Gary D. Collins Gaming Guru

Offshore under Fire - The Antiguan Experience

Antigua and Barbuda is an independent twin island nation located in the Eastern Caribbean. The country is renowned for its 365 beaches (one for each day of the year), and also for its carnival from late July to early August. Sailing week in April attracts mariners and enthusiasts from every corner of the globe.

The country shares a colonial heritage with the other islands in the Caribbean, and like them, made the transition from the sugar cane economy to tourism. To facilitate its emergence into the world of international finance and investment, in 1982 Antigua and Barbuda gave birth to its offshore industry with the passage of the International Business Corporations Act.

This Act provided for the establishment of offshore banks, trusts, insurance, manufacturing, and commercial companies.

In 1994 the country established a Free Trade and Processing Zone to expand its industrial and economic base, and provide an offshore location for investment, manufacture, technology, and transit.

In 1995 sports book companies were added to the list of offshore products with the passage of the International Business Corporations (General Control of International Bookmaking) Regulations.

When the phenomenon of internet gaming gained a critical mass that could no longer be ignored, Antigua and Barbuda sought to capitalize on this market by enacting the 1997 Virtual Casino Wagering and Sports book Wagering Regulations.

As with the advent of any new invention, the Antigua and Barbuda offshore industry was not without its hiccups, setbacks, and problems.

In the latter part of the 1990's certain offshore banks failed to maintain the proper standards required of such financial institutions. The failures of these banks had far reaching international repercussions. Issues of money laundering and appropriation of customers' deposits were highlighted, and the culmination of these events darkened the previously clear blue skies of Antigua and Barbuda as an offshore jurisdiction.

The resulting advisories issued by the United States and British governments against Antigua and Barbuda's offshore industry created the storm clouds of suspicion and doubt as to the future of the industry.

Meanwhile, the G7 group of "super" nations had created the Organization for Economic Cooperation and Development (OECD) to protect their own financial interests.

The now infamous OECD Report condemned low tax jurisdictions as tax havens and accused them of engaging in "harmful tax practices". The dreadful sanctions which the OECD threatened to impose on those offshore jurisdictions created a heightened sense of awareness as to the power of the OECD and the fragility of the economies of the affected jurisdictions.

Equally troubling was the simultaneous development of problems in the gaming sector of the offshore industry. Senator John Kyl proposed a bill to criminalize internet gaming in the United States of America. This bill, if passed, would have wide reaching effects on the operators of online gaming enterprises. Following closely on the heels of this bill was the National Gambling Impact Study which recommended to the United States government that internet gaming should be outlawed but that traditional land based casino games should be retained.

The United States Attorney for the Southern District of New York commenced indictments against several United States citizens who operated internet gaming enterprises in the Caribbean, notably Antigua, and these indictments culminated in the trial and conviction of one such person, namely Mr. Jay Cohen who operated the Antiguan licensed internet sport book called World Sports Exchange.

These events reverberated throughout the entire offshore industry of Antigua and Barbuda, and the aforementioned storm clouds burst into a downpour of criticism that flooded the international community.

The government of Antigua and Barbuda embarked on several ventures to resuscitate the good image of the country and demonstrate its commitment to develop, promote, and regulate its offshore industry in accordance with acceptable international standards.

Funds suspected of being laundered money were frozen in offshore banks under the Proceeds of Crime Act. Certain offshore banks were investigated, put into receivership and closed down.

Further amendments were made to the International Business Corporations Act and the Money Laundering (Prevention) Act. A Mutual Legal Assistance in Criminal Matters Treaty was executed. The Office of National Drug Control Policy was strengthened.

Closer cooperation with the United States government, the British government, and the Canadian government was achieved in the fight against illegal narcotics and money laundering. The statutory body that oversees offshore companies took on a more regulatory function and is now restructured as the International Financial Sector Regulatory Authority.

A General Extradition Arrangements Order was enacted to more easily facilitate the extradition process of fugitive offenders.

Whilst the specific details of these initiatives would be beyond the scope of this article, the general effect is that the financial services sector of the offshore industry has been overhauled and a leaner, trimmer, more efficient and better regulated sector has emerged in Antigua and Barbuda.

In the gaming sector, a committee was established to have the oversight of both local and offshore/internet gaming. With the representation of the committee's chairman, Antigua has joined the International Association of Gaming Regulators.

The committee has recommended the establishment of a gaming authority which will closely regulate all forms of gaming at the highest international standard, and bring offshore/internet gaming under the stricter confines of proper gaming regulations.

The relevant amendment to the Betting and Gaming Act has been drafted and is awaiting its first reading in the House of Representatives in mid September 2000.

Closer surveillance is being effected on gaming activities to ensure that money laundering is not being facilitated by offshore/internet gaming operations.

All these initiatives have borne fruit as Antigua and Barbuda has successfully complied with the guidelines and recommendations of the Financial Action Task Force (FATF) which was established by the G7 countries to monitor financial activities. This has removed Antigua and Barbuda from the so called black list of countries targeted by the FATF as being non compliant with standards set for international finance and the effort to control money laundering.

Antigua and Barbuda has emerged from the fiery furnace as a tried, tested and proven jurisdiction, that is in the forefront of cooperation in the efforts to curb narcotic trafficking and money laundering and in adherence to acceptable international standards in regulating its offshore industry.

Antigua and Barbuda has been quite active in the international arena by attending seminars, workshops, conferences, symposiums and summits, in an effort to secure the survival of its offshore industry.

One such event was the Shorex 99 North American Conference on tax planning and financial services held in Toronto in November 1999.

At the conference the Premier of Nevis spoke of the concern that Caribbean jurisdictions have with regard to the OECD threat to the industry. A suggestion was made to him by a delegate from Antigua that the proper forum for this issue to be addressed, with equality being afforded to the Caribbean jurisdictions, is the Heads of Government meeting at the United Nations.

The Honorable Lester B. Bird, Prime Minister of Antigua and Barbuda, has come to the defence of the industry at the Millennium Summit of the United Nations, held during the first week of September 2000. In his address to the gathering of more than 150 world leaders, Prime Minister Bird noted that "the OECD...has unilaterally devised a set of standards for taxation that it wants to impose on other jurisdictions". "The OECD is demanding that states change their domestic laws to allow the tax authorities of OECD countries unfettered access to banking information". In addressing these issues he noted that "the OECD action is designed to impose its unilaterally created standards on states with low tax requirements so that they can justify and maintain what amounts to a high tax cartel".

The Prime Minister pointed out that "the OECD has attempted to cloak their position in moral rectitude with references to the evils of money laundering. Harmful tax competition has nothing to do with money laundering" . He stressed the fact that this action by the OECD "violated both the letter and spirit of countless resolutions adopted by the UN General Assembly".

Similar issues were addressed by Antigua's ambassador to the United States when he and other ambassadors met with US government officials at the State Department in Washington DC on 1st September 2000.

The offshore industry in all its sectors must survive the various attacks from its assailants. History has taught us that great innovations meet with severe opposition but it is the ability to survive which gives them strength, and that future generations are the beneficiaries of the efforts made by the earlier pioneers.

I would expect that the wheel, the industrial revolution, transatlantic sea travel, the telephone, the airplane, space exploration, and the computer, all had their opponents. The internet still has its opponents. The offshore industry is no different from any of those above mentioned in being essential to the functions of life as we know it today but nevertheless subject to deadly attack from entities driven by their own agendas.

Cooperation, proper regulation and mutual respect for each other's sovereignty and individuality must play a major role in the survival of this industry.

If this is achieved, we can set our sails with the winds behind our backs and head out to meet the new horizons of distant inventions and innovations with faith and confidence that the offshore industry we are now molding will be a world that we will be truly happy to live in.

A New Authority in Gaming: The Antiguan Initiative