The Barbados International Business Association (BIBA) welcomes the prospect of an economic recovery gaining momentum in Barbados. A growing economy inspires investor confidence and promotes foreign direct investment, which in turn contributes to further economic growth.
The international business sector, as the main locus of foreign direct investment into Barbados, has long been a pillar of economic development. Even as Barbados endures its toughest economic period in a decade, the international business sector has proven to be a reliable source of tax revenue and foreign exchange, and to produce growth with a resilience lacking in other sectors.
Even in 2010, a testing year against the backdrop of a lagging global economy, Barbados saw more new international businesses registering in Barbados than in 2009. Key to this sustained business is Barbados’ standing as an international jurisdiction of choice. This standing is the result of Barbados’ trusted reputation in the international business arena built on a solid regulatory environment.
Reputational risk is a prime concern for multinational corporations and BIBA commends successive governments for having made the commitment to ensure that in the arena of financial regulation, Barbados’ reputation remains unsullied. However, reputation is only one part of the equation when an international entity makes a choice of where to register; the other factors are the ease and value proposition of doing business in a jurisdiction.
BIBA is strong supporter of appropriate ‘right-sized’ legislation that does not impose a cost of compliance out of keeping with our market size and resource capacity. However, we are concerned that the Money Laundering and Financing of Terrorism (Prevention and Control) Bill currently in its draft form, well intended as it is, could unnecessarily diminish Barbados’ ability to attract new business and could indeed drive away some existing business.
One of the major concerns with the draft legislation as it currently stands is that it will place unnecessary burden on entities that do not conduct financial transactions outside of their corporate group. It is understandable for entities that provide services on the open market to be subjected to the provisions of this legislation since third-party clients might seek to take advantage of Barbados’ clean reputation and by laundering money through Barbados-based entities.
However, for companies which are established and operate here to provide intra-group operations and treasury support for their affiliates, there is no real money laundering risk and hence the imposition of the obligations contemplated some provisions in the legislation would place an unnecessary burden on them.
For example, a company with its headquarters in Canada, but which has an arm in Barbados that provides intra-group treasury support to its many affiliates around the world, should not have to comply with the same level of reporting for ongoing financial transactions as a company that is providing services for unaffiliated third parties. Should this company become frustrated with the undue burden of compliance and decide to move to another jurisdiction, this would not simply be one less active international business on Barbados’ record books; it would represent a loss of employment, income tax revenue, corporate tax revenue, license fees, as well as of all the foreign exchange brought into the island to cover operational costs and day-to-day living expenses.
If this example is multiplied by the departure of several companies for this reason and if such businesses spread the word internationally of the burden and cost of inappropriate compliance obligations in Barbados this could quickly stem the influx of new business and the economic shock to Barbados could be very damaging.