have become an avatar used by industrialised nations to disparage the offshore financial sector in the Caribbean.

The Caymans’ regulator of the sector, the Cayman Islands Monetary Authority (CIMA) has hit a road block as it seeks to rigidly enforce the anti-money laundering rules in order to have the country removed from the FATF ‘grey list’.

Cayman High Court Judge Ian Kawaley, however, recently ruled in favour of financial services group, Maples, in an action it brought against CIMA over new rules requiring the recording of clients’ details as part of the enhanced anti-money laundering regime.

According to media reports, a 2020 on-site inspection by CIMA officers of Maples Corporate Services Ltd and Maples FS Ltd resulted in the regulator’s conclusion that the two entities had failed to properly meet their AML obligations in some areas.

On the other hand, Maples contended “CIMA had gone beyond the basic legislation relating to anti-money laundering and had misinterpreted the regulation, which was disproportionate and commercially onerous”.

Justice Kawaley found the regulator “should have been more flexible over disagreements that arose during the inspection process”.

According to the jurist: “In my judgment flexibility ought ideally to be the norm because the statutory framework is clearly based on the notion that [financial service providers] will primarily regulate themselves on an individual basis and/or through the Supervisory Authorities. . .”

In addition, the claim that the two Maples firms had not checked all of their clients’ transactions was also deemed as overstepping the regulations.

We highlight this case to demonstrate how jittery national regulators have become as they try to maintain their country’s ability to continue to operate in the global financial space. The result can be over censuring and cannibalising of the very economic base they seek to protect. 

We in Barbados ought to take note and create the optimum balance that allows the sector to grow and still be well regulated.