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Gilbert N.M.O. Morris, 02-14-01

Reflections on the Bahamas Blacklist Strategy

by: Gilbert N.M.O. Morris
Security Policy Group International (SPGI)
George Mason University

     Survival in the international arena requires a steely nerve; an assured sense that a leader has made his decisions, backed by the professional agencies of his country on one side, and supported by his country's friends in powerful places on the other. This is actually a principle in all strategic decision-making. In the Air Forces, on battle-fields, in business we say: "cover your flanks "that is, you do not have a plan until you have a plan B. Put another way, Plan A is not complete unless it includes plan B.

     In my analysis of this issue made last November, I suggested principally that one reason no concessions should be given to the Financial Action Task Force (FATF) was because the Bahamas had not negotiated a position which ensured that new demands would not be made. Now the FATF has made it clear that they will not move names off the Blacklist. In an manner of speaking, they have moved the goal-posts in the middle of the game played by seemingly blind players.

     Here at an International Venture Capital Banker's Conference in Germany, all the talk is of Barbados. I find myself bombarded by questions such as: How could your Bar Association let your government make such deals ? My answer - it appears they were not consulted. How could your financial professionals not press for a guarantees ? My answer - they appear not to have been party to the policy.

     These perceptions are not the end of the story. Policy failures deepen over time, taking their effects in ways which are not immediately obvious. But this much is clear, the Bahamas do not lead on this issue and it shows. Moreover, In hopes of wining a game in which no rules were set, the Bahamas government has enacted legislation which alters the quality of Bahamian citizenship in the following ways:

     The sovereignty of the Bahamas has been compromised, while the goal for which it was compromised remains unattained - and may be unattainable.

     The Bahamas has made itself subject to an unelected body, with no capacity in international law to be party to a treaty between nations.

     The Bahamas, having shown its willingness to compromise without strategic guarantees, further agreed to allow United States Treasury Department officials to obtain information on Bahamian account-holders without guarantees as to types of accounts or limits on details.

     The Bahamas government has unilaterally altered its lawyer/client privilege rules which have formed part of the common law legal protection of clients for over 300 years. (See: Waldron v. Ward, 82 English Reports 853 (Kings Bench 1654).

     The government has extended a police power to the Governor of the Central bank, which makes the sovereign bank an investigative arm of the United States government.

     Let me explain, indeed emphasize why it was bad policy to have dealt the FATF in the way it was done:

     First, if the FATF refuse to strike the Bahamas from their lists, then pandering to them at the high level of the office of Prime Minister must be considered an extreme loss of face for the Bahamas, perhaps even of professional dignity.


     If it does not matter whether the FATF removes the Bahamas from the lists, then the alteration of legitimate Bahamian laws is a loss of face in which, the Bahamas was made to compromise its prestige for exactly nothing.

     That is to say, whether the Bahamas acted or failed to act in response to the Blacklisting now seems to matter very little nothing the Bahamas government wanted seems to have been delivered. If the Prime Minister had not complied with FATF demands, the Bahamas would be Blacklisted, and even though that office ignored advice from Bahamian professional agencies, and did as he was told, the Bahamas remains Blacklisted what then is Plan B ?

     Part of the problem is in diplomatic terms, the Bahamas acted without a pre-text. That is, without any leverage to guarantee its concessions would have a positive result. Pre-text in this sense is an invaluable diplomatic tool.

     In the initial stage, when the FATF first made its demands, the government ought to have assessed the situation, and consulted with the Bar Association, The Association of Chartered Accountants and the Chamber of Commerce. From that a set of public statements should have been offered to inform the public on the issues. A committee should have been appointed to report to the country, then public hearing held to access the report.

     The second stage of creating a pre-text is to determine if one complies with the demands of external agencies, how far will one go. This is determined first by accessing whether the law allows compliance. The Bahamas Bar may have determined this question, and found that compliance with the FATF tended to undermine the sovereignty provisions of the Constitution of the Bahamas. Second, it was necessary to determine the economic impact of compliance, and whether the FATF demands interfered with the promises which the government made to the country.

     Third, it was necessary to determine what the Bahamas would get for compliance. If the FATF could not guarantee anything, such as removal from the Blacklist with a specific timetable, then there was no point in even considering their demands, since they would have shown that their policy is run by the "seat of their pants". No serious national leader gives concessions to any external body under such terms.

     While doing these things above as part of a defensive strategy, the Bahamas government ought to have had a robust offensive strategy.

     First, the government could have taken note that an American election was upcoming, and depending on who won, an understanding could have been arrived at about the significance of the FATF. It turns out, as my analysis explained, the Republicans regard the FATF as a meaningless body, out of control. If the defensive strategy was followed, it would have bought enough time so that the Bahamas decision to comply or not would have come after the elections, when a clearer strategy could have emerged.

     Secondly, whether or not there were American elections pending, there are powerful Americans who have financial interests in the Bahamas. The government could have used inside channels to put pressure on the FATF to deal with the Bahamas in a manner proper to the nation's dignity and sovereignty. Perhaps the Bahamas would have been in the position to reject the FATF demands outright - with the backing of powerful friends in corporate America, in the Florida business community and in the American government.

     The third move would have been to lead on this question: First, the government could have used the economic, legal and social impact report by Bahamian professional agencies as the basis for an international discussion. This is the way a national leader adds to the prestige of professional bodies in his country. The nation's journalists, scholars, lawyers, accountants, bankers and business community get to show their critical skills and professional competence on the world stage. On the basis of such a document, the national leader then may invite leaders of other countries to follow the lead of the Bahamas. Barbados for example is an infant compared to the Bahamas in the financial services sector. Yet, in international circles in which I move, Barbados stature has grown 1000%

     from its leader's clear, unemotional professional defense of Barbados' sovereignty. National leaders in banking countries are not thinking of following the Bahamas, but Barbados' skillful offensive as a pre-text for action.

     Usually, all that I have described above is part of the "give and take" in diplomatic practice, in which you give nothing to those who can guarantee nothing. Moreover, one certainly gives nothing to agencies who offer no pre-text for one's government's concessions to its proposals. Now the Bahamas has been overtaken in prestige by relative newcomers to a sector we once dominated. One Caribbean diplomat who spoke off the record said to me: "The Bahamas let us down. We only just arrived in the [banking] business. We were looking to them as the Banking leaders we thought we could band together and make this a regional issue even the South Americans wanted the Bahamas to lead." Now the international perception is - as someone wrote in one of the hundreds of e-mails I received on this question - that the Bahamas can be "yucked to and fro like some jook jook country". I ask again: what is plan B ?

     Many Bahamians complain to me that they figure the Bahamas government's policy on the Blacklist is wrong. But "how", they ask, could the Bahamas have resisted the demands of powerful countries ? This leads to the last point in creating pre-text: Know your enemy ! The FATF is not a direct representative of any country. And many governments in larger countries do not consider their authority final. This means that a clever leader could have exploited this limit in FATF authority to protect its own interests.

     I hope we can see that by creating pre-text, showing respect for our professional bodies, and knowing how to leverage our powerful friends, countries like the Bahamas can become a force in the world.


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