Caribbean territories added to EU blacklist, St. Lucia removed

Tuesday, March 13, 2018

EU ministers meeting Tuesday carried out expected changes to its lists of non-cooperative and non-compliant tax jurisdictions, the so-called blacklist and greylist, respectively, bringing unwanted attention and the possibility of sanctions to multiple Caribbean territories.

The EU's Economic and Financial Affairs Council added the Bahamas, Saint Kitts and Nevis (SKN) and the US Virgin Islands (USVI) to the increasingly dreaded blacklist, though removing Saint Lucia (in addition to Bahrain and the Marshall Islands), citing "commitments at a high political level to remedy EU concerns."

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Bahamas listing 'out of left field'

The Bahamas' inclusion to the list came despite a 11th hour trip by cabinet officials to argue that legislation was forthcoming that would bring the country in line with EU anti-tax avoidance standards.

In a Tribune Media report, former Bahamian financial services minister Ryan Pinder said the blacklisting has "come out of left field", expressing fears over the potential fall-out for correspondent banking and custodial relationships.

The Graham, Thompson & Company attorney and partner warned that EU's branding of the nation as 'non-cooperative' in the fight against tax avoidance could result in foreign financial institutions viewing the Bahamas as 'high risk'.

Should this happen, he told Tribune it could lead to the loss and/or severing of international relationships that the Bahamian financial services industry - and wider economy - rely upon for the smooth conduct of cross-border commerce and capital flows, especially with Europe.

Pictured: Hopetown, Bahamas.

The grey list

The EU council also added Anguilla, Antigua and Barbuda (AB) and the British Virgin Islands (BVI) to its grey list of countries that - while not fully compliant to standards, have exhibited high-level cooperation to come into compliance.

The actions also mark the end to a reprieve offered to jurisdictions suffering severe damage from last fall's record hurricane season (AB, Anguilla, Bahamas, BVI, Dominica, SKN, Turks and Caicos and USVI).

In a statement, the council said the hold was removed in January 2018 "when letters were sent requesting commitments to remedy EU concerns."

"The Bahamas, Saint Kitts and Nevis and the US Virgin Islands are added to the list (annex I) as a result of that process. This is because they have failed to make commitments at a high political level in response to all of the EU's concerns," it continued.

"At the same time, the council decided to add Anguilla, Antigua and Barbuda, the British Virgin Islands and Dominica to annex II [the grey list]," read the statement. "This was justified by commitments made to address deficiencies identified by the EU. Those commitments were assessed by EU experts, and their implementation will be carefully monitored."

The statement added that the review "process continues with regard to an eighth Caribbean jurisdiction, the Turks and Caicos Islands, from which a commitment at a high political level is being sought by 31 March 2018 to address EU concerns."

Nine jurisdictions now remain on the blacklist: American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago, and the US Virgin Islands.

More action

In additional action, the EU council agreed on a draft directive that requires intermediaries that design, market, organize or make available for implementation or manage the implementation of a reportable cross-border arrangement or tax planning schemes to report schemes that are considered potentially aggressive.

The member states will be required to automatically exchange with other EU nations the information they receive from intermediaries through a centralized database.