Thursday, November 8, 2018
By DIANE PHILLIPS
There probably isn’t a Bahamian soul alive today who would trade independence for rule by another. We are so proud of being a sovereign nation and a success story from the moment we threw off the reins that bound us that we celebrate every year as if it were the first. We gather at Clifford Park by the thousands, exclaim when fireworks light the night sky. We applaud the Royal Bahamas Police Force and Defence Force bands. We wipe away a tear when we sing the National Anthem.
We are such a proud people and so very proud of our independence.
We rarely stop to think how that very sovereignty has left us exposed, vulnerable to bullying by the big guns who think they can tell us how to run our economy and who we should let live, invest, work or play in this independent country. We rarely stop to think a regulator in northern Europe or somewhere else who may never have been to The Bahamas believes he thinks he knows what is good for The Bahamas and what The Bahamas must do to be good for the world and keep it safe from all the crazies, terrorists and demons out there. Salvo after salvo they fire at us and we sit, open-chested, taking the bullet and taking it to heart, trying to please.
In its latest salvo, the OECD has targeted The Bahamas real estate industry and officials have responded by incorporating real estate in the Financial Transaction Reporting Act. That now places the same kind of onus for risk assessment on real estate firms as on banks. Before you do business with someone, the big guns say, you need to have a compliance officer investigate the source of the client’s wealth and the source of his or her funds.
This goes beyond normal know your customer. This is know everything about your customer, where the money they are about to spend for a lease originally came from, where it’s been, what the client’s hidden agenda may be, if there is one. Investigate, keep the records, but for just exactly the right time and if you do anything wrong as a real estate broker you could face a fine of $5,000 a day for non-reporting.
It was not until the Bahamas Real Estate Association hosted a seminar this week to provide information about the new requirements amending the 1995 law governing the real estate industry that I understood the relationship between sovereignty and vulnerability.
What a dummy I was living under a rock in quiet mossy cover thinking that the reason The Bahamas was on a blacklist and always trying to get off and no matter how much we did there would be new rules and new lists was because we had been very bad before.
I thought it was because in our heyday of tax haven ‘heaven’, we had ‘banks’ that operated out of suitcases and were, to put it mildly, a little on the slack side when it came to checking where the money that was deposited between their leather covers came from. Of course, in those days there was less fear about money funding terrorism though certainly there was awareness of funds derived from ill-gotten means that needed a good laundering. But it was not until the brilliant senior attorney and compliance specialist Cheryl Bazard who led the November 6th BREA-session added, almost as a footnote, that the reason The Bahamas gets picked on so much is “because they can” and the reason “they can” is because we are unprotected.
It had not occurred to me, living under that rock of complacency with regard to financial services, that the reason we are always being targeted is because we are a sovereign nation. We sit out there all by ourselves like a bright target in the sand. Turks & Caicos, Cook Islands, Canada, Cayman Islands all have protection. They are either protectorates or have special status. But the little old Bahamas, well, we are just all alone out there and Ms Bazard is right, they pick on us because they can.
The very sovereignty which inspires us to hold our heads high and shoulders back opens us to a kind of aloneness that few other nations with sophisticated financial services regimes face. And it will not be until we find the courage to stand up to the bully that we will be truly sovereign because our independence is in name only if our behaviour is always under scrutiny and our punishment is only another list away.
That is not to say that we should ignore the rules that are designed to keep the world a safer place. There is no question that vast sums of tainted money make their way around the word and searches for a convenient laundering jurisdiction. And real estate is a likely laundering loophole. Buy, flip, re-invest, buy, flip re-invest, a few transactions down the line and you won’t even be able to trace the original source of funds.
But to require every three-person real estate firm to have a compliance officer in-house or on retainer and to hold a real estate sales associate as culpable for handling a lease or sale of a condominium, for instance, as a bank with fines of $5,000 a day for failure to file is like taking away after school sports for three months for failing to tie a shoelace.
The new Act requires real estate firms to keep records of all correspondence in English between agents, brokers and clients for five years but orders that they be destroyed exactly after five years. And if there is an inquiry post the five-year mark and the individual produces a file that implicates someone whose reputation could be impugned by the document, the individual could be fined for exposing the client unnecessarily.
The Act places risk assessment squarely on the shoulders of those who practice real estate even if deposits go directly to the attorney’s office because, the drafters of the legislation assert, the individual whether associate, broker or appraiser contributed to the transaction.
“If it started out as tainted money, you are getting tainted money in your commission,” explains Ms Bazard, who has advised jurisdictions around the region on compliance and legislation and acknowledges that the Bahamas Association of Compliance Officers (BACO) has not yet been consulted in the legislation drafting process. However, the Regulations are not finalized and it is anticipated that BREA, the Bahamas Developers Association and BACO will all seek to contribute. If there is a single strong message they can deliver in a unified fashion to those who complying with the clampdown, trying to narrow the opportunity for funds from nefarious sources making their way into and through The Bahamas, it is this:
The Bahamas is not perfect. But neither are those who are trying to strangle this small country by creating rules for us that do not apply to them. Opening a new bank account in The Bahamas can take months or longer. Opening a bank account in London, New York or Miami takes about as much time as reading this sentence despite the Financial Action Task Force.
Even more to the point, The Bahamas is a tiny player in a swirling money mega-world world, a grain of sand on a beach a mile wide. We have been squeezed until it hurts and those who are squeezing are far larger players in the world of questionable funds buying up real estate in places like New York and London. Why stifle development in a land where the middle class strives for ownership and education is key to future success, where hope, peace and security are far greater treasures than a pat on the back from Brussels.
We may not be perfect but we have given it one heck of a try and at the expense of what was once a thriving financial services sector boasting of being the Switzerland of the West. If bullies find satisfaction in reducing the value of our economy and the respect of our brand, when will they stop? For one thing is certain, The Bahamas will not trade its sovereignty for anyone’s attaboy.