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 P.O. Box 10882
Alexandria, Virginia 22310-9998
Phone: 202-285-0244
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The Institute for Economic Freedom

April 25, 2001

The Blacklisting Presentation of
Dr. Gilbert Morris
to the
Congressional Staff

The Bahamian Dr. Gilbert NMO Morris of Security Policy Group International and George Mason University addressed the U.S. Congressional Staff on "The OECD & Blacklisting" in Washington DC on Monday, April 23, 2001. His objective was to provide a clearer understanding of the impact of un-elected international agencies on the sovereignty and legal structure of their members. He eloquently described the plight of the Bahamas and asked the audience "to counsel congressional and cabinet officials against these initiatives."

The twin onslaughts.

Dr. Morris began his address by describing how beginning in 1998 the Organization of Economic Corporation and Development (OECD) developed its "international standards" to combat "harmful tax competition" and the related Blacklist of 47 nations that engaged in such activity.

The 47 were "invited" to comply with the Full Memorandum by 2005 by adopting detailed legislative plans to achieve full transparency in their financial systems, providing information exchange mechanisms and in the case of non-tax nations, imposing taxes to deter those seeking tax holidays.

The 47 were "called" on to adopt measures that "would not pass muster under the American constitution, or common law privacy rules. Stunningly…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 country requesting the information." Furthermore, "each country is called upon to adopt rules preventing either criminal charges or civil claims against the institutions providing it."

The Financial Action Task Force (FATF), an un-elected subsidiary of the Group of Seven (G-7) and the OECD mounted a second frontal attack. Its focus was money laundering, the act of depositing the cash proceeds of drug sales into the banking system where then it can more easily used by the illicit drug business.

Its "Forty Recommendations" are incredibly broad in application and, like the OECD's Memorandum of Understanding, make "the same or similar 'upon-request' demands, equally inconsistent with common law jurisprudence, that are an assault upon personal and financial freedoms."

Dr. Morris contends that these twin assaults remained largely "toothless" until the erstwhile Secretary of the US Treasurer Dr. Lawrence Summers and President Clinton entered the fray. In February 2000, President Clinton's budget called for an American Blacklist of Offshore Banking Nations and the use of U.S. taxation as the retaliatory measure not previously identified by the OECD.

Why the US should disavow blacklisting.

Dr. Morris urged the Congressional Staff to advise congressional and cabinet officials to disavow Blacklisting. He stated that –

  • These initiatives – no matter how well-meaning – were a usurpation of the treaty power of the effected countries, by an un-elected body, whose proper duty is to report and advise…much less exercise or threaten sanctions.
  • The countries behind these initiatives are a "high tax" lobby whose larceny against their citizenry is in contrast to the U.S. and "support for the initiatives effectively compels the U.S. to represent a culture of taxation inconsistent with its general market-based values."
  • These measures attack the concept of Sovereignty insofar as they "effectively redefined the legislative personality of the nations at whom they are directed by duress."

The plight of the Bahamas.

Dr. Morris then described the eleven pieces of legislation adopted in early December 2000– "not by its own choosing, though against warnings".

"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 promulgation of law at so demonic a pace. No nation demanding it can claim to be a friend."

The legislation was adopted without adequate consultation or impact studies that would identify the collateral business effects. However, the impact has been immediate. In January 2001 alone – within 4 weeks of the legislation – the country lost 2,587 International Business Companies (IBCs) to other offshore centers and the likely economic consequences will go well beyond this.

He reminded his audience that 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 Bahamians spend nearly 1 and one half billion dollars a year." In addition, "the Off-shore centers, given these initiatives, are threatened by an increase in…illicit activity" and "an increase in the frustration of legitimate activity by regulatory pursuit of mere suspicion, supported by an undisciplined regulatory regime. This means bureaucratic excess, an increased cost of doing business, arbitrary criminalization and insecurity of information.

The solution.

As a solution Dr. Morris called for a regional conclave to discuss these issues and to protect the sovereignty of Offshore Banking Nations and the long standing business relationships between America and the Caribbean. He called "for an Organization of Off-shore Banking Nations to set regulations among themselves and negotiate according to their proper interests with countries in the region and G-7 countries in general."



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