Dr. Morris is a Bahamian scholar who once organized the Sir Milo B. Butler Lectures on The Bahamas Constitution.  He is Co-Director of the Security Policy Group International (SPGI) - which conducts studies on international relations, economic policy and security issues.  Morris is a member of the Committee of Mentors at the London School of Economics (LSE), has taught English Banking Law and is Professor of The History of Systems of Thought at George Mason University in Virginia.  He is also Lecturer in International Law and Diplomacy for The National Student Leadership Foundation (from the same author, see also: "Signs and Sovereignty: The Growth of Supervenient Authority in the United Nations", http://www.solami.com/MorrisUN.htm).

    1.  Refuse any and all attempts to undermine bank secrecy in the Bahamas.

      2.  Set up a  think tank staffed by Financial Policy specialists to examine Money Laundering and discreet financial arrangements in the Bahamas.

      3.  Call for and establish an international body (along the lines of OPEC), made up of the finance Ministers of the more prestigious Off-shore financial centres.  This body would set down membership guidelines for each state wanting to attain or retain bank secrecy.

      4.  Create Chart of Account Formation which shows all of the check points in establishing accounts under bank secrecy in the Off-shore centres.  (This allows all to see the procedures for establishing accounts, while keeping the accounts themselves secret).

      5.  The additional duties of the body would be defending bank secrecy against the encroachment of external interests.

Today, I write as a concerned citizen for whom the Bahamas is beloved, for what seems to be - with all due respect - a rather timid policy on the Blacklist sponsored by The Financial Action Task Force (FATF); created by the Organization for Economic Corporation and Development (OECD) - in the interest of stemming the tide of money laundering.  The danger of this initiative is breath-taking: if we comply with the current FATF proposals, and lose banking secrecy, as has been reported, we would effectively lose even the strategic sovereignty we possess, our banking industry would be dead ... positively; and this may have a catastrophic effect on the standard of living of every Bahamian.

We have approximately 400 banks registered in the Bahamas, with some $ 200 billion dollars in financial assets.  Listen: we cannot begin to calculate the value of such a privilege.  These dollars distingush us from many small countries who spend their time hustling to get the attention of larger more powerful countires.  Some readers may question whether these banks hire Bahamians directly, as a consequence of which they question the importance of banking to the economic life of the Bahamas.  Let me, in answer to that attitude tell a little story.

In 1992, while participating in a roundtable on The Economics of Freedom at a Mont Pelerin Society meeting in Vancouver, I turned to the scholar next to me and said: Freedom is not merely a set of privileges, but a series of costs.  That scholar introduced himself to me as Dr. Milton Friedman - the Noble Prize winner for Economics in 1976. We talked a little about my country - The Bahamas - and the Commission of Inquiry which convened after the 1992 elections in which the FNM became the government of The Commonwealth of the Bahamas.  Sovereignty is a series of costs too, he said.  I thought on that conversation extensively at Vancouver.  I thought about our fragile situation in the world, and how the loss of confidence in the Bahamas could mean that we are reduced to basket-case status in the world community.  With all due respect to our tourism professionals, we would be-come a financial back-water where people from wealthy countires come only to play native.  In this respect tourism maybe our largest industry, but banking is the most important.

As result of this thinking, I wrote a letter called the Vancouver Letter - Concerning the need for a Thorough Commission of Inquiry, which was published in some of our leading papers.

My concern was that the drama of our domestic issues were being played onto a world stage.  How we handled ourselves, determined how we would be treated in the international community, again, as a series of costs.  Respectfully, I have concerns with the way the Inquiry proceeded, and with its conclusion, which are not fully relevant here.  I will say only, in a world where impressions are now more immediate than ever, our approach to our own internal issues are no longer internal matters.  And new economic partnerships in a highly competitive world may hinge on the perceptions our own actions tend create.

That is why we must act with a mature foresight in the current crisis.  I tell you in the strongest terms, whether or not the many banks we have employ Bahamians directly is not an issue.  Since we have $ 200 billion dollars it means that the world financial community cannot ignore us.  It means that through our contacts with that community over money and banking, we may win other concessions on trade and immigration or allowances for education for instance.  It means opportunities for the development of venture capital enterprize, that prestigious international corporations with specific needs have to deal with us because of the skill pool we developed handling those funds.  Through such relationships, the international partners of our banks, or their own clients may decide to give the Bahamas a try for investment purposes.  That, my fellow Bahamians, means jobs and the maintanence of our standard of living!  Therefore losing our banking industry and our sovereignty may very shortly become  a set of costs, and bluntly, a disaster for our way of living.  I am sure we all agree that money laundering is dangerous to our economic health.  We could start by saying it is morally wrong.  If we examined the possible corruptions to our reputation and our banking system, we may simply say money laundering is:

      a.  inflationary - it causes prices to rise and fall sporadically - since it introduces loose or arbitrary credit and cash into an economic system, often outside the discipline of the legitimate economic institutions, such as in our case the Central Bank.

      b. Depending on its point of entry into an economic system, money laundering can have a variety of effects.  In some cases it develops through bogus corporations and companies.  The effect of this can mean that earnest Bahamians could find themselves suddenly out of jobs they thought had long term prospects.  As such, it could have a punishing effect on the loss of skilled labour applied to production and services, which enriches the economic life of the Bahamas.

      c. Direct money laundering through the Banks is yet another type of money laundering which has altogether different effects.  One of the main issues here - which one may accept as a rule is that going after bad money interferes with good money.  That is, in an effort to smoke out the dubious investor, we may give the legitimate investor the wrong impression.  He or she may decide that it is not worth the hassle to have to deal with the inquiries into such private matters, and decide to take their business elsewhere.

I would like therefore to outline some of the issues in ways which I have not seen so far in the press.  First, let me lay out very shortly, some of the basic questions before us.  I will say someting about the OECD, the reason they support this policy, what I really think it is all about and what we can do about.

Who are the OECD?   They are a group of the 29 richest countries, based in Paris.  USA, Britain, Germany, France, Italy and Canada, or the major industrialized countries in the world operate through this group, whose polices can have profound effects on international bodies such as the the IMF, the World Bank, the WTO and the GATT.  All this should tell us that any sanction initiating from the OECD must be taken seriously.

The Blacklist itself is not a sanction.  It is a first step in that direction.  Although, if investors are frightened away because we may be blacklisted, again we are the losers.  What about the Blacklist itself?  How does a country end up on it at all?  It is believed that over $600 billion dollars in illicit funds are roaming through the banks of off-shore financial centres like the Bahamas.  The big countries have decided to get tough, since if this money is laundered, drugs traffickers will have access to clean funds.

Does this mean that these threats of blacklisting are about getting after the proceeds of drug dealing?  In my view, yes and no. Obviously, we must develop comprehensive strategies to deal with drugs trafficking.  If Mafia leaders and drugs traffickers have access to substantial amounts of clean funds they could pose a danger to legitimate business and governments; wrecking havoc on regional economic systems, costing billions in policing and security.  In a country of our size they could have a deleterious effect on small business by financing false competition and again, causing wild movements in prices.  However, FATF - the OECD body in Paris - have been very sloppy if they are really targeting drug dealers attempts to clean money.  First, their efforts are only concerned with bank accounts.  I indicated at the beginning that there are many types of money laundering. Bogus businesses, land deals, trust arrangements and so forth.  It is not enough to say money ends up in the bank from these practices anyway, since funds maybe cleaned BEFORE it gets into the banks.  In fact, structurally, banking is the least interesting way to clean money.

Why then this evangelistic approach to getting countries like the Bahamas to comply such haphazard policies?  In my view it is not drugs money at all, but tax dollars that they are after.  That means they are after what they have always been after: BANK SECRECY in off-shore centres.  It is also interesting that countries like the Bahamas and Israel are under fire when, most of the off-shore centres are under G-7 control, particularly the U.K. with Jersey, Isle of White, Bermuda, Cayman and Turks and Cacois Islands; and the USA with Delaware and Alsaka.

However, you must see that the OECD countires are not being all that unreasonable either.  It is no exaggeration to say that this crisis shows that we have underestimated the field in which we have been playing.  Like Microsoft discovered the hard way, we cannot hope to sit in the balmy breeze and make billions of dollars without taking into account how other powerful interests may react.  In the OECD countries, populations are aging.  They face statistical forecasts in their countries showing in some cases, that more than 50% of their populations will be of retirement age in the next 12-15 years.  This is a serious issue.  It means these countries will have to face a shrinking tax base or fewer working people, therefore fewer people from whom to draw taxes.   The shortfall in tax revenues could amount to an important security issue.  As such, they must go after every tax dollar, Franc, Pound, Euro etc., in the off-shore centres.  I think we all can understand their concerns, yet it is a well established rule of international law, that one country does not enforce anothers financial laws; they should control their own citizens.

But what shall we do about this problem that does not hurt us in the final analysis?  First, we are an adult nation, seasoned by centuries of dealing with crisis.  We must not panic.  We must accept some blame.  The statistics on population aging have been around for decades now.  We should have formed our financial policies to anticipate the current attitudes.  Respectfully, officials at the Central Bank, The Bar Association, The Bankers Institute, Accounting Associations and the Chambers of Commerce, should have seen it as being in our vital national interests to have foreseen this sort of thing, and should have advised the governments of the day to form policy reflecting this understanding of the world.  As an adult nation we cannot be put in the position of reacting to so profound a challenge or be seen to be reacting, since it diminishes our bargaining position and our prestige.

A few months before FATF announced the intention to form a blacklist, The Hon. Padideh Tosti - an international security scholar at the London School of Economics - wrote an article exploring the options which faced the Bahamas and other countries squeezed between the powerful drugs barons and the international enforcement authorities.  It seems as if each of these sides will destroy the parties in the middle to avoid or attack the other.  Tosti suggested that we in the Bahamas form a think tank to examine the issues before our country, so that we determine our policies by anticipating the possibility of initiatives such as blacklisting (I quote at length):

As concerns rise globally regarding the threat of illicit activities, the Bahamas will come under increasing pressure to find a solution to a problem it had little hand in creating.  While the type of trafficking and money laundering occurring today may be new to the Bahamas, these concerns are certainly not a new phenomenon to the region.  Historically, the Bahamas has been a stopping point for international shipping as well as a refuge for those escaping duller climates or the reach of authorities.  The Bahamas enjoys an elegant and romantic history from the late 1600s, when it was known for the notorious pirates who assaulted European ships on their way home from the Spanish Americas.  It has since survived by sheer determination, creativity and not without some luck.  The solution to the current concerns will require the same variables.  The solution lies in a new modes of thought, a restructuring of perceptions combined with a uniformly committed Bahamian effort. A committed Bahamian effort would manifest itself in two ways:

A) First, the Bahamas must actively set forth a plan to seriously research these issues with the input of its academic and policy communities, from the Bahamas and other transshipment countries. The proposal here is for a long term plan which includes foundational work in the research and understanding of narcobusiness and its effects as specific to the Caribbean region. There needs to be created a think tank which puts forth ideas for business, economy, social issues related to the drug trade. It is an absolute that participants be drawn from not merely diverse backgrounds, but from diverse ideological perspectives.  A group of people with the same basic ideology, and often from similar social circles would not suffice regardless of their workplace affiliations.  Their task would be to answer questions such as: what is a black market?  A gray market?  Who defines it?  Is the economic prosperity of the Bahamas due to its thriving industries or daily infusions of laundered money?  If a Bahamians citizen stockpiles US dollars, are they [to be thought of as] criminals?  How do we make such determinations?  How do we protect Bahamian sovereignty and attack the drug trade fully?  What alternative approaches are there to coping with narcobusiness which will not worsen our social and economic satiates in the future?  Has narcobusiness really expanded to threaten the Bahamas, or is this another scenario of arbitrarily legitimized activities (pirates and privateers) used for political gains?  Incidentally, answers to such questions will also provide answers for other issues such as technology, cutting edge policing and so forth.  The Bahamas should and is able to lead in this.  The final and most difficult task of the Bahamas is to, with diligence and consistency, apply this new thinking as an effort to deter a situation of social and economic despair, and maintain control over its future.

B) Second, once the task entrusted to the committee has been completed, government officials must support the implementation of the committees recommendations.  The support must be sustained or else the recommendations, no matter how sound, will necessarily fail.  This grave error would once again throw the future security of the Bahamas and its people into the custody of narcobusiness.
(See:  www.spgi.org/articles.htm)

      a.  As Tosti suggested, we form a think tank as an act of national maturity and sovereignty, to explore these and other issues related to our vital national interests.  This would demonstrate good faith to the international community.

      Policy point:   we should never again allow ourselves to be put in such a fix.  We must use our professional bodies to keep on top of such things advising our governments of the day appropriately.

      b.  We take the lead, and invite other off-shore centers to join an international association - headquartered in the Bahamas - which sets standards for financial services regulation; while conducting  our own comprehensive study of money laundering and its structure in the Bahamas, determining whether and how in the various methods of obtaining accounts in our banks the structures may be abused.

      Policy point I:   take the leading role and develop relationships with those who have interests similar to our own.  By taking the lead in establishing an International Off-shore Financial Committee, we show professionalism, and maturity; moreover, Luxembourg, Israel, Liechtenstein, Switzerland and Hong Kong are not bad company to keep on such a committee.

      Policy point II:   If already the DEA are boarding Bahamian boats do we want them along with the Secret Service and the US Treasury investigating even ordinary Bahamian accounts; even recommeding seizure of funds?  We must always form our policies in ways that protect our sovereignty and prestige.

      c   We should classify all of our accounts by the process of their establishment in the Bahamas, demonstrating the controls and checks we employ to show how we prevent money laundering on the basis of our own regulations - we should than publish the processes as an example of an industry standard.

      Policy point:   There are dozens of financial products in a sophistocated banking sector such as our own. We cannot accept a blanket review of our financial institutions by foreigners. The preliminary three steps above will force our  inquirers to stipulate   what sort of accounts they think are out of compliance. It means that instead of negotiating our entire banking system at once, we break it into many phases, and discuss each phase separately.

      d.  We must negotiate to have FATF accept a standard for account holders - such as that the person does not appear on the lists of Interpol or the DEA or the FBI, nor is currently under investigation which implicates him in money laundering.

      Policy point:  since this will not be the last time the powerful nations will make demands of us, we develop a mature strategy not merely for survival, but success.  We must never capituale, never react in panic, and never engage in complaining. We think our way out.

It should be clear that I take the position that under NO circumstances should we give up our secrecy or bargain parts of it away.  (Though I am told that this has already occurred, I refuse to believe it).  We must determine what the sanctions are. Perhaps we can survive the initial stages while we seek a resolution to them.  (Why should we react when the penalties are still unclear?)  Also, we have natural allies in among the G-7.  We must begin to put together a coalition to protect our interests.  For instance, we give life to the economy in Florida, with hundreds of millions of dollars in business, it is time to pressure the public officials and economic interests in Florida who benefit from our business to defend our vital interests - since it protects their business also.

You may ask why should FATF accept our assurances of self-regulation that we are doing all we can to stem the flow of laundered money in the Bahamas.  I remind that reader of the admonishment in the Vancouver Letter to be diligent and thorough.  That is why we must pursue our domestic issues with our eyes open to our position in the world.  The reason that Austria capitulated so swiftly undermining its banking secrecy is of course the Haider Affair.  We have no such affairs to worry about.  The question is do we have the clout and prestige to insist upon self-regulation?  If not why not?  If we do not get to the bottom of such questions, our sovereignty may carry a series of costs which we are unable to pay.