CHARLESTOWN, Nevis – THIS year marks the 25th anniversary of Nevis entering the Financial Services industry, made possible by the passage in 1984 of the Nevis International Business Ordinance.
SKNVibes caught up with Permanent Secretary in the Ministry of Finance Laurie Lawrence, who spoke about some of Nevis Finance’s highs and lows and plans to ensure the continued prosperity of the financial services.
Lawrence considers the 1990s to be the highest point in the industry to date.
“…in the 90s we went through a period of rapid growth in terms of the incorporation of international business companies, trust, limited liability companies and so on.”
It was during that particular period that the sector opened up its doors to all and sundry.
“So, in the 90s, we had not only people from abroad becoming service providers but many locals also entered into that sector and we had really good growth. Nevis became well known in some circles and, of course, we saw the revenues coming into the coffers of the Nevis Island Administration.”
This high soon ended however, being replaced by what Lawrence viewed as the low point of the Services existence. According to Lawrence, it came around 2000-2001.
“And basically that came because we were blacklisted by the Financial Action Task Force as being non-cooperative in the fight against money laundering.”
According to Lawrence, that move had placed a damper on the growth of the financial services sector, damaging Nevis’ reputation and causing a decline in business.
“The growth that we had experienced in the 90s fell off. We really had to put in a lot of effort to deal with the issue of the blacklisting. We had meetings after meetings. Going abroad, meeting with the Task Force to try and get us off the list. We had to pass money laundering legislation, we put in place the Financial Services Commission, the Financial Intelligence Unit.”
These steps were taken to help Nevis comply with international standards and be taken off the blacklist.
“That was basically the lowest point. Since then I cannot say we have fully recovered from the effects of that period, but we were able to overcome it in terms of the reputational damage and so on. We are more or less back on track – of course we have some more damages we have to deal with.”
Part of the reason for the delayed recovery could be attributed to the tardiness of the Financial Action Task Force (FATF) in communicating that a jurisdiction had been taken off the blacklist.
“We eventually came off the blacklist. When you are put on the blacklist everybody knows, but when you are removed for some reason that information is not well communicated,” Lawrence said.
“So it takes a lot of time after removal for people to become aware that you are actually off of the blacklist. So the negative impact continues even after you are successfully removed from the blacklist.”
Lawrence pointed out that contrary to perceptions among some people, Nevis is not an offshore banking centre but is, in fact, a financial services centre.
“There is only one offshore bank in Nevis, which is the Bank of Nevis International…a branch of a Class A bank.”
He continued: “I made this point because when we were blacklisted there was a perception that we had all these offshore banks in Nevis. When we met with some of the officials and they realised we just had one offshore bank they were surprised. We are not a banking jurisdiction. We offer financial services and banking is just a minuscule part of that.”
Recession and the OECD
Lawrence explained that there are now a number of other issues engaging the attention of Nevis Finance in the current recession. He said with many people worldwide losing resources on investments like stock exchanges and hedge funds offshore centres are not very popular.
He said this has put a damper on financial services around the world. Coupled with this is the fact that the Organisation for Economic Co-operation and Development (OECD) has become more aggressive in dealing with financial centres in much the same way the FATF dealt with the issue of noncompliance in money laundering matters.
The difference is that there is a greater emphasis on the sharing of information, forcing offshore jurisdictions to provide tax information on their citizens.
“Of course, added to that is the election of President Obama who is considered to be a person who perceives offshore jurisdictions as a negative. Sometime ago, Obama and, I think, Senator Levine tried to put a piece of legislation through the Senate to basically make it difficult for Americans to establish offshore accounts and so on. The standards they are putting in place are designed basically, in my view, to destroy the offshore centres.”
Lawrence revealed that St. Kitts-Nevis is now on a gray list which means the country has been trying to deal with the issue of exchange of information. The aim is to make it to the white list but the PS admits there is some work to be done.
“… basically what they are requiring now is not just the passage of legislation, but we must have a certain minimum amount of bilateral agreements with various countries to demonstrate that we are serious about sharing information. So right now we are on that gray list until we could sign, I believe, between 10 and 12 bilateral agreements with other countries to provide access to information.”
Lawrence admitted the situation is challenging but not out of control.
“We have the recession; we have the downturn in business; we have the OECD bringing all these requirements for exchange of information…a definite damper in terms of the financial services sector. But we are not giving up. We are trying to comply with most of the requirements to make sure that our jurisdiction cannot be accused of non-compliance, and, more importantly, we are now trying to develop a strategy on how we go forward.”
Lawrence continued: “Right now on Nevis we are in the process of engaging some consultants to assist us in mapping a way forward for the financial sector. We want to look closely at the external environment, all the threats and challenges and then develop a strategy that will ensure our survival.
We want to determine the best possible products to go on the market and what are the potential niches that St. Kitts-Nevis could exploit. These are the areas that we have worked in and we are in the process of putting that strategy forward so that we could continue to ensure the prosperity of the financial services in Nevis.”
