Liberia Fights ‘Tax Haven Blacklist’

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The Government of Liberia has rejected a publication branding the country as being on a tax haven list for Bulgaria, Greece, Croatia, Latvia, Poland, Portugal, Slovenia and Spain.

A publication by an unidentified journalist reveals that the European Union will announce a new “tax haven blacklist” in mid-2016 that will likely involve Liberia that it claims since the late 1940s, has “been running a tax haven laws more secretive than Panama’s.”

The Panama Papers is a massive leak of documents from Mossack Fonseca, a Panamanian law firm published by the International Consortium of Investigative Journalists that showed how the law firm set up secret companies, allowing sanction breakers, senior politicians and others to hide their identities while moving money and accumulating wealth.

In response to the publication, Information Minister Eugene Nagbe said in a release April 27 stating that “It is an attempt by a free-lancer who associates with a small London-based NGO for journalists to initiate a smear campaign about Liberia and its Maritime Program.”

The publication, according to Minister Nagbe, is trying to publish an issue which is a “no-story” because the steps required to being fully compliant are far advanced and concluding.

“The Liberia Maritime Flagship Program,” Minister Nagbe said, “was started in 1948 as an entity registered in the United States with activities that involved the registration of ships and the registration of corporations that run the Shipping Registry.”

The publication said Liberia’s secret offshore companies made an appearance in the Panama Papers when a secret Liberian company connected to the family of Pakistan Prime Minister, Nawaz Sharif was used to move funds.

“In that case, there was no evidence of any wrongdoing on the part of the Sharif’s family,” the publication noted.

It further noted that while Panama is found near the top of international rankings of financial secrecy, Liberia is one of a handful of countries that ranks even higher, noting, “Under the Tax Justice Network’s Financial Secrecy Index, Liberia had a secrecy score of 83 out of maximum of 100. Panama scores 72.”

To this point, Minister Nagbe reacted that “Liberia is noted to have one of the best records under the shipping registry. Over the past years, the Government of Liberia has been evaluating this program and has taken measures to improve upon the transparency and management of the program to meet all of the Organization for Economic Cooperation and Development (OECD) requirements.”

But the publication also countered that Liberia is one of the few countries in the world that has not made it past the first phase of the OECD’s Global Forum for Tax and Transparency peer review process.

The OECD-led initiative accordingly examines the legal systems of each member country and assesses them against international tax and transparency standards.

Explaining further, the publication said “for a few hundred dollars and a matter of hours online, anyone in the world can set up a tax-free Liberian company that offers total anonymity to its owner. Such anonymity allows individuals to hide their assets from tax and law enforcement agencies.”

In another counter reaction, the Information Minister said “Liberia currently meets the requirements of the OECD and is in fact a ‘white listed’ jurisdiction.”

According to him, the final step required to concluding all of the requirements is the passage of a legislation which is currently before the National Legislature and expected to be passed by next week (meaning this very week).

Minister Nagbe, however, recalled that the government is aware that OECD deadline for the ratification of such legislation is the end of next week, a deadline the government is committed to meeting.

“The government is also aware that falling short of meeting such deadline in time does not suggest an act of criminality by Liberia except for obtaining a ‘non-compliant’ status by OECD for at least 1 year,” he added.

The publication quoted a campaigner for Global Witness, Jonathan Gant as saying, “Secret companies have been used to hide ill-gotten money from drugs, corruption, and terrorism, and it would be very damaging to Liberia’s hard-won reputation for transparency if it was shown the country is harboring secret companies.”

The unidentified journalist’s report said former Maritime Commissioner, Binyah C. Kesselly spoke to him in February and said Kesselly expected Liberia to be removed from the current European list once the country has ratified its tax information exchange treaty with Poland, which it signed in 213, noting that Kesselly said the Liberian government was taking active steps to improve compliance ahead of a review by the OEC later this year.

Minister Nagbe, too, said it was disingenuous for a person to attempt maligning the reputation of the Liberian Presidency and the image of the country as a substantive complaint regarding the ROL simply on account of delays in the passage of a piece of legislation.

“The country remains committed to cooperating with the OECD, which has given Liberia reasonable extensions on this legislation during and after the Ebola crisis,” Minister Nagbe said.

He dispelled allegation that “Liberia is a financial center and a tax haven, saying the claims made for secrecy regarding the registry are just attempts to sensationalize the story.”

Minister Nagbe clarified that “Financial Secrecy Index” cited in the article ranks Liberia as a far less “secret jurisdiction,” corporate registry modeled off Delaware laws, the affairs of the Corporate and Maritime Registries are made public, LISCR maintains the highest standard of scrutiny and universally praised by international bodies.

Local Banking Reactions:

A senior executive in a local bank in Monrovia told the Daily Observer that what the story alleges is quite plausible because Liberia is indeed among the top ten countries through which money laundering takes place.

The reason is that Liberia is a dual currency country and businessmen may freely import and export US dollars in Liberia. Both the Liberian dollar and the US dollar are used interchangeably and this makes it easy for anyone to import and export any amounts of US dollars.

That is why it is difficult for certain banks in Liberia with the exception of such international banks as UBA, and EcoBank to maintain a strong relationship with foreign banks that could be called corresponding banks. Only UBA and EcoBank have corresponding banks abroad, sources told the Daily Observer.

However, the president of the Liberia Bank for Investment and Development (LBDI), Mr. John Davies refuted the claim and said LBDI’s main corresponding bank abroad is City Bank, New York, one of America’s leading banks.

He said “There is a problem for Liberia being exposed to money laundering. That exposes us to increased scrutiny because of the unequal environment in terms of the legal framework or laws governing our relationship with foreign banks. Foreign banking institutions represented, especially by the Financial Intelligence Unit (FIU) contend that our laws concerning the transfer of money are not strong enough.”

For example, Mr. Davies said when an international bank or the FIU suspects an illegal transaction taking place or about to take place in Liberia, the international banking system wishes that suspect banking transaction to be frozen.”

The Liberian government, on the other hand, says that under the Liberian Constitution, the freezing of that transaction cannot be automatically done without due process. In other words the matter has to go to court.

This, according to Mr. Davies has created an impasse between Liberia and GIABA, which is the West African Ant-Money Laundering agency. Mr. Davies said this is the main problem between banks in Liberia and international banks.

The Liberia Bankers Association (LBA) president suggests that the Minister of Justice, the Central Bank of Liberia and the legal advisers to the President should get together and draft an amendment to that law requiring due process before a suspect banking transaction can be frozen.

But Mr. Davies, the LBA President, insists that the onus for this should be on the Minister of Justice to draft that amendment.

Mr. Davies then gave this warning: “Liberia has until the 31st of May to enact an amendment, or else, Liberia will be downgraded by the West African Anti-Money Laundering Agency.

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