Offshore Finance

Treasury Crackdown on International Financial Services. Are the British Overseas Territories being unfairly targeted again? I ask that question because the UK Treasury Department has just announced another investigation into our international financial services industry. You can read all about it for yourself on Parliament's website.

Does this initiative derive from the recent National Audit Office report? If so, we are in for a rough ride. I previously wrote about it here, and here, and here.

I never was able to understand. Why does not parliament similarly investigate British bankers, insurers and money managers? Why investigate us? We are at the bottom of the food chain when it comes to the international financial services industry. I remember Rodney Gallagher once explaining to a meeting of the Anguilla Financial Services Association that the West Indian financial centres could expect, at most, the crumbs that fall from the financial services table. The reason? We are already so well-regulated, so transparent, so small, and far away compared to Jersey, Guernsey, the Isle of Man, Monaco, Lichtenstein and Zürich, that only the smallest share of the business will ever venture out our way.

Now, the jingoistic British press have taken up the cudgel. See the Guardian article here. The headline reads, “Britain's overseas territories open to fraud and money laundering”. Note the suggestion that we are “open”, as in “welcoming”!

This is typical of the English newspapers when the markets are heading down. Blatant protectionism of the City and its outposts in Jersey and the Isle of Man. They don't even consider that it may well be that regulation in Anguilla and the other BOTs is now so tight that no crimes have taken place. Certainly a possibility in a place as small as Anguilla is.

What is the proportion of regulators to employees in the UK? Is it any better than in the BOTs?

Are the regulatory techniques in Anguilla and the other BOTS any different to those employed in the Crown Dependencies of the Channel Islands?

Does any fraudulent scheme, such as the BCCI fraud, that has the smallest link with a BOT in the Caribbean, not have its headquarters in the City or in the Channel Islands?

Does the British banking system not rely on repackaging debt products in offshore centres such as Anguilla and the Isle of Man? Should Anguilla be shut down to ensure that all the City's offshore business goes elsewhere?

They are all in the game, and it is just a question of where it is played. If the principle is that, “We only like offshore if it is our offshore”, then does not Anguilla qualify?

The problem is that these people run the UK, and it appears that we are going to bear the brunt of their own political nervousness over the forthcoming economic downturn. Same as it ever was!

Pit Bulls

Dog Fighting. I heard by email from PETA recently. PETA stands for People for the Ethical Treatment of Animals. I thought I would share this new development with you.

The email was signed by Kristin DeJournett. I Googled her. I found out that she is a well-known and respected animal rights campaigner. This is what she wrote to me:

“I’m a cruelty caseworker with PETA and we were forwarded a news article in which you discuss dog fighting in Anguilla. PETA is always interested in shutting down dog fighting whenever and wherever possible, and we’d like to see if you would work with us to get this investigated. Your anonymity is 100% guaranteed, unless you desire otherwise. We cannot guarantee results, but we will do whatever we can to stop animal fighting.”

With her permission, I forwarded her email to several contacts. I picked the ones who should know about dog fighting in Anguilla. Some I met and spoke to. Some telephoned me and spoke to me. One wrote back,

“Yes, there is a serious dog fighting problem in axa. I would prefer not to write about it. We will talk on Friday. Be careful.”

Another wrote earlier,

“There is some truth in what you heard at the beach. The exact story is that Morlens was fire bombed. This happened while Dr. Vanterpool was involved in writing the legislation for the Government regarding banning the importation of Pitt Bulls. Many Pitt Bull owners were unhappy with him. The ramifications can be deadly for those that intervene and that is why it is a Police matter. If you have any other questions you may want to ask Dr. Vanterpool.”

At the farewell ceremony for the outgoing Chief Justice, I sat in court next to the Commissioner of Police, Keithley Benjamin. I told him what I had learned. I asked him what was the status of the investigations. He replied,

“There is no investigation of dog fighting in Anguilla. I have never heard of a report of organised dog fighting in Anguilla.”

I have to say, at that point I thought the Commissioner appeared to be a bit out of touch. So, I did not ask him anything further about the reports I had received. I have now spoken to and exchanged emails with several persons who had contact with the police over this issue in past years.

One group associated with AARF was trying to stop organised dog fighting in Anguilla. To his credit, they included the vet, Patrick Vanterpool. I am told the campaign did not get anywhere. Dr Vanterpool had his life threatened. His veterinary surgery was firebombed. One of the principal dog fighting organisers was said to be the son of a Chief Minister. He has strenuously denied any involvement in dog fighting, by the way. Another organiser was said to be the nephew of a different Chief Minister. I do not know his name and have not spoken to him. The police dropped the investigation. They appeared to lose interest. The pressure on the police and the AARF campaigners to cease and desist proved irresistable. The campaigners regressed into looking out for the interests of stray dogs and pets. They took their eyes off the ball. They left it to the police. Now, it seems, even the police are in denial that reports were even made to them.

There are two reasons why dog fighting is illegal in Anguilla. One is because it is an offence of cruelty against section 2 of the Protection of Animals Act. The penalty is a fine of EC$4,800.00 or six months imprisonment.

Dog fighting also involves the offence of gambling contrary to section 337 of the Criminal Code. The whole point of organised dog fighting is the gambling associated with it. The dogs fight in a ring with the gamblers assembled around. They are not there just for the thrill of seeing the dogs kill each other. Each dog owner pays a premium to put his dog in the ring. I am told that it is a minimum of US$5,000.00. Large sums of money change hands as the spectators place their bets on the outcome of each fight. We can expect that large amounts, hundreds of thousands of US dollars, change hands in one night.

You would think that the penalties for this type of gambling would be appropriately significant. I had a look at the laws of Anguilla. The penalty for the organiser of a gambling event is one year's imprisonment and a fine of EC$1,000.00. You may well consider that fine ludicrously low. The penalty for anyone found in the place is imprisonment for 6 months or a fine of EC$500.00. The penalty for the actual gamblers is the less than impressive amount of a sentence of up to 3 months or a fine of EC$250.00.

You have told me the stories. You have shared the rumours with me. I know the names of some of the persons alleged to be the ring-leaders. I know some of the alleged locations of the fighting and gambling. I have heard about all your fears and concerns. Now, I want the evidence. Some of you will have trophy photographs of the dogs in action. Perhaps taken by a long since discarded boyfriend. Some of you might have recordings of conversations between the perpetrators. Some of you may have photographs of the players standing around the pits. Others may have taken lists of the licence numbers of the cars parked at the venues.

I need the names, addresses and dates. I need the photographs and tape recordings. Your anonymity is guaranteed. I would like to send all this to Ms DeJournett. It is likely that only a gutsy organisation like PETA will be able to help us get rid of this vile business in Anguilla.

I accept that there is no point sending any of it to the Royal Anguilla Police Force.

Mercy Committee

Advisory Commission on the Prerogative of Mercy. This is the last commission that falls to be provided for in Anguilla's new Constitution when it comes to be drafted. It is sometimes called the “Mercy Committee”.

Such a Commission does not exist strictly for the enforcement of a fundamental right. Mercy is not a right. However, it is recognised in all civilised societies that sometimes conditions affecting a prisoner change. It is then appropriate, in suitable circumstances, for society to show mercy. There is no reason why mercy should be applicable only in cases of the death penalty. We do not have a death penalty. We have prisoners. Some of them may well, one day, deserve an element of mercy.

Lawyers refer to it as the “Queen's prerogative of mercy”. It is not a personal attribute of the Queen. It is an aspect of society acting, at the highest impersonal level, in the interests of the community. The Queen is merely a convenient legal fiction for this concept.

At present, there is no mercy committee provided for in the Constitution. The Governor represents “the Queen” in Anguilla. He may or may not exercise the prerogative of mercy from time to time. It is not known how or when he does it. There are no published reports or statistics. This is recognised by all Anguillians as a most objectionable state of affairs. It needs to be corrected. Governors must find the personal responsibility oppressive. Everyone wants the situation corrected.

Fortunately, we do not have to re-invent the wheel. The Virgin Islands have a most acceptable provision in their new VI Constitution 2007. It is section section 44. There is no reason I can think of why we should not be able to adopt it wholesale.

We have now looked at several Commissions. Some of them already exist. Others would be new. The big change would be making them independent of the Governor and the Ministers. Giving them real responsibilities and powers.

Each of them performs a vital job. That does not mean that we need to make government top heavy with Commissions. There are several steps we could take to prevent this.

We could double up the personnel on each Commission, and to provide that only one stipend was payable, no matter how many Commissions an individual served on.

Membership of one Commission could be dependent on agreement to serve on other Commissions.

Most Commissions should incur little or no expense to the public.

Independent oversight bodies are vital. they provide an essential function in a democratic society. They constitute checks and balances on the Governor and the Ministers. We must ensure that they are put in place if we are to guarantee the protection of our rights and liberties as we move into the new era of increased self-government.

Human Rights

Human Rights Commissioner. We now turn to look at some independent Commissioners who should exist under our new Constitution. The first would be the Human Rights Commissioner. This is a Constitutional body which exists to protect the human rights of citizens when they are infringed by any member of the executive, or by the Assembly itself. It is not a normal provision in a British style constitution of an Overseas Territory. But, it is not unknown to Commonwealth constitutional law.

I have previously written about the role of such a Commissioner in various Commonwealth countries. In African Commonwealth countries there are many different types of national human rights and administrative justice institutions. There are over 30 Ombudsman institutions in that continent alone. Additionally, there are Human Rights Commissions, Gender Commissions, Racial Equality Commissions, and Anti-discrimination Commissions. Many of them operate in challenging environments of corruption, violation of human rights, military coups, and dictatorships. These Administrative Justice Boards are typically given broader jurisdiction and stronger powers than the classic model of Ombudsman. These are called the ‘hybrid model.’

Ghana’s Commission on Human Rights and Administrative Justice is a model of a hybrid institution which performs the triple mandate of acting as the Ombudsman, a Human Rights Commission, and an autonomous anti-corruption agency. Another feature of the hybrid is that some, like the Ghana Commission, have been given power to have their decisions and recommendations enforced in the courts. The Tanzania Commission of Human Rights and Good Governance also has a similar provision empowering it to go to court to enforce its recommendations and decisions where they have not been complied with in a specified period. This is a departure from the classical Ombudsman, who relies on his moral powers of persuasion.

Given the high cost of litigation in Anguilla, it will not surprise anyone to learn that during the public meetings held in the year 2006, this was one of the most frequently heard requests. The Constitutional and Electoral Reform Commission made the appropriate recommendation when it filed its report with government in August 2006.

Such a provision is not difficult to draft. It could be as simple as:

Human Rights Commissioner

95. (1) There shall be an independent Human Rights Commissioner for Anguilla who shall investigate, resolve and prosecute claims of infringement of any person’s rights under this Constitution.

(2) The Human Rights Commissioner shall have such other specific functions and jurisdiction as may be set out in a law.

The general provisions relating to all Commissioners would apply. Thus, he or she would be appointed by the Governor after consultation with the Premier and the Leader of the Opposition. No person would be appointed who has been a member of the House of Assembly or a candidate for election. He would not be subject to any direction or control of any other person or authority. He should have security of tenure, and not be capable of being dismissed by the Governor or the government. He can only be dismissed for cause such as misbehaviour or ill health. His emolumnts are guaranteed by the Constitution in that they cannot be reduced while he is in office. He must report annually to the Assembly, which must publish his report within a specified time.

Such relief is ernestly sought by the average citizen of Anguilla. It will go a long way to ensuring that the rights of the people can really be said to be guaranteed.

Making it a hybrid, combining the Human Rights Commissioner with the police complaints authority and the Ombudsman, will be an obvious cost-saving measure.

Judicial Services

Judicial Services Commission: One of the most important Commissions under the Constitution is a JSC. One is provided for by section 67 of the Anguilla Constitution 1982. It consists of the Chief Justice, another judge, and the Chairman of the Anguilla Public Service Commission. This JSC is not to be confused with the Judicial and Legal Services Commission, which was established by the Courts Order in 1967 to serve the entire OECS. That appoints the judges of the High Court for the entire sub-region.

At present, the JSC advises the Governor on the appointment of the Magistrate and the Registrar of the Supreme Court for Anguilla. The Attorney-General is supposed, in constitutional theory, to be non-political. But, the JSC plays no role in advising on the A-G's appointment. The Governor appoints as A-G whomsoever he wishes, or more likely, whomsoever the FCO tells him to. The JSC also advises on the appointment of Crown Counsel to the A-G's Chambers.

Because there are so few judicial and legal appointments made in Anguilla, the present JSC functions, we can suppose, only very intermittently. Additionally, the appointments are made by the Governor only after “consulting” the JSC. He is not obliged to follow their advice. The result, we can surmise, is that the JSC is only a rubber stamp committee. It has no real decision-making power. The Governor and his advisers, probably the Attorney-General and the legal advisers to the FCO, make the final decision. This has had most unfortunate consequences in the past.

The Constitutional and Electoral Reform Commission recommended that this situation be changed. It urged that the type of Commission found elsewhere among the BOTs of the Eastern Caribbean Supreme Court system be adopted. We do not have very far to look. The new VI Constitution 2007 sets out the modern role of a JSC in a BOT. Section 94 is the relevant provision. We would do well to adopt it without much alteration. If we did, it would look something like this:

94. (1) There shall be for Anguilla a Judicial and Legal Services Commission which shall consist of—

(a) the Chief Justice, who shall be Chairman;

(b) another judge of the Court of Appeal or the High Court nominated by the Chief Justice after consultation with the Governor;

(c) the Chairman of the Public Service Commission; and

(d) two other members appointed by the Governor, acting in accordance with the advice of the Premier and the Leader of the Opposition who will each nominate one member, at least one of whom shall be a legal practitioner.

2. For the purpose of subsection (1)(d), the Premier and the Leader of the Opposition shall alternate in nominating a legal practitioner, with the Premier making the first such nomination upon the commencement of this Constitution, provided that such nomination shall not be construed as precluding the nomination of two legal practitioners under subsection (1)(d).

3. If the office of a member of the Judicial and Legal Services Commission appointed under subsection (1)(d) becomes vacant or if such a member is for any reason unable to perform the functions of that office, the Governor acting in accordance with the advice of the Premier or the Leader of the Opposition, as the case may be, may appoint another suitably qualified person to that office for the unexpired term of the previous holder of the office or until the holder of the office is able to resume his or her functions.

4. Any decision of he Judicial and Legal Services Commission shall require the concurrence of not less than three members of the Commission, and the Commission shall take its decisions in such form and manner as it may determine.

5. In the exercise of its functions, the Judicial and Legal Services Commission –
   

• shall not be subject to the direction or control of any other person or authority; and
• may regulate its own procedure.”

Note the major changes from the present arrangements. One, the Commission is enhanced by the addition of two persons from within the community. Two, it is democratised by having these two members appointed on the advice of the Premier and the Leader of the Opposition. Three, it is professionalised by having at least one representative of the Bar Association. Four, its decision-making power is guaranteed by having its independence from the Governor and the Ministers entrenched in the Constitution.

There is no reason why we should not get such a Commission, if we ask for it. One, a majority of Anguillians who think about this subject want it so. Two, it is not in Britain's interest to retain a one-man power to appoint the Commission. Three, a modern JSC has previously been approved for other BOTs, so we are not asking for anything unusual. It is clear that if the Chief Minister's negotiating team insists on this type of modern Commission, the Foreign and Commonwealth Office will not put up much more than token resistance.

This goes a long way to what most thinking people mean by “full internal self-government”. That phrase does not mean, as some would have it, giving the elected representatives more power. If it meant just that, it would be better titled “fully guaranteed self-destruction of our liberties”.

An independent local JSC can be a guarantee of independent and professional judicial and legal services for the community. Such independence is one of the bulwarks of liberty under a modern written Constitution.

Anguillian Status

Anguillian Status Commission. We continue our examination of the Commissions and Commissions that are required to oversee our administrators if we are to invest them with increased political powers, amounting to "full internal self-government".

This Commission is the one which decides who is and who is not an Anguillian under the relevant constitutional provision. There is in existance just such a Commission. It was appointed under the Anguilla Constitution 1982. The provision is short. It reads:

“80. (1) There shall be an Anguilla Belonger Commission . . ., the composition and functions of which shall, subject to the provisions of this section, be prescribed by law.”

The law in question is the Anguilla Belonger Commission Act c A60. This may fairly be described as a most unsatisfactory law. The complaints made against it include: (a) it is a stooge of the Chief Minister from time to time, implementing his policy moods as they change, depending on the side of the bed he wakes up on; (b) its members have no security of tenure, so they had better follow the Chief Minister's instructions, or they might all be fired; (c) even the Governor can remove the members without cause; (d) it is difficult to find out how to apply to the Commission for your rights to be determined, as it has no website or other publicly published information about it; (e) it seldom meets to do its work, and if it does meet, this is a state secret. It does not release any information about its decisions. How much of this is true is hard to determine. In theory, the function of the Commission is simply to apply the definition of belonger status under the Constitution.

Needless to say, this type of amateur arrangement does not find approval with most Anguillians. The Constitutional and Electoral Reform Commission did not make any specific recommendations for upgrading the Commission when it presented its Report of August 2006. However, the entire tenor of the Commission's recommendations was directed to improving independence, transparency and integrity in the work of all Commissions, including this one.

Commissions exist to apply government policy, while ensuring that the guarantees of the Constitution are not infringed.

Commissions remove important decisions affecting the rights and property of persons from the political decision-making process.

Commissions ensure that the Constitution and the law are followed by the administration. Such a dichotomy is a necessary guarantee of our liberties. Anguillians recognise this. The British Government recognise this.

It will not be impossible for us to frame a new constitutional provision that will ensure that this objective is achieved.

One, the new Commission must not be subject to the direction or control of any other person or authority in the exercise of its functions.

Two, the Governor should appoint the Chairman after consulting with the Premier, not acting on his advice.

Three, no person who has been a candidate for election to the Assembly should be qualified to be appointed.

Four, security of tenure should be enhanced by making their term of appointment five years instead of the present three. Also, the Governor must not be able to remove a member without cause. And, the emoluments of the members must not be subject to government approval.

Five, the Commission should report annually to the Assembly, not to any Minister or the Governor. The Report must be widely published within a specified time. This will not be expensive. It can be done by a novice IT person free of charge on the government website.

The Constitution sets out who is to be an Anguillian and who is not. It is not appropriate for persons close to the Chief Minister or the Governor to have a final say in such an important matter.

It is fine to say that an aggrieved person can always sue.

Have you checked out the cost of litigation in Anguilla recently?

Financial Services

Financial Services Commission. International financial services is one of the areas that are in the Governor's reserved powers. This is found in section 28(2)(a) of the Anguilla Constitution 1982. This area of governance used to be purely local. The Minister of Finance issued offshore banking licences. Then came the BCCI Financial Scandal in 1990.

Some Pakistani bankers operating out of England defrauded thousands of depositors. The Bank of England was accused by the international press of negligence. It had allowed the Overseas Territories to form subsidiary companies used by BCCI in the frauds. The Bank of England pointed out it had no jurisdiction in the Overseas Territories. The FCO asked the local Ministries of Finance to clean up their acts. They did not move quickly enough. They made mistakes. One was to take away Allen Stanford's Montserrat offshore banking licence. He relocated to Antigua. He sued the Montserrat government. The case took years to complete. The court decided that the Montserrat authorities had acted unconstitutionally. Damages were awarded. Meanwhile, the British Government had taken away international financial services from all the BOT Ministries of Finance. They gave it to the Governors to handle. In Anguilla, they did this by The Anguilla Constitution (Amendment) Order 1990, Statutory Instrument 1990/587.

Since those days we have come a long way. Most Governors have placed the administration of financial services in the hands of the Ministers of Finance. It was the regulation of financial services that the Governors retained.

The Governors could not by themselves regulate banking, insurance, trust companies, mutual funds, and the like. They had laws passed setting up Financial Services Commissions. The law in Anguilla is The Financial Services Commission Act, Chapter F28 of the Revised Statutes of Anguilla. The Commission gives out licences, and penalise those companies that do not follow the rules. The Commission carries out the responsibilities of the Governor in the regulation of international financial services. He does not do it personally.

Most persons in the industry consider this system works well. It is preferable to going hat in hand to a Governor to beg for a licence. That is almost as bad as the previous system. In some islands it meant going cash in hand to the Minister to obtain a licence. A Commission of professionally trained persons charged with the responsibility of carrying out the policies of government is far preferable. In theory, the Governor could still resume direct control of the industry. The Constitution has vested him with that power.

It is now time to step up the system to reflect our growning political maturity and ability to govern ourselves. Accordingly, in August 2006, the Constitutional and Electoral Reform Commission presented its Recommendations to Government. The relevant ones read:

“56. Administration of International Financial Services. . . . It was generally agreed by all persons consulted by the Commission, except the Governor’s Office, that there was no longer any justification for this area to remain one of the Governor’s responsibilities. The Commission recommends that responsibility for the administration of international financial services be removed from the Governor’s portfolio.

57. Supervision of International Financial Services. It is generally agreed that Anguilla benefits internationally from the Governor’s power of supervision of the industry. It is to our advantage to be able to claim that the industry is subject to a higher supervision than can be provided locally. The Governor’s power to supervise is in practice carried out by the Financial Services Commission.

58. Constitutional Recognition of the Financial Services Commission. By the Financial Services Commission Act16 the House of Assembly of Anguilla established the Financial Services Commission (FSC) to supervise the financial services industry. The members of the FSC are appointed by the Governor and they report to the Governor. It generally agreed that it is desirable that the Governor’s office continue to be seen to be responsible for this aspect of the industry. The FSC is however not presently recognised under the Constitution. It was generally agreed that the FSC ought to be given constitutional recognition. The Commission recommends that the Constitution be amended to make provision for the FSC and for its governing law.”

We are not speaking about rocket science. This is a relatively simple matter to accomplish constitutionally. There could be a section which reads something like:

“There shall be for Anguilla a Financial Services Commission which shall be established as a body corporate with perpetual succession and a corporate seal and which shall be responsible for the regulation of the international financial services industry and having such specific functions and powers and a board to be appointed by the Governor all as may be set out in a law.”

There are other general provisions that should apply to all Commissions. These would be set out in a section of general applicability in the Constitution It would cover such matters as:

1. protecting Commissions in the exercise of their functions from the direction or control of any other person or authority;

2. enabling a Commission to confer powers and impose duties on any public officer or on any authority of the Government for the purpose of the discharge of its functions;

3. disqualifying from membership any person if he has been a member of, or a candidate for election to, the Assembly;

4. publishing of reports periodically; and

5. security of tenure of members.

The advantages that would accrue to Anguilla from this type of constitutional advance are several and varied. They should also be obvious. Placing the administration of international financial services directly in the hands of our Ministry of Finance will assist in developing tools of good governance in that regulatory authority. Placing the regulation of the industry in the hands of an independent Commission will help to develop professionalism in our institutions.

The crisis has now passed. There is no need for such a draconian solution as that previously selected. The British authorities would do better concentrating on cleaning up the financial frauds, such as BCCI, that are centered in the City of London, not in the BOTs.