Comment: Resilience marks the Bahamas financial services industry
Tanya McCartney discusses how resilience shown in the face of natural disasters and global pandemics is equally effective in the changing world of international financial services.
The Bahamas is the leading international financial centre in the Latin America and Caribbean region, respected for its expertise in fiduciary services. The financial services sector has been impressively resilient and progressive in the face of events such as Hurricane Dorian, the current Covid-19 pandemic, international initiatives and in the midst of the continued and sometimes challenging evolution of the global industry.
None of these challenges have impeded the country‘s financial services industry from conducting business and delivering bespoke solutions to meet changing diverse client needs.
The Bahamas has evolved over the years from being an ‘offshore' centre, with all that the word connotes, to the world's premier international banking and trust business centre in the Caribbean and Latin American region."
Robust business continuity plans that are in place with all financial institutions have allowed business to continue doing business during Hurricane Dorian last fall and now as the world deals with Covid-19. The far-sightedness of business continuity measures have clearly been in play in cushioning the implications of these events and reinforces why the country is seen by many as an ideal location for financial institutions and the services they provide to their international client base.
Adaptability
This adaptability has been especially evident in The Bahamas' response to international initiatives, which has ensured adherence with the highest standards of compliance with every internationally agreed standard of conduct.
The Bahamas has evolved over the years from being an ‘offshore' centre, with all that the word connotes, to the world's premier international banking and trust business centre in the Caribbean and Latin American region. The jurisdiction has been and remains demonstrably and effectively unwelcoming to those seeking to engage in questionable and illegal activities. Further, The Bahamas is a cooperative and transparent partner in tax and related matters.
European Union
Acknowledgement of this commitment was the news earlier this year of The European Union's Economic and Financial Affairs Council's complete removal of The Bahamas from its List of Non-Cooperative Jurisdictions for Tax Purposes.
Against this background The Bahamas joined more than 108 countries in the OECD's Global Forum in formally acceding to The Multilateral Convention on the Mutual Administrative Assistance in Tax Matters (The Multilateral Convention). The legislative framework for implementation of The Common Reporting Standard was also put in place by The Bahamas in 2016.
In addition to CRS implementation, signing MCAA and entering BEPS, the integrity of the jurisdiction is evidenced by the following:
(a) A strong anti-money laundering, counter financing of terrorism Regime; and
(b) US Foreign Accounts Tax Compliance Act implemented (FATCA Compliance).
The Financial Action Task Force (FATF) has acknowledged that The Bahamas has remediated the issues identified in its assessment of its anti-money laundering framework and had agreed to an onsite inspection as a part of the formal process of exiting the FATF ‘Grey List'. This onsite visit was scheduled for April 2020 but had to be postponed as a result of the COVID19 pandemic.
The Bahamas remains buoyed by that announcement, notwithstanding later conflicting news of the EU's intention to include The Bahamas on the list of high-risk third countries, which would take effect in October 2020.
The Bahamas is engaged with EU officials at the highest diplomatic and political level to demonstrate the strength of The Bahamas' AML/CTF regime. The Bahamas maintains that it is attaining the highest standards in the fight against money laundering, terrorist financing and other identified financial crimes risks.
A shared commitment
Financial services are the second most important industry in The Bahamas after tourism. As such, successive governments have recognised the importance of the industry to the country's continual economic and social development. The financial sector's viability is therefore a priority for both public and private sectors alike.
This level of importance is indicated by the responsiveness of the legislature and regulators to the needs and demands of the market, as well as the swiftness with which these processes can take place. It is also demonstrated by the balance that regulators strike between ensuring that the financial services industry keeps its integrity, while still encouraging lively competition. What's more, The Bahamas has a government ministry dedicated solely to financial services, and a shared commitment exists between the public and private sectors to help promote and develop the industry.
Transparent environment
With a history of financial services dating back to the 1930s, The Bahamas ranks among the world's most significant international financial centres (IFCs). The jurisdiction is one of the world's leading international banking centres, alongside New York City and Miami in the United States, London, Switzerland, Toronto, Dubai, Hong Kong and Singapore; and it is the preeminent banking jurisdiction of the Caribbean region.
The centre comprises several sectors, including banking, private banking and trust services, mutual funds, capital markets, investment advisory services, accounting and legal services, insurance and corporate and shipping registry. While providing the largest offering of international banks - US, Europe, Asia and Latin America - in the region, including South and Central America.
Wealth management accounts for a large part of the jurisdiction's financial sector. For many high-net-worth individuals, banking and wealth management outside one's home country are simply good business and a wise avenue for investment. There are several reasons for this.
First, multi-national and multi-generation families and family businesses find that they can preserve their wealth for the long term and transmit it to younger generations with ease when they site some of their assets in a jurisdiction with trust laws. Their home jurisdiction might be subject to civil unrest or have a history of political or financial instability, while its government might want to expropriate their wealth and subject them to capital controls.
It is therefore important for HNWIs to offset these risks by keeping at least some of their assets in a jurisdiction that does not suffer from these problems. Further, international banking and wealth management centres often possess financial products and services that are superior to those found in their home countries.
The Bahamas requires businesses and other entities to disclose information to the government about the ways in which they generate their income and the amount of tax they pay. The jurisdiction can also be said to be tax transparent because it follows the doctrine that nations ought to exchange information with one another about people's and entities' tax affairs - on request in some cases and automatically in others.
This feature was taken from the 2020 Bahamas Special Report. Tanya McCartney, CEO and Executive director of The Bahamas Financial Services Board introduces the special report in a video message below.
