Last Thursday, Allen Stanford, the flamboyant Texas-born, Antigua-based billionaire, was sentenced to 110 years in prison for defrauding investors around the world, including some here in T&T, of more than US$7 billion over two decades. On Friday, a former Goldman Sachs board member India-born Rajat Gupta, was convicted of three counts of securities fraud and one count of conspiracy for sharing corporate secrets with his friend, hedge fund manager Raj Rajaratnam, who is from Sri Lanka. Rajaratnam was convicted of insider trading last year and was sentenced to serve more than a decade in prison. The sentencing of Stanford and the conviction of Gupta and Rajaratnam underscores once again how seriously white-collar crime is taken in the US and how they have arranged their legal system to ensure that it is more than likely that someone who is caught doing a white-collar crime, will suffer the humiliation of being brought before the courts and sentenced to spending time in jail. In a statement, FBI assistant director Janice K Fedarcyk called the conviction of Gupta “the latest milestone in an FBI initiative undertaken in 2007 to zero in on illegal conduct in the hedge fund industry. Rajat Gupta broke the law, plain and simple.” Apart from the willingness of the US authorities to make examples of those who breach corporate laws, there is also the fact of the ability of the Americans to progress their prosecutions through their courts fairly quickly. Stanford, for example, was arrested in June 2009 and sentenced in June 2012. His trial on complex, multi-jurisdictional charges of conspiracy, wire and mail fraud took seven weeks. The willingness and the ability of the US authorities to prosecute white-collar criminals is in stark contrast to the unwillingness and inability of our authorities.
No trial in T&T takes seven weeks and it is probably unprecedented for such a trial to take three years from arrest to conviction. The allegations against those who were charged with crimes relating to the Piarco Airport expansion have not been resolved one way or the other after more than ten years and the prospect of resolution anytime soon seems quite remote. If white-collar criminals can be confident of evading the police and, if they are charged, of evading the justice system by the use of delaying tactics, then the problem of this particular sub-set of crime is only going to get worse—with all of the well-reported implications for the country’s business reputation. On the issue of white-collar crime, the Jamaica Gleaner reported yesterday that that country’s finance minister, Dr Peter Phillips said on Tuesday that his ministry, the country’s central bank and its attorney general's department propose to collaborate in a study of the risks, costs and impact on Jamaica’s laws of the Foreign Account Tax Compliance Act (FATCA), which is a United States law aimed at finding and prosecuting tax evaders. “The Bank of Jamaica will carry out its risk assessment on its licensees to determine the readiness of these entities. We will refer the available materials on FATCA to the Attorney General's Chambers for their advice about the implications of the FATCA regime under Jamaican law. In particular, we will have to minimise the legal risks faced by our financial institutions," Phillips said, in an address to a breakfast seminar. The IRS expects to track tax evasion by US citizens, green-card holders, non-residents who elect to file a joint income tax return and certain non-residents who live in a US territory by requiring them to file a form 8938 (Statement of Specified Foreign Financial Assets). According to the IRS Web site: “A married couple living in the US and filing a joint tax return would not file Form 8938 unless their total specified foreign assets exceed US$100,000 on the last day of the tax year or more than US$150,000 at any time during the tax year.
“The thresholds for taxpayers who reside abroad are higher. For example in this case, a married couple residing abroad and filing a joint return would not file Form 8938 unless the value of specified foreign assets exceeds US$400,000 on the last day of the tax year or more than US$600,000 at any time during the year.” The decision by the Jamaican government to take the lead on this issue—which includes weighing a proposal to negotiate a bilateral arrangement with the US to relieve local financial institutions of the potentially costly burden of compliance—is laudable. The Jamaican government’s stance on FATCA follows an attempt by the bankers’ association there to sensitise the Jamaican population about the potential impact of the US legislation on the financial sector. This sensitisation includes seminars, appearances on radio and television talk shows, letters to the editor and other forms of lobbying. In Jamaica, FATCA is being taken as a serious issue because it would require indigenous Jamaican banks and other financial institutions which host deposit and other investment accounts, to make disclosures to the US Internal Revenue Service of accounts or assets held by US citizens or green-card holders living in Jamaica. But in T&T, it does not seem as though FATCA is an important issue for our bankers, auditors, stockbrokers or financial analysts.
While there is evidence that there have been internal discussions by individual financial institutions about the impact of FATCA, there has been no effort by T&T’s Bankers’ Association to sensitise the T&T public about the potential impact of the legislation. There have been no seminars, no appearances on television or radio talk shows that I am aware of and no letters to the editor from the Bankers’ Association. In fact, one of the few published pieces on this issue was one that appeared in this space in the May Week Two edition. As a result of the lack of feedback from the entities that will be most affected by the law—the banks, insurance companies and brokerage houses—which comes into force at the start of 2013, there has been nothing prodding the T&T government to adopt the pro-active position that the Jamaican government has taken on this issue. Given the silence from the local financial community on this issue, it is quite likely that there will be a mad scramble towards the end of the year by all the parties involved. By then, it will be too late to put in place the changes that are needed to accommodate this new law.