Global Policy Forum

Caribbean Leaders Grapple with Threats of Sanctions for Money Laundering


BY Eileen McNamara

Associated Press
July 3, 2000

Caribbean leaders on Monday debated a united response to possible sanctions by industrialized nations after a report recently listed several of the islands as havens for money laundering and tax evasion.

The report by the Paris-based Organization for Economic Cooperation and Development named five Caribbean countries as centers for international money-laundering by criminal groups. It cited several more for lax banking rules that allowed wealthy individuals and companies to hide funds from tax collectors in developed nations.

Developed countries have threatened sanctions unless financial controls are tightened - endangering offshore banking industries that have brought a measure of wealth to these resource-poor countries. "They are out to defend their interests," Dominica's Prime Minister Rosie Douglas said Monday, echoing criticism that the rich countries' high-minded stance amounts to little more than a disguised effort to recoup lost tax revenue. "We will not give up our sovereign rights."

Still, he conceded that the 15-member Caribbean Community, whose leaders began four days of talks here Monday, must take the charges seriously. "We'll have to review our tax legislation and how it affects Europe and the United States." "Some corrective measures are needed in Dominica," he said. "We know in a couple of cases there was money laundering, and we can't have that."

The United Nations estimates that $600 billion in criminal funds is hidden from law enforcement officials every year by such money laundering methods as moving it through offshore accounts, and about $60 billion of that passes through Caribbean banking centers.

There are no firm figures of U.S. tax revenue lost to offshore tax havens, but Britain estimates its losses at about $1.6 billion a year.

The United States has indicated it will look at the OECD lists, as well as its own studies, when deciding whether to punish countries under new legislation being considered in Congress. France also is considering similar legislation.

At opening ceremonies for the summit on Sunday, Premier Sir James Mitchell of the host nation St. Vincent condemned the measures under consideration as a "direct threat to the region's economic base and stability." Mitchell said that while the region will cooperate to stop money laundering, developing countries should be allowed to offer tax concessions as a way to draw desperately needed business and investment. "We in the Caribbean do not aspire to be a refuge for drug barons and money launderers," said Mitchell, who is current chairman of Caribbean Community. "We are not doing anything illegal or immoral. Tax competition is about whose treasury gets the money."

Five of 15 alleged money laundering centers were identified in the Caribbean, and 15 of 35 countries listed as harmful tax havens are Caribbean nations or territories of Britain, the Netherlands and the United States. The OECD gave them 12 months to work with the organization to eliminate "harmful features" of their tax regimes, or face sanctions.

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