St. Lucia, Tue. October 6th, 2015: The Caribbean Association of Banks Inc. (CAB) is once more forced to express its deep concern over yet another “tax-haven” list which includes 15 Commonwealth Caribbean countries. The referred list appears within the District of Columbia’s 2015 Budget Support Act which expands the definition of “tax haven” (for purposes of the water’s-edge combined group rules). This Act is due for passing by the US Congress in just 18 congressional working days from Sunday 20th September, 2015.
While the CAB fully supports the District of Columbia’s efforts to combat tax evasion, the CAB feels that the designation of Caribbean territories as “tax havens” is prejudicial. It is noteworthy that:
The Organisation for Economic Co-operation and Development (OECD) and the Global Forum on Transparency and Exchange of Information for Tax Purposes have confirmed that all members of the Caribbean Community and Common Market (CARICOM) are fully or largely compliant and have committed to Automatic Exchange of Information (AEOI);
None of the CARICOM countries listed in the Act are on the Financial Action Task Force
(FATF) AML/CFT Strategic Deficiencies Lists;
All of the CARICOM territories listed in the Act have cooperated with the US Internal
Revenue Service through the US Foreign Account Tax Compliant Act (FATCA) and (with the exception of one) are listed as either having a signed intergovernmental agreement (IGA) or being treated as having an IGA in effect; and
All CAB member Banks and financial services institutions have mechanisms in place to satisfy FATCA requirements.
Additionally, the CAB as part of its mandate, works very closely with its members to ensure compliance, training and other measures are satisfactorily in place with respect to regulatory, legislative and other matters of such nature.
It must be highlighted that this inaccurate description of Caribbean territories has already had and could have even further-reaching effects on the Caribbean’s financial services sector as well as the economies. Indigenous banks in the region are currently being challenged with the threat of loss of correspondent banking relationships which are provided by international banks. The DC 2015 Budget Support Act’s “black list” may serve to exacerbate the perception of our region as a high risk area and consequently, negatively impact the Risk Rating profile of financial institutions by correspondent banks.
As financial intermediaries, banks are highly dependent upon correspondent banking relationships to facilitate critical economic and financial transactions such as, remittances, foreign direct investments and international trade in goods and services. For example, the value of United States exports to CARICOM countries for the periods 2011-2013 were US$16.99B, US$18.6B, US$17.9B respectively; while US imports from CARICOM countries for the same periods were US$9.5B, US$8B, and US$8.4B respectively (Source: CARICOM Statistics). These trade flows are derived mainly from key sectors such as Tourism, Manufacturing, Agriculture, Retail, ICT etc. Consequently, this issue impacts the very livelihood of Caribbean people.
Accordingly, the CAB is unable to understand the justification for identifying these countries as tax havens and has written to the District of Columbia Mayor Muriel Bowser (also copied to 13 Council members) and key members of Congress (Chairman and Ranking Members of both the House Appropriations Committee and the Subcommittee on Financial Services) urging them to remove the names of the Caribbean countries from this listing of “tax havens” as defined.
The Caribbean Association of Banks continues to monitor this state of affairs, closely.
Caribbean Association of Banks, Inc is a community of banks and other financial institutions in the Caribbean/CARICOM Region, which provides opportunities for discussion on issues impacting the regional banking/financial services community as well as for the sharing of experiences and networking. CAB is an organization dedicated to the advocacy of national and institutional adherence to AML/CFT. It recommends and supports full compliance with the AML/CFT standards in order to protect all financial systems, within the region, from ongoing money laundering and terrorist financing risks offering ongoing training and education for its members.