Allyson Maynard-Gibson argues that the Bahamas is a financial centre with a difference, and assesses some of the policies and innovations that make the jurisdiction stand out.
In his keynote presentation at the ComplianceAid Caribbean Anti-Money Laundering Conference on 19 April in Miami, Florida, Peter Turnquest, the deputy prime minister of the Bahamas, made it clear that the Bahamas will continue to meet its international obligations and invited “advanced economies to take the mark off the back of the Caribbean”.
While acknowledging the scepticism that advanced economies have about the financial practices of Caribbean financial centres, due to their “size and relative vulnerability”, Turnquest pointed out that “it is also rooted a failure of the international community to let go of the past and treat countries like the Bahamas as progressive, cooperative, sovereign partners who share the same goals.”
Confirming that the Bahamas, like Switzerland, Delaware and New Jersey, is not a tax haven, he emphasized that the country is “a transparent compliant and cooperative wealth management jurisdiction, providing competitive services to international financial markets and financial services …competing on the strength of our services and the quality of our professionals”.
Global Regulators and international standard setters aggressively promote financial inclusion and attainment of the UN Sustainable Development Goals. The deputy prime minister pointed out that banks have pegged the Caribbean region as too high risk. Rather than manage their risks in accordance with FATF guidelines banks are “terminating relationships, restricting business or wholesale moving out”, often without any evidence of “systemic malfeasance within the jurisdictions from which they are withdrawing”. This trend is continuing even though the IMF has noted that “correspondent banking is like the blood that delivers nutrients to different parts of the body… it is core to the business of over 3,700 banking groups in 200 countries”.
For service based economies, correspondent banking is all encompassing, affecting daily transactions varying from purchasing goods and materials, to payments of college tuition, to receiving payments from international vendors! De-risking adversely impacts financial inclusion and inhibits attainment of the UN Sustainable Development Goals. The DPM advanced that a balance must be struck between “AML/CFT regimes, financial inclusion objectives and the sustainable development interests of SIDS.”
Especially given the significant internet penetration in the Bahamas and mobile network penetration (84%), the country is rapidly moving to digital banking and E-Government. The government is leading the way and will partner with the private sector and international agencies, such as the Inter-American Development Bank, in “ease of doing business” steps and changing “phobias” about using electronic transactions. The Government’s goal is to leverage this 84% penetration so that a mobile phone can become a “…digital wallet to securely conduct transactions…”. Already in place are online platforms for tax payments of VAT, business license and real property tax, driver license payments and online company incorporations. Plans are underway to “… create a robust and secure national cradle-to-grave identification system…” As well as facilitating the e-government thrust, this source of identification will be conclusive customer due diligence for all businesses that must conduct customer due diligence, including banks.
The Central Bank, now a principal member of the International Alliance for Financial Inclusion is reviewing KYC requirements. Importantly, the Bahamas should not be disadvantaged by the imposition of requirements on the Bahamas that do not equally apply to its competitors.
Allyson Maynard-Gibson is a QC at Clement T. Maynard and Company, in the Bahamas.