Testimony of Lester B. Bird before the U.S. House of Representatives

Madam Speaker

I'm taking the opportunity of the presentation of this Bill to amend the Money Laundering (Prevention) Act to make a statement about the future of the Offshore Financial Services Sector.

Before the March 9th general elections which brought us to this Honourable House as the people's representatives, both political parties in their manifestos acknowledged the great potential held out by the Offshore Financial Services Sector for the growth of our economy. Both political parties pledged to promote and develop these Services so that they could produce more revenue for the State and more jobs for the people.

In looking at the economy of our country, both political parties recognised that the service industries and particularly financial services were natural areas of growth for Antigua and Barbuda. Both parties saw the sector as one which could play a major role in diversifying our economy from its dependence on tourism alone.

Since the elections, some members of the Opposition seem to have forgotten the stance they took in relation to the Offshore sector. In their zeal to attack the Government, some members of the opposition have joined with the enemies of our Offshore Sector in painting the worst possible picture of it.

But, our approach to this sector cannot be partisan, Madam Speaker. For, it is Antigua and Barbuda's sovereign rights and its economic survival that is at stake. If the main political parties in this country show division and dissension over the Sector, it will be seized upon by its enemies to paint it in its blackest terms so as to kill it.

This Honourable House and the members in it have to make up their minds whether or not they feel our country is entitled to operate a legitimate and clean Offshore Sector which lives up to its international responsibilities while resisting bullying attempts by others to control it or wreck it. A decision has to be made -- not by the Government side alone -- but by all parties that we will not allow our country's rights to be infringed in the prosecution of some other country's agenda to stop the flow of legitimate capital internationally.

In making that decision, both sides of this Honourable House will have to be prepared to standup to the international media onslaught and other means that will be used to portray us as a "rogue State" simply because we choose to resist the attempts by others to wreck an industry they consider harmful to their tax regimes

It is my hope, Madam Speaker, that this House will adopt unanimously a Resolution affirming its commitment to maintaining a responsible and accountable Offshore Financial Services Sector that will provide legitimate services to its clients while combating money and financial crime.

Madam Speaker, last year the Organisation for Economic Co-operation and Development (OECD) produced a document entitled, "Harmful Tax-Competition: An Emerging Global Issue". In that document, some of the countries of the OECD set out a clear agenda that spelt out their hostile attitude to Offshore Sectors in countries such as ours.

Two of the member states of the OECD, Switzerland and Luxembourg, rejected the recommendations of the document entitled, "Harmful Tax Competition." But, the others including the United States, France, Germany and the United Kingdom have been going along with the recommendations of the document.

The report was originally commissioned by Ministers of the OECD "to develop measures to counter the distorting effects of harmful tax competition on investment and financing decisions and the consequences for national tax bases." However, as Luxemburg pointed out, the report limited itself to financial activities and excluded industrial and commercial activities. To quote the government of Luxemburg, "the Report gives the impression that its purpose in not so much to counter harmful tax competition where it exists as to abolish bank secrecy." The government of Switzerland called the report "partial and unbalanced."

Both these governments rejected the report because they earn a great deal of revenue from financial services. They recognised that often the persons and organisations who place money in their banks are legitimately moving their resources from other countries with high tax brackets or other punitive forms of levies on income. These persons and organisations are not criminal; they are simply seeking to avoid paying taxes in certain countries.

We in Antigua and Barbuda are in a position similar to Luxemburg and Switzerland, except, of course, that the scale of financial services that they offer and the volume of business they transact are far larger than ours.

The OECD countries that subscribe to the report want to create conditions that stop the flow of money from countries with high taxes in to countries such as ours. The report states, "If the spillover effects of particular tax practices are so substantial that they are concluded to be poaching other countries tax bases, such practices would be doubtlessly labeled harmful tax competition."

The Report admits that the concept of "tax haven" does not have a precise meaning, but it goes on to establish its own criteria for a "tax haven." One of the three criteria is "whether a jurisdiction imposes no tax or only nominal taxes and is perceived as a place to be used by nonresidents to escape tax in their country of residence." All the criteria are subjective. None of them are objective or scientific, and they are based purely on whether a country believes that conditions in another country could be used to escape taxes."

The Report aggressively states that "Governments cannot stand back while their tax bases are eroded through the actions of countries which offer taxpayers ways to exploit tax havens and preferential regimes to reduce the tax that would otherwise be payable by them."

Recognising that "the jurisdictional limits to the powers of a country's tax authorities restrict the ability of these authorities to counter some forms of harmful tax competition," the Report calls for concerted OECD action against countries that they perceive as tax havens.

None of the recommendations made by the Report are binding on the member states of the OECD and none are enforceable in international law, but they are being used as guidelines by some governments. These governments are trying to enforce the guidelines by encouragement in some cases and by coercion and pressure in others.

Antigua and Barbuda is not Switzerland or Luxemburg. We do not have the economic clout to standup against coercion and pressure unless we are united as a nation in doing so. For the coercion and pressure will take many forms. Amongst them will be a portrayal of the country as a rogue state, of the government and opposition as irresponsible, of the financial services sector as riddled with criminals and crime.

It is in the face of that knowledge that my Government did not complain or quarrel with the Financial Advisories issued against our financial services sector earlier this year.

Instead, we tried to satisfy all the concerns expressed. We did so willingly and readily.

But, having met the expressed concerns, my Government is not prepared to preside over the demise of our Offshore Financial Services Sector. We will continue to regulate it carefully and we will swoop down on any illegal activity immediately and fully. However, we will not allow illegal incursions into the Sector by others who believe that it "harmful" to their tax regimes.

My Government intends to open a dialogue with the OECD Secretariat about our Offshore Financial Services Sector. We want to assure them that we will be transparent in what we do and we will provide legitimately required information in criminal cases in accordance with our laws and treaties to which we are party, but we can not permit the destruction of the Sector.

It is my hope that our willingness to enter such a dialogue with the OECD Secretariat will advance understanding on both sides and create a framework for genuine cooperation, but like the Swiss and Luxembourg governments, we consider the recommendations of the Report to be one-sided and harmful to the development aspirations of countries such as ours.

I hope Madam Speaker, that this Honourable House and this nation can be united in our determination to safeguard our Offshore Financial Services Sector in our own national interest while playing our full part in combating money laundering and financial crime.

This is a time for partisan politics to be set aside in the interest of a national concern. If that cannot happen, Madam Speaker, then let it be known that my Government cannot envision how our small country will stand up to the pressures and coercion we will surely face. In that context, our Offshore Financial Services sector and all the potential it has for contribution to our economic growth will be no more.

The time has come to make up our minds. Will it be partisan politics or national resolve? We must now decide.

Now to the Bill that is before us. This Honourable House is aware that we are amending the Money Laundering (Prevention) Act because amendments that we made last year have been criticised by some of our partners in the international community. Indeed, a Financial Advisory was issued by both the US and UK governments urging caution in dealing with large and unusual transactions into and out of Antigua,

In their Advisories, the Treasury Department of both governments also expressed concern about the membership of the International Financial Services Authority, the body that is charged with both regulating and promoting the offshore sector. In response to those concerns, persons on the Authority who had any connection with licensees resigned, and the Government appointed a new Board whose members have experience in law, banking, law enforcement and business. The IFSA cannot now be said to have any links to the organisations licensed to carry on offshore activities.

It is important that this Honourable House and the people of Antigua and Barbuda understand that the Financial Advisories do not affect offshore banks alone. They include financial transactions from all institutions, including local Banks.

Money laundering is not limited to offshore banks only. Money can be laundered through onshore banks and organisations as well.

In the interest of ensuring that all organisations and the ordinary person in Antigua and Barbuda are able to continue to conduct international financial transactions, it is important that these Financial Advisories be lifted, and that no new ones are issued by any other countries.

Should the existing Advisories be broadened, and should other countries also issue Advisories, every institution, both onshore and offshore, as well as individuals will find it extremely difficult to conduct international financial transactions. In the worst case scenario, correspondent banks, in the countries issuing the Financial Advisories, might choose not to continue to do business with institutions in Antigua and Barbuda. Should this occur, Antigua and Barbuda could find itself isolated and unable to do business in the world including purchasing goods, sending money to relatives, and receiving payments for goods and services.

Since the US Advisory was issued, I appointed a Special Committee headed by the Attorney-General to review the Money Laundering (Prevention) Act. Amongst the members of that Special Committee were the British Financial Adviser in the Caribbean, Rodney Gallagher, and a representative of the Caribbean Financial Action Task Force in the person of the Attorney-General of the Cayman Islands.

That Special Committee produced a number of recommendations for amendments to the Money Laundering (Prevention) Act. The recommendations were included in a Bill that was brought to this House on May 27th . The Bill seeks to repeal all the amendments we made last November to the Money Laundering (Prevention) Act. This was considered by the Special Committee as the tidiest way in which to deal with the amendments that both the US and UK governments felt had weakened our legislation.

However, the Special Committee also recognised that some of the amendments we adopted last November had extremely beneficial features. In the effort to fight money laundering, some of the amendments we passed were tougher and more effective than the laws of the US and the UK. Therefore, these amendments -- with minor textural changes -- were maintained in the Money Laundering (Prevention) Act.

I would highlight the amendments as follows:

1. They extend the powers of the Supervisory Authority to investigate and share information with our international partners;

2. They require the reporting of movements of cash and negotiable financial instruments in excess of US $10,000 without exception;

3. They extend the provisions for freezing and forfeiting bank accounts and assets; and

4. They establish a forfeiture fund.

The amendment to Section 4 of the Act also attempts to establish a balance between the need for a tough law to deal with money launderers and the provisions of our Constitution.

When the Bill was brought before the House on 27th May, there was a feeling expressed by members on both sides of the House that it warranted greater discussion and more detailed attention before it was debated. Therefore, the House made a decision to send the Bill to a Select Committee drawn from both sides of the House. The Speaker graciously appointed three members from the Government side, including the Honourable Attorney-General, and two members from the Opposition including the Leader of the Opposition.

The Select Committee has met and, indeed, has taken evidence on the amendments in two public sessions. Persons giving evidence and making representation to the Select Committee included banks, lawyers, accountants and members of the public.

Much disquiet has been expressed over the amendments by the practitioners who would be affected by these amendments. They have included bankers and lawyers. I would have expected such disquiet to be expressed by practitioners. Therefore, I do not regard such disquiet as a reason, in itself, for this Honourable House not to proceed to adopt the amendments to the Money Laundering (Prevention) Act as recommended by the Special Committee.

However, the Leader of the Opposition came to see me formally on Monday, June 14th. He has expressed concern that one of the proposed amendments -- the amendment to Section 4 of the Money Laundering Prevention Act -- is unconstitutional. The Honourable Leader of the Opposition has put it to me (and I hope he will corroborate this in the House today) that while he recognises that the governments of the United States and the United Kingdom in particular are anxious that we should adopt all the recommended amendments now before this Honourable House, he would urge that we do not adopt the amendment to Section 4 and instead that we send a delegation to Washington and London to negotiate with these two governments.

It is important that I place the amendment to Section 4 in its proper perspective for the benefit of all the members of this Honourable House, for the people of Antigua and Barbuda and for the international community including the media who have an interest in this matter.

Section 15 (2) of our Constitution assures every person in our country of the protection of the law. It reads as follows: "Every person who is charged with a criminal offence -- (a) shall be presumed to be innocent until he is proved or has pleaded guilty."

In other words, under our Constitution, every person is presumed to be innocent until proven guilty. The burden is on the prosecutor to prove guilt, the burden is not on the accused to prove innocence.

This is a standard which we inherited from the United Kingdom and which is practiced and respected in the United States of America. In the United Kingdom, legislation has not reversed the situation where a defendant at first instance would bear the legal and evidential burden of proof.

When this Honourable House passed the Money Laundering (Prevention) Act in 1996, we actually reversed the burden of proof so that the accused would bear the burden of proving himself innocent. The Act stated plainly:

"Where an offence under the provisions of Section 3 is committed by a body of persons, whether corporate or incorporated, every person who, at the time of the commission of the offence, acted in official capacity for or on behalf of such body of persons, whether as director, manager secretary or other similar officer, or was purporting to act in such capacity, is guilty of that offence, unless he adduces evidence to show that the offence was committed without his knowledge, consent or connivance."

At the time that the 1996 Act was passed, we did so on the basis of a model Money Laundering Act that was developed by the Commonwealth Secretariat on behalf of Commonwealth countries. That model read as follows:

"Where an offence under the provisions of (the appropriate) section is committed by a body of persons whether corporate or unincorporate, every person who, at the time of the commission of the offence, acted in an official capacity for or on behalf of such body of persons, whether as a director, manager, secretary or other similar officer, or was purporting to act in such capacity, shall be guilty of that offence."

The point should be made that the Commonwealth model was developed because of the increase in crimes of money laundering globally. Countries throughout the world developed and extended their money laundering laws to combat such criminal activity.

In the case of the neighbouring island of Barbados -- a sister country in the Caribbean Community and Common Market, legislation was enacted which states that where an offence is committed under the appropriate section of the Barbados Money Laundering Act, every person who acted in an official capacity "is guilty of that offence and shall be tried and punished accordingly."

It should also be noted that Section 15 (11) of our Constitution does not stop the passage of a law that imposes on the accused the burden of proving certain facts. Section 15 (11) of the Constitution reads:

"Nothing contained in or done under the authority of any law shall be held to be inconsistent with or in contravention of subsection (2) (a) to the extent that the law in question imposes upon any persons charged with a criminal offence the burden of proving particular facts."

Notwithstanding Section 15 (11) of the Constitution, and because of the view that Section 4 of the Money Laundering Act was in conflict with Section 2 (a), this Honourable House amended the 1996 Act. In the course of doing so, we specifically amended Section 4 to state that a person is guilty of an offence "if it is established that the offence was committed with his knowledge, consent or connivance."

This was regarded as a weakening of legislation even though the standard that it followed is one that applies in the United States, the United Kingdom and many other countries of the world.

Therefore, the Special Committee that I established after the UK and US Financial Advisories were issued, recommended a further amendment to Section 4 of the Money Laundering Act. Their recommendation tries to find a balance between the protection offered by Section 15 (2) (a) of the Constitution and a tough law against money laundering.

It is that amendment that has exercised the attention of the Select Committee and that was the meat of the representation made to me on Monday, 14th June by the Honourable Leader of the Opposition. It seems that members of the Select Committee of this House cannot unanimously recommend the adoption of this amendment of Section 4 of the Act, since it is felt that the amendment continues to be in violation of Section 15 (2) (a) of the Constitution. It is further felt that a delegation should be sent to the United States and to the United Kingdom to attempt to negotiate an appropriate form of words that would satisfy concerns about our Constitution while meeting the concern of implementing a tough law on money laundering.

Madam Speaker, I want to make it clear that my Government is resolved to do all in its power to combat money laundering and other financial crime. We will have zero tolerance for any attempts by anyone to abuse our Offshore Financial Services Sector for illegal activity. We will not be found wanting in the fight against financial crime.

It is for that reason that we accepted without quarrel or complaint the assertion by the US and UK governments that our Money Laundering (Prevention) Act may have been weakened in some ways by the amendments adopted last November. It is also for that reason that we reconstituted the Board of the International Financial Services Authority again without quarrel or complaint.

My Government wanted to make it pellucidly clear to the entire international community that we are willing to cooperate fully to meet the legitimate concerns of partner governments. No finger should be pointed at Antigua and Barbuda with the accusation that this country is in anyway giving the slightest encouragement to financial crime or fraud.

However, since the Select Committee, drawn from both sides of the House, is unable to unanimously recommend all the proposed amendments for adoption, and mindful that the Honourable Leader of the Opposition has made representation to me that a delegation be sent to the United States and the United Kingdom to negotiate this clause, I propose the following to this Honourable House:

1. That as a show of our good faith and our firm intention to cooperate fully with our international partners in the fight against money laundering, we adopt today all the amendments in the Bill except for the amendment to Section 4.

2. That with regard to Section 4, this Honourable House regard it as unfinished business and that it authorise the establishment of a team drawn from the government and opposition benches to seek meetings in Washington and London with appropriate representatives of the Governments of the United States and the United Kingdom to discuss the terms of Section 4 at the earliest possible opportunity.

3. That this Honourable House receive a report on the discussions with the United States and the United Kingdom from the team immediately after their discussions and revisit Section 4 of the Money Laundering (Prevention) Act on the basis of that report.

I can think of no more fair, transparent and democratic a manner to deal with this matter. I urge this Honourable House to act now.

Thank you, Madam Speaker.