A Barbados-domiciled offshore bank has been reclassified from “low risk” to “high risk” by American authorities over the past few days.
And the Barbados International Business Association (BIBA) is concerned that this unexpected development may be linked to France’s political posturing, signalling real economic consequences for Barbados.
BIBA?president Connie Smith said she was acutely concerned, in light of recent pronouncements by France’s President Nicolas Sarkozy that classified Barbados as a “tax haven” in the company of some of the world’s less well regulated and well established international financial centres.
In a statement released within the last 72 hours, the BIBA boss urged Government to “use all diplomatic channels at its disposal to have this matter resolved before this reputational risk undermines Barbados’ standing as a jurisdiction of choice from which to operate”.
While not naming the financial institution, Smith said: “Already, one of our international banking members has come forward and told us that, as of last week, the United States federal bank examiners have reclassified their long-standing relationship with a US-based bank from one of ‘low risk’ to one of ‘high risk’ in one fell swoop.”
According to Smith, the president of Tricor Caribbean, “We do not believe that it can be a coincidence that this decision by United States regulators was made within days of the French president blaring across the media that Barbados is one of 11 jurisdictions with ‘serious shortcomings’ in the area of exchanging tax information.
“We are pleased that Government has come out and strongly pointed out how erroneous this is, given that Barbados does not facilitate tax evasion and we have a wide network of tax agreements in place to prove such.”
She added: “This bank that has been reclassified is now reviewing its compliance framework and calculating the costs of having to jump through the new hoops that the United States has now presented to it in order for it to continue to do business with its American banking counterpart, with which it has had a transparent and stable relationship for years.
“What we are most concerned about is that, if more members of our international banking community are faced with having to incur costs to meet new regulatory requirements imposed on them by the United States or other members of the Organization for Economic Cooperation and Development because they are resident here, this will make Barbados look like less and less of an attractive option.”
Smith reflected that the economic impact on Barbados could be significant because there were about 45 international banks resident here, each paying either $50 000 or $100 000 annually in licensing fees depending on what type of business they did.
The BIBA?president noted: “This is a steady inflow of, at the minimum, $2.25 million in foreign exchange into Barbados’ coffers each year that we desperately need.”
According to a recent paper by the Central Bank of Barbados, the international banking sector spent an average $165 million a year locally.
“Therefore, we cannot afford for not even one of these banks to consider moving its business somewhere else,” Smith lamented.
