DI laments Government decision to stop Ghana’s multi-billion off-shore banking

The Danquah Institute has described as “very unfortunate” and “loss of a multi-billion dollar opportunity”, the decision by the Mills administration to discontinue with the arrangement by the previous government to make Ghana an offshore banking centre.

Nana Attobrah, Head of Research, DI, made this known when he addressed the press Wednesday on the growing multi-million dollar trade in illegal international transfer of money to Ghana.

“It would have been a great way for a developing country like Ghana to enhance its economic growth, since offshore banking allows a redistribution of finance from the developed economies to the developing economies,” he states.

The policy researcher and analyst argues, “Offshore banks are there to provide access to politically and economically stable jurisdictions. So to be considered as ripe for offshore status is a very strong message about our investor-friendliness as a developing nation.”

He adds that it was meant to serve as an advantage for residents in other African countries, especially, where there  is a risk of political turmoil who fear the security of their assets may be jeopardised.

The Kufuor administration passed the Anti Money Laundering Act of 2007 (in force from 22nd January 2008), a primary legislative tool in anti-money laundering, together with the Banking Amendment Act of 2007, in preparing Ghana as an offshore financial services centre, offering tax free services for international depositors.

However, under pressure from the developed nations that make up the OECD, the NDC government in 2009 developed cold feet for the project. Barclays Bank, which in 2005 led the process to introduce offshore banking into the country and  was on the verge of opening Ghana’s first offshore bank, eventually gave up trying to convince the Mills administration of its benefits.

Last month, they disengaged the entire infrastructure for the potentially multi-billion financial service, and have been trying to persuade its international clients for the Ghana offshore banking system to send their funds to other Barclays offshore setups elsewhere.

The Organization for Economic Cooperation and Development (OECD), in January of 2010, issued a stern warning to Ghana that her emergence as a tax haven for banking clients could fuel corruption and crime in the West African region. Jeffrey Owens, head of the OECD’s Tax Centre, said at the time: “The last thing Africa needs is a tax haven in the centre of the African continent.”

However, this received condemnation from the Danquah Institute which argued that what is good for the developed nations must also be good for a developing nation like Ghana so long as it does what is required to ensure that our systems are in sync with the practices and disciplines of other offshore banking centres across the world.

Ghana’s Anti-Money Laundering Act established a Financial Investigation Centre whose mandate includes assisting in the identification of proceeds of unlawful activity and the combat of money laundering.

“It was obvious to us that the institutional framework was being put into place in preparation for Ghana as an emerging offshore banking centre,” says Nana Attobrah.

It is recalled that two months after the OECD sounded the alarm against Ghana, the Danquah Institute in March 2010 invited a leading legal expert on money laundering and offshore banking, John Hardy QC, to Ghana to deliver a paper on the subject.

Nana Attobrah explains, “The Danquah Institute held the anti-money laundering seminar not because it agreed with the ‘DON’T GO OFFSHORE’ posture of the OECD, but rather because we appreciated their concerns and wanted to educate the public about the opportunities and threats of offshore banking and to interrogate the stakeholders to find out what was being done to make sure that Ghana measured up to the task of ensuring our offshore status was protected, according to international standards, and that such a significant, new business opportunity would not merely make us a soft-touch magnet for a flood of ‘dirty money’.”

The objective of the lecture was to educate the financial sector, the business community, policy makers, the general public and the international community about the exciting prospect of Ghana’s offshore status and measures that needed to be taken to safeguard the status against money laundering.

Participants, mainly local stakeholders, agreed that Ghana would benefit immensely from going offshore banking but that all must be done to insulate it  from ‘dirty money’.

Unfortunately, Nana Attobrah moans, “the Government of Ghana heeded to concerns of the OECD and felt the best way to respond to them was to discontinue the process of establishing off-shore banking status in Ghana. This, we are sad to say, was an important project which, if diligently nurtured, could have transformed Ghana into a multibillion dollar investments and savings destination.”

Ghana’s international finance centre status would have made it the second in Africa, after Mauritius. Services would have included offshore banking, offshore insurance, offshore funds management, and other international financial services.

“It could have helped Ghana source investment and create growth in our economy,” the DI man says.
Ghana’s offshore banks were expected to function with low cost base, which in turn could offer higher interest rates to the depositors when compared to their home country.

The Anti Money Laundering Act of 2007 (in force from 22nd January 2008), a primary legislative tool in anti-money laundering was passed, together with the Banking Amendment Act of 2007, to ensure our systems were in sync with the practices and disciplines of other offshore banking centres across the world. This AML Act also established a Financial Investigation Centre whose mandate includes assisting in the identification of proceeds of unlawful activity and the combat of money laundering. It was obvious to us that the institutional framework was being put into place in preparation for Ghana as an emerging offshore banking centre.

Since establishing an offshore financing service centre, Mauritius has attracted more than 9,000 offshore entities, many aimed at commerce in India and South Africa, and investment in the banking sector alone has reached over $1 billion.

Mauritius, with a population of 1.3 million, has attracted US$10.98 billion in Foreign Direct Investment inflows.

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