Is Ghana still a financial secrecy risk?

Ghana financial secrecy risk

Last week, the latest edition of the Tax Justice Network’s Financial Secrecy Index was released.

Switzerland, the global capital of bank secrecy, retains the worst ranking, and the US has moved up to second. With Bahrain and Lebanon dropping out of the top ten, Guernsey and a new entry in Taiwan has replaced them.

“The US’ rise in the FSI 2018 rankings is part of a worrying trend. This is the second time in succession that the USA has risen up the Financial Secrecy Index. In 2013 the States was in 6th place, and in 2015 it took 3rd.  In 2015 the country was one of the few to increase its secrecy score. This time the increase in ranking is driven by a huge rise in their share of the market in offshore financial services that wasn’t neutralised by a significant reduction in their secrecy. In total, the share of global offshore financial services taken by the United States rose by 14% between the 2015 and 2018 index from 19.6% to 22.3%,” the TJN said in a release.

Financial secrecy is a key facilitator of financial crime, and illicit financial flows including money laundering, corruption and tax evasion. Jurisdictions who fail to contain it deny citizens elsewhere their human rights and exacerbate global inequality.

The Ghana case

Ghana has always been observed in terms of what she is doing regarding financial secrecy particularly because she put in all the processes to operate as a secret jurisdiction since 2005.

So, just how does the TJN rate Ghana? How does the network’s ranking assess Ghana? Read the full brief on Ghana in the ensuing paragraphs.

TJN’s Narrative report on Ghana

Ghana has long been touted as an inspiration for true multi-party democracy and a nation with a fairly well-performing economy in sub-Saharan Africa. Over a decade ago, Ghana formally initiated and eventually became a secrecy jurisdiction – an International Financial Services Centre (IFSC) was created and Barclays Bank Ghana Limited (BBGL) was granted the only offshore banking licence in the country. Ultimately, Ghana failed in its quest to become a secrecy jurisdiction, less than five years after BBGL was granted an offshore banking licence. However, the framework that established the IFSC still exists on Ghana’s law books. Currently, there are plans to revive the IFSC in 2018.

The history of Ghana as a secrecy jurisdiction

Formal proceedings to set up an IFSC in Ghana began in 2005 when the then government under the leadership of President John Kufour signed a Memorandum of Understanding (MoU) with BBGL to further investigate the establishment of an IFSC in Ghana. In fact, in 2002, Kufour had already alluded to the direction Ghana would take in a speech to the Ghana Investment Advisory Council, “There are still some important issues to be resolved. For example, not much progress has been made on the proposals for the establishment of an offshore banking enclave”. Both parties to the MoU were to commit to the investigation of the proposed IFSC in Ghana. In 2006, the government and BBGL worked together to design the operational, legal, regulatory and organisational framework of the IFSC. This included research done by global consulting firm Grant Thornton on the feasibility of an IFSC in Ghana drawing on Mauritius’ experience.

Additionally, a working paper in 2006 “Development of Offshore Financial Services Centre in Ghana: Issues and Implications” was published by Ghana’s Central Bank, Bank of Ghana (BOG). An important step in the realization of Ghana’s IFSC was to amend the country’s banking laws. In 2007, Ghana’s Parliament amended the banking act to “facilitate the establishment of an International Financial Services Centre that seeks to attract foreign direct investment, income from licence fees payable in foreign currencies, create employment, enhance local skills and knowledge, strengthen the financial sector through expansion in the use of investment banking instruments and to provide for related matters”.4 In 2007, BOG granted the only licence to BBGL to operate offshore banking services.

The failure of offshore banking

The licence for BBGL to operate offshore banking services was short-lived. After less than five years of operating offshore financial services, the government under the leadership of the late Professor John Evans Atta Mills5 revoked BBGL’s offshore banking licence in 2011. This was to avoid blacklisting by the OECD. Former President Atta Mills himself was once a Commissioner of the then Internal Revenue Service and also a tax lawyer. It was a move to save face. As Central Bank Governor Mr. Kwesi Amissah-Arthur remarked in a Monetary Policy meeting of BOG “Ghana was gaining a reputation for launder, we did not want to confirm this misperception”. Although Ghana was placed on the Financial Action Task Force’s blacklist of money-laundering countries, it was removed in 2012 following government action. It is of no surprise that the management of BBGL led by its Managing Director, Benjamin Dabrah, expressed discontent with the withdrawal of the offshore banking licence in 2011 and accused the government of not fulfilling its side of the bargain. Dabrah said “The country currently does not have the legislative framework and tax reforms to allow the smooth operation of an International Financial Services Centre.” Dabrah, who was appointed Managing Director of BBGL in 2008, took over when the bank was making losses for the first time and needed to stay in business.8 BBGL stayed in business and made significant profits during his tenure, which can be partly attributed to the offshore banking licence it had at the time. The withdrawal of BBGL’s offshore licence in 2011 significantly impacted BBGL’s finances and eventually led to the Dabrah’s resignation in 2013.

To be continued…


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