Part I: The Onslaught:

1    From this portion of my remarks, I shall like you to come away with a clearer understanding of the onslaught initiated by the bureaucrats in Paris, and how a combination of un-elected agencies arrogated to themselves the power to conduct foreign policy. In 1998, the Organization of Economic Corporation and Development (OECD) published a Report on Harmful Tax Competition in which - without consultation with the relevant nations - it devised international standards, (Framework for A Collective Memorandum of Understanding on Eliminating Harmful Tax Practices) in its words to combat harmful tax competition.

2     Jeffrey Owens (Fiscal Affairs Director OECD/FATF,Oct. 19th 2000) stated: Harmful tax practices are defined by:  Lack of Information exchange, lack of transparency, attracting business with no domestic activity, coupled with low tax or no tax policies. While this appears to me as a definition of privacy, in July 1999, the OECD announced a Blacklist of 47 nations meeting the foregoing criteria. The international outrage, particularly in the Eastern Caribbean, led the OECD to restrain its assault upon Off-shore banking nations for one year until July 2001, when - as yet undefined - retaliatory measures will be taken against the listed nations.

3    Several of the Collective Memoranda of Understanding, are direct assaults on the Sovereignty of the listed nations: First, they are "invited" to comply with the Full memorandum by 2005 - with incremental agreements each year until then. The nations are called upon to "adopt" detailed legislative plans to achieve full transparency in their Financial systems, provide information exchange mechanisms and particularly in non-tax nations, impose taxes to deter those seeking tax holidays.

4    Second, many of the measures would not pass muster under the American constitution, or common law privacy rules: The Memorandum calls for "spontaneous" access to bank information on persons and businesses domiciled in the relative jurisdictions.  Stunningly, each nation is called upon to ensure that the information be provided without the requirement that the acts alleged are not illegal in its own territory - that is, each country must provide private information on-demand whether or not a crime has been committed in its territory; or whether a crime has been committed in the G-7 territory requesting the information. This represents the greatest assault upon the common law "burden of proof", since its inception in western legal procedure.

5    Moreover, where that information is provided in error, each country is called upon to adopt rules preventing either criminal charges or civil claims against the institutions providing it.

6    The Financial Action Task Force (FATF), is an associated subsidiary under G-7 and OECD respectively; representing another front in the assault on Off-shore banking nations and the private banking industry. It seems that if a country is not caught on the tax-competition, it is attacked on its vulnerability to money laundering. The FATF was formed at the 1989 G-7 summit and its life runs until 2004. Obviously, for reasons I am explicating here, I advise that it be allowed to die of natural causes. The body is comprised of officials from 29 nations, inclusive of the European Union and the Gulf Corporation Council^[1] . Its job is very similar to my own, in that it develops typologies of money laundering. That is, it demonstrates and monitors models of money laundering, or financial structures  susceptible to money laundering. For evidence of collusion between these bureaucracies, look no further than The Forty Recommendations- which form part of the unilateral, so-called, "international rules" which bears a direct relationship to the OECD’s Memorandum of Understanding. Specifically, it makes the same or similar "upon-request"^[2] demands, equally inconsistent with common law jurisprudence, in an assault upon personal and financial freedoms.

7    Obviously, the FATF’s stigmatization of a business as participating in money laundering is far more threatening. It permits the FATF and its regime of agencies to ruin hard won business reputations without evidence, on the basis of suspicion with none of the procedural rules common to exercises of investigative authority in nations committed to the rule of law. Already in the Bahamas we have begun to see the astounding consequences of this pogrom against privacy. A small family owned concern, Deltec Bank - which was the forerunner of domestic micro-credit in the Bahamas has had its license revoked. Ms. Joan Thompson and Economist Ralph Massey of the Institute for Economic Freedom in the Bahamas have warned of awful consequence to follow. What we are witnessing is the stazification of life in the Off-shore countries, in which, like the despotic regimes of the cold war era, one is forced to prove oneself innocent of unknown charges to one’s own government - in this case, at the behest of external interest groups.

8    The FATF recommendations^[3] call for black-listed nations to  criminalize their definition of money laundering, and to add to that definition predicate offences implicit in their criterion which is subsidiary to the Vienna Convention. This means that the bureaucrats in the FATF have assumed a treaty-making power, which alters substantially the relationships of the G-7 countries – including the United States without consultation or congressional review. They insist on liability^[4], not only for individuals found wanting according to that criteria, but that several liability should be extended to corporations - disregarding common law notice or conspiracy rules, long central to our conceptions of justice.

9    The recommendations carry over the insistence on absolute legal protection from criminal or civil liability on erroneous disclosures of private information, whilst insisting^[5] on the right to on-demand information on Directors, Officers, Shareholders and employees of corporations - giving lie to the notion of the corporate veil, which protects the viability of legitimate business. The recommendations also demand an end to all banking secrecy, and on-demand exchange of information on all settlors, trusts, trustees, agents, nominees and all proxy relationships common to sound business.

10    The recommendations round out with a call for extreme seizure and confiscatory powers, superaided by extradition authority - yet another treaty-making power the bureaucracies accorded to themselves.  In case any form of privacy survives in its wake, the FATF  insists that its rules be applied to non-financial businesses, and that the information exchange process be initiated by ordinary suspicion.

11    If all of this seems somewhat brazen to those with even the slightest knowledge of the role of Sovereignty or comity between nations, I fear it does not end at those recommendations, whose bilious threats belie their name.

12    Added to this regulatory mafia is the Financial Stability Forum (FSF). In 1988 here in Washington DC, G-7 Finance Ministers and Governors of their Central Banks asked Hans Tietmeyer, President of the Bundesbank to form a regulatory body to monitor their activities toward the enhancement of the international financial system. Based on The Tietmeyer Report^[6], the G-7 Ministers set up the FSF in Bonn in 1999.

13    I feel somewhat competent to comment here again since the FSF does precisely what I do, which is to design and examine sector-specific regulations and transactional structures between treasuries, central banks and securities markets. In this sense, I am not opposed to the FSF, since I believe its role is important  in reporting to assure a well-maintained international financial system. However, I object most strongly to its role - as it too is un-elected - acting as "bounty hunter" for the FATF and OECD. Its Off-shore Center Working Group (OFC)., however, reporting last year concluded, as we did at Security Policy Group International (SPGI)^[7] , that Off-shore Centers cause no significant interferences to international financial stability. In typological terms, you may begin to see how the OECD and FATF initiatives are incompatible; since accounts which concern the former are often sedimentary, whilst, in the latter case - laundered funds are often peripatetic^[8].

14    The OFC-working group did suggest in its Executive Summary^[9] however that the "loopholes" presented by some OFCs hinder efforts to improve the global supervisory financial system through the implementation of international standards more broadly, frustrating collective efforts to reduce overall exposures to global financial instability, and creating a potential systematic threat to the financial system. Unfortunately I cannot accept the summary as written. Surly, Off-shore Centers must do their part to the stability of the international financial system. However, not in response to extra Sovereign, often unconstitutional abjurations of common law; certainly not in response to high-handed paternalism. Moreover, what loopholes amongst the G-7 have France, who has been the hatchet man on black-listing - embroiled in a massive money laundering scandal as we speak, and what structural flaws allowed English banks to clean monies for Nigerian General Abacha’s widow? These are far more threatening to the financial system as we know it – I assure you.

15    The well-informed will agree that there have been no greater threats to systemic international financial stability than the irrational dependence on projected profits by hedge funds on Wall Street and its multiplier effects on auxiliary credit and poor savings habits and extortionate taxation in G-7 countries.

16    For the most part, the OECD, FATF and FSF have succeeded largely by hubris and threats. There were some stirrings early in these bureaucratic assaults. But capitulation of Austria to FATF demands, given the Haider Affair and the defenseless compliance of British Protectorates, such as Bermuda, Caymans, Jersey and others, were not enough to give political heft to these initiatives propelled by the French.  It was not until the erstwhile Secretary of the US Treasury, Dr. Lawrence Summers entered the fray that these acronyms took on their ominously powerful effects. Through FinCEN and the IRS, Summers gave these bureaucratic efforts an authority which seemed to speak for the American government. In addition to this, in Feb. 2000, President Clinton’s budget proposals called for an American Blacklist of Off-shore Banking Nations, with the penalty that all American account holders in black-listed nations would become ineligible for Foreign Tax Credits^[10] (FTC) or withholdings under the Qualified Intermediary^[11] Rules (QI)., for individuals.

17    To carry out their agenda, FinCEN used an agency similar to the G-7’s FSF, called Financial Intelligence Units (FIU). These units could be placed into the central banks of Off-shore (obviously non-G-7) countries), ostensibly, to monitor compliance with U.S. backed rules. The collectivity of these groups are known as the Egmont Group; whose prominence means the U.S. has become literally, the defacto Governor of the Central Banks of a host of Sovereign countries. This used to be called Colonialism – though Jefferson had other names for it in the Declaration of Independence.

              Part II: Why The US Should Disavow Black-listing:

18    At this point, I shall like to say why the United States should disavow black-listing, laying out the reasons those gathered here in advisory capacities, should counsel congressional and cabinet officials against these initiative.

19    First, the US government should reject these initiatives unreservedly as they constitute a reconfiguration of U.S. relationships with its neighbours without consultation by bodies outside the US sphere of influence. These initiatives, no matter how well-meaning, are an usurpation of the treaty power of the effected countries, by an un-elected body, whose proper duty is to report and advise, rather than to consult Sovereign governments directly, much less exercise or threaten sanctions.

20    Second, the countries behind these initiatives are a "high tax" lobby whose larceny against their citizenry is in contrast to the U.S. The most aggressive European countries here average over 45% in a tax to GDP ratio, and are effectively socialist countries. In contrast, the U.S. is in the most moderate group of taxing nations, even as you have an administration and a congress which regards that as excessive. In European countries vigorously supporting these initiatives, taxes have increased by a full 10% points, even in future value terms every 7 years. They tax a greater portion and proportion of their nation’s wealth, in more ways, more times and for more egregious purposes than does the United States. Support for the initiatives effectively compels the U.S. to represent a culture of taxation inconsistent with its general market-based values.

21    Third is the question of Sovereignty. Discussions on this notion are  taken often to be particularly abstract. However, Sovereignty may be a thing difficult to define, which proves disastrous when its definitive effects are arbitrarily lost.  The trove of regulations forced forth by the OECD, FATF, FSF, IRS and FinCEN have effectively redefined the legislative personality of the nations at whom they are directed by duress. For instance, since Dec. 2000 the Bahamas has enacted – not by its own choosing, though against warnings: The Evidence (Proceedings in other Jurisdictions) Act; The Evidence (Proceedings in other Jurisdictions) Amendment Act; Central Bank of the Bahamas Act; The Bank and Trust Companies Regulation Act; The Financial Intelligence Unit Act; The Financial and Corporate Service Providers Act; The Criminal Justice (international co-operation) Act; Financial Transaction Reporting Act; International Business Companies Act; The Proceeds of Crime Act and the Dangerous Drug Act all 13 days before Christmas.

22    The obvious vulgarity of this orgy of legislation is not the only ridiculous feature of its undertaking. But how the devil is a Sovereign nation with a legitimate business culture supposed to orient itself to this irrationalism without altering its social culture? No nation can claim to be sovereign which can be forced to undertake promulgations of law at so demonic a pace. No nation demanding it can claim to be a friend. In the words of Maurice Glinton, a Barrister and scholar, Chairman - Bahamas Foreign Relations Council, "if the U.S. supports these initiatives it will engage in the suborning of breaches to the rule of law". What Glinton is saying in part is  we have enjoyed relative peace in our region, in part because smaller countries like that Bahamas have, by the most subtle means, kept faith with a certain respect for semblances of legal propriety. In shoving these legislation down the throats of its citizens, the government has unilaterally altered the quality and content of Bahamian citizenship for the sake of others. More importantly, it has learned that it can do so. And now the Emperor being unclothed, what prevents, now ordinarily, outrages of legal excess, known to regions other than our own in the Americas?

23    Additionally, the Bahamas has seen in Jan. 2001 alone, within 4 weeks of the legislation, the loss of 2,587 International Business Companies (IBCs). The government reports this as a loss of $20millions of dollars in revenue; an infinitesimal amount to  this gathering, but sufficient to pay for the education of every Bahamian currently attending university abroad. Moreover, the government’s percentage implies a market loss of US$200 million. Since there was no time to consult national agencies, or conduct impact studies on collateral business effects - though in my lettre to the Prime Minister I pleaded that he wait a little - we must wait to see what the specific economic consequences will be beyond the obvious.

24    The overall effect of any severe downturn in the Bahamas will increase crime, lessen tourism and represent a cost to the Southern United States where Bahamas have spent nearly one and one half billion dollars a year. Mr. Mark Brantley, a Barrister and Scholar in Nevis and St. Kitts has been eloquent on this question.

                 Part III: Conclusion:

25    In conclusion, the Off-shore centers given these initiatives, are threatened by an increase in, what we call at SPGI, "Discreet Sectors." We mean by this not simply an increase in illicit activity, but an increase in the frustration of legitimate activity by regulatory  pursuit of mere suspicion, supported by an indisciplined regulatory regime. The new business typology in Off-shore centers complying with the initiatives will mean bureaucratic excess, increased cost of doing business, arbitrary criminalization and insecurity of information. K. Neville Adderley, a Bahamian Barrister argued:

Being on the money laundering blacklist is bad for the Bahamas because this, mean the virtual shutdown of the offshore financial sector in the Bahamas, with obvious impact on our economy. On the civil side, organization[s] [may] find [themselves in] as co-defendant in 'complicated lawsuit[s], with high legal fees, and if money laundering is found, banks and their employees, officers, directors and persons with fiduciary duties could find themselves personally liable or constructive trustees for loss to' persons suspected to be involved in money laundering transactions.

27    I add to this a call for an Organization of Off-shore Banking Nations to set regulations between themselves and negotiate according to their proper interests with countries in the region and G-7 countries in general. Through such an organization the typologies of financial regulations will not be examined from a single perspective, but will maximize the professional knowledge of those on all sides of the question. Anything less than that Frederick Hayek has taught us, will lead us down the road to serfdom.
 

Notes:

[1]     The five member states are: Saudia Arabia , Kuwait ,UAE , Bahrain, Oman & Qatar.
[2]     Recommendation No. 32.
[3]     No.4
[4]     No.6.
[5]     No.16.
[6]     Report on International Co-operation and Co-ordination in the Area of Financial Market Supervision and Surveillance. See at: ( www.oecd.org )
[7]     See: www.spgi.org  at "Press Documents": Reply to U.S. Embassy: On the G-7 Initiative in the Bahamas. See also: www.Bahamasb2b.com at black-listing, then click on "Opinions").
[8]     This is true even with a single national financial system.
[9]     See: http://www.fsforum.org/Reports/RepOFC01.pdf  Executive Summary, pp.1, ss.4.
[10]     The United States taxes a U.S. multinational company on its worldwide income. In 1918, Congress enacted the FTC to prevent a U.S. taxpayer from being taxed twice on income from foreign sources -- by the foreign country where the income is earned and by the United States. Generally, the FTC allows a U.S. corporate taxpayer to reduce the U.S. income tax that it pays on its foreign income by the foreign income taxes that it pays on that income.
[11]     See: www.spgi.org  at Press Documents: The False Dawn of Qualified Jurisdiction (QJ) Status. (See also: www.Bahamasb2b.com  at black-listing, click "Opinions" [and http://www.solami.com/QInews.htm]).