Bahamas

Strengthening the Pillars of The Bahamas Financial Services Sector


By (24/08/2017)

Any country heavily engaged in financial services bears the responsibility and a commitment to the international community of which it is intricately involved, the financial institutions operating within its borders, the clients which it serves and its citizens which rely on the sustainability of the industry for continued economic development. The Bahamas is such a country. The Bahamas has always sought to provide superior financial products and services and a world-class client experience. It has proven itself to be nimble and responsive to global changes – always mindful of the need to adhere to international standards with respect to compliance, cooperation and transparency. This is complemented by the fact that The Bahamas is not only somewhere that offers bespoke private wealth management, it is also a beautiful place to live and work in.

The need to be a responsible international financial service provider is not seen as a heavy burden to those engaged in financial services. Rather, it is embraced as sacred pact with the many stakeholders who have come to rely on and recognize The Bahamas for its financial services acumen over the years.

Three vital features are at the heart of what distinguishes The Bahamas as an international financial centre of significance: Expertise, Innovation and Location. Everything the Bahamas offers is defined by these three words. Everything that comprises the Bahamas’ value proposition and continued success as a leading international financial services centre is guided by these distinguishing factors.

Expertise

With an 80 plus year track record in financial services, few jurisdictions offer the wealth management experience that The Bahamas has to offer. This heritage is the basis for the strong legal framework that has been cultivated for financial services, an investment climate that has been nurtured through years of maturity and a stable and predictable business environment anchored by the thousands of Bahamian wealth management professionals who work side by side with expatriate colleagues in the more than 250 financial institutions that call The Bahamas their home.

Innovation

Market responsiveness has long been a part of The Bahamas’ DNA as a forward thinking international financial centre, and has been the basis of legislation creating innovative, client-centric products and services in a modern, compliant regulatory regime. Such innovation can be seen in the country’s evolving and often ground-breaking trust legislation. It led The Bahamas to become the first common law jurisdiction to introduce foundations. It sparked the Bahamas Executive Entity and has thrust The Bahamas into the forefront of the investment funds industry with the introduction of SMART Funds and the Investment Condominium (ICON) fund. And with this innovative spirit it should come as no surprise that the country’s once dormant insurance business has re-emerged as a sought-after destination for captives.

The innovation experienced in the sector is fuelled by a progressive investment climate that seeks to place financial services in the context of development.

Location

The unique geographical location of The Bahamas, a sovereign parliamentary democracy, just 50 miles off the coast of Florida and positioned as the gateway to the wider Americas, is an undeniable advantage for The Bahamas.  Our proximity to the United States, Central and South America places The Bahamas in an enviable position to serve both our traditional and emerging markets and presents an opportunity to link commercial and financial interests. In recent years, as more and more individuals have chosen to ‘follow their money’ with respect to where they live and work, The Bahamas with its tropical environment has become the preferred choice for many who yearn for an excellent quality of life whilst being able to manage their financial affairs.

Individuals, family offices and institutions will find a warm welcome when they come to The Bahamas as the country is committed to utilising its natural resources and cultivated assets to create an environment that is attractive to business and the enjoyment of life. Few competitive jurisdictions can claim – or duplicate – the business and lifestyle combination which exists naturally in The Bahamas. The quality of life in The Bahamas is mirrored by the standards to which the country holds itself as being accountable to and respectful of the international community in which its financial services industry operates.

Clients and service providers can be confident that The Bahamas is a well-regulated jurisdiction committed to adhering to international standards. The strong regulatory regime that characterises the financial services sector ensures that the integrity of The Bahamas as an international financial centre is maintained. As a sovereign nation for more than 40 years, successive governments have consistently demonstrated the country’s commitment to international best practices. There is collaboration between government and private sector to ensure that the Bahamas remains a well regulated, blue chip international financial centre. In fact, The Bahamas Financial Services Board (BFSB) was established in 1997 to create a public-private partnership and forum for open dialogue about the challenges and opportunities facing the country’s second most important economic sector. The integrity of the jurisdiction is evidenced by the following:

(a) A strong anti-money laundering, counter financing of terrorism Regime;

(b) Tax transparency and cooperation

(c) US Foreign Accounts Tax Compliance Act implemented (FATCA Compliance); and

(d) Commitment to automatic exchange of information/the Common Reporting Standard

 
Strong Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) Regime

The Bahamas has always been committed to complying with international best practice and has fared well in its phase two ‘Peer Reviews’ by the OECD’s Global Forum. In fact, The Bahamas has been deemed “largely compliant” with the OECD’s existing standard of exchange of information on request. The jurisdiction has gone on record with its intention of attaining and maintaining "the very highest levels of conduct as a clean jurisdiction, complying with the highest standards to prevent the abuse of its financial system by money launderers and criminal elements". It has committed to satisfying recommendations coming out of the Caribbean Financial Action Task Force (CFATF), and Financial Action Task Force (FATF) in relation to simplifying and making more efficient The Bahamas' cooperation with foreign jurisdictions in legal proceedings.

Tax Transparency and Cooperation

To meet international standards for transparency and tax cooperation, The Bahamas has entered into 33 Tax Information Exchange Agreements (TIEAs). On 20 March 2010, The Bahamas achieved the G20 standard on Transparency and Cooperation in Tax Matters. This standard was first promulgated by the Organisation for Economic Cooperation and Development (OECD) in the 1990s.  Today, The Bahamas facilitates international co-operation in tax matters through these various exchange of information agreements.

The Bahamas is FATCA Compliant

On 3 November 2014, the Bahamas and the US signed the Agreement to Improve International Tax Compliance (the Agreement) and to Implement FATCA based on the Model I IGA. To accommodate the non-direct tax system in The Bahamas, the IGA is a model 1B (non-reciprocal) IGA. As an IGA partner jurisdiction, Bahamas based Financial Institutions will not be subject to a 30 per cent withholding tax on US source income, unless they fail to meet the requirements set out in the IGA and in Bahamas domestic implementing legislation.

Commitment to the Automatic Exchange of Information/Common Reporting Standard

The government is taking steps to implement The Common Reporting Standard using a bilateral approach. Legislation was passed in December 2016, which came into force in January 2017. The regulations have been finalised and Draft Guidance Notes published for public consultation. Industry and government are collaborating on the implementation strategy to ensure that The Bahamas evidences its commitment to being a responsible international player.

The Jurisdiction of Choice

Expertise, innovation and location are the pillars of financial services in The Bahamas. In combination, they form a compelling reason to strongly consider The Bahamas as place to do business, live and work, and will continue to guide the jurisdiction’s pathway to be a provider of superior financial products.

About the Author

Tanya McCartney was appointed CEO of the Bahamas Financial Services Board in December 2015.  She is an attorney and chartered banker. Her professional career began in 1997 as Assistant Counsel in The Office of the Attorney General. Since 1999 she has held senior positions in financial services.