The Bahamas: A 360 View

Know Your Jurisdiction (KYJ)

We have all become quite familiar with the concept of “KYC” (Know Your Customer). However, what should be equally important is to “KYJ”, that is Know Your Jurisdiction! The issue for international financial centres after a year of the pandemic and after years of scrutiny by international bodies is one of retaining the trust and confidence in the clients they serve.  Knowing your jurisdiction – its essence, character, and offerings – should lead to a clear choice of where you should do business and perhaps even settle in life. It also gives a unique perspective on what should lie at the heart of a reputable international financial centre, what individuals, families and institutions should consider, and insights into a financial centre’s character and qualities.

The Bahamas 360

Should one scrutinise The Bahamas from a KYJ perspective, what emerges is an international financial centre cultivated by a culture based on experience, innovation, government commitment, an ideal location, exceptional lifestyle, and a diverse product portfolio. It is, in the words of Wendy Warren, Managing Director of Caystone Solutions, “a 360-degree offering with interweaving elements that support each other, creating a strong sustainable platform with the ability to provide solutions at any level”. A 360 evaluation allows you to assess the accomplishments and strengths of The Bahamas in a number of key performance indicators including location, expertise,  innovation and lifestyle.

The Bahamas: The 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.  Our proximity to the United States, Central and South America places us in an enviable position to serve both our traditional and emerging markets and presents an opportunity to link commercial and financial interests. This unique geographical location at the crossroads of the Americas benefits from a high level of scheduled airlift into The Bahamas.

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 global affairs. “We see the client as a person first, not a transaction,” said Ms. Warren.  “We are not here just for the business but to provide bespoke client services that meet individual needs. This is a place that has an enviable perspective on what should be cherished and enjoyed in life and business.” 

The Bahamas is a well-regulated jurisdiction and a fully engaged international player. Within the past few years, it has enhanced its regulatory regime to entrench international standards of best practice.  Most recently, on July 1^st, 2021, the Government of The Bahamas expressed its support for the proposals of the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting to reform the global taxation system. These proposals and the accompanying rules for international taxation are geared at addressing the tax challenges arising from the digitalisation of the global economy. The government has, at the same time, lodged reservations particular to The Bahamas. As a member of the Inclusive Framework, it has actively participated in the development of these measures and has ardently articulated the legitimacy of jurisdictions such as The Bahamas. It views these measures as a viable option for ensuring that small jurisdictions benefit from any measure to tax entities operating within its jurisdiction.

On December 18, 2020, the Financial Action Task Force (FATF) announced that The Bahamas was delisted from its grey list of “Jurisdictions under Increased Monitoring”. The FATF indicated that The Bahamas had strengthened the effectiveness of its AML/CTF system and addressed related technical deficiencies to meet the commitments in its action plan and to remedy the strategic deficiencies identified by the FATF in October 2018. The jurisdiction is now no longer subject to FATF’s increased monitoring process. Earlier in February 2020, The Bahamas was removed completely from the European Union’s list of Non-Cooperative Jurisdictions for Tax Purposes, after being deemed fully compliant with the bloc’s tax standards. The move by the EU underscores our commitment to adhere to global regulations and best practices as a premier international financial centre.

The Bahamas: Expertise and Innovation

The recently introduced Digital Assets and Regulatory Exchange Act (DARE) was developed with the view of how we approach the wider picture. DARE is not a stand-alone single solution but rather comprises the broad features of the jurisdiction such as private banking and funds coming together to recognise why it and a broader based FinTech capability is required. It is just the latest example of the strength and flexibility of the jurisdiction -- the weaving together of elements to create a financial services fabric that is durable and responsive.

“While we are building our digital services and infrastructure, let's not forget that we also have bricks-and-mortar premises where our experts are able to meet and interact with clients,” said Christel Sands-Feaste, Partner with Higgs & Johnson. “It means clients can have the assurance that there is someone next to or in front of them who knows the jurisdiction well and who is committed to the standards of the jurisdiction.”

Market responsiveness has also 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. This led to The Bahamas becoming the first major common law jurisdiction to introduce foundations. It also sparked the Bahamas Executive Entity and has strengthened our position at the forefront of the investment funds industry with the introduction of SMART Funds and the Investment Condominium (ICON) fund.

“The Bahamas continues to refine existing products such as SMART Funds – a product for which The Bahamas is very well-known and which is a well-established product particularly in the private client space,” said Ms. Sands-Feaste. “Over the last two years we have also introduced new legislation in accordance with international best practices regulating investment managers providing services to Bahamian investment funds. Clients who choose to utilise The Bahamas for investment fund structures have the assurance that the investment manager must meet, firstly, international standards of fitness and properness, and secondly, will be regulated by the Securities Commission of The Bahamas in a very transparent manner through a registration process that is tailored to take account of the level of risk associated with the services provided by investment managers.”

The Bahamas: Live, Work & Play

The Bahamian lifestyle however goes beyond world class real estate developments, restaurants, marinas and other amenities. It includes catering to the non-financial needs of life such as high end medical and dental facilities, for example. And while the sheer number of such amenities cannot match London or New York, the quality of these services is certainly equal. What cannot be matched is the warmth and friendliness that is inherently Bahamian, and which is especially evident in the level and quality of service provided in the financial services community. 

Individuals who invest at least US$750,000 in The Bahamas are entitled to apply for a certificate of permanent residency. Where the amount invested is US$1,500,000 or greater, the application is expedited. The most common form of investment associated with applications for economic permanent residency is the purchase of a residential property to be used as either a primary or secondary home.

“Economic permanent residency is not a citizenship by investment programme and no such programme exists in The Bahamas,” according to Kevin Moree, Partner with McKinney Bancroft  & Hughes. “Rather, permanent residency status provides individuals who have invested a significant amount of money in The Bahamas with certainty that they will have the right to enter the jurisdiction as they please without having time restrictions or needing to make yearly applications for renewal.”

He adds, “Because of the substance requirements legislation among other reasons, I think that more ultimate beneficial owners and directors of those entities will move to The Bahamas to create certainty with respect to fulfilling the substance requirements. But that is obviously not the only reason.

“One of the biggest value propositions of The Bahamas is that while there might be a legislative or financial rationale for a move here, it is a stunning country to live in. That, coupled with solid infrastructure inclusive of transportation and telecommunications, the people, and the expertise that we already referred to, really makes it the number one choice in terms of jurisdictions.

“When you can live in a jurisdiction such as The Bahamas, be close to your assets, able to go and have lunch with your wealth manager or your attorney, it's really a completely different game to conducting business through emails and attachments.”

Ms. Warren agrees. “When we consider the Commercial Enterprises Act 2017, The Bahamas has been, for a number of generations, a unique place which attracts people and business leaders to establish businesses with physical presence in the jurisdiction and also live here and we now formally facilitate it through the Commercial Enterprises Act which offers incentives. But at the same time, we created a substance regime that ensured that those who chose to establish in The Bahamas would be able to be recognised by the OECD, the EU, and globally as meeting the demands from that lens as well.”

Conclusion

In considering a jurisdiction, due diligence must be done on the character and inherent nature of the country as well as its suite of product and service offerings, overall governance, and regulatory environment and capability.  When you put The Bahamas under the microscope and examine for these conditions, its strong and well-established platform of services, its value proposition as a jurisdiction and its strategic risk management response have not only enabled it to survive but come through even stronger as a more compelling jurisdiction for financial services.

Dr. Tanya C McCartney
Dr. Tanya McCartney is a UK trained barrister and chartered banker who since 2016 has served as the CEO and Executive Director at the Bahamas Financial Services Board. Over the past two decades Tanya has distinguished herself as a hardworking professional with expertise in the law, regulatory and gaming compliance, risk management, banking, and international financial services. She holds a Doctor of Business Administration from Edinburgh Napier University (Scotland, U.K.) for a programme of work entitled “Perspectives on Leading change: Exploring Change Readiness Strategies used in the Bahamian Financial Services Sector”. Tanya was appointed to the Senate of the Commonwealth of the Bahamas in 2001 being one of the youngest persons ever appointed to the Upper House where she served for five years. She vied for a seat in parliament in the 2002 general elections. She is a former President and founding member of the Bahamas Association of Compliance Officers. She is the co-chairman of the Bahamas Chapter of the global Association of Certified Anti-Money Laundering Specialists. Tanya is also an adjunct professor in the School of Business at the University of the Bahamas. She has served on several government boards over the years including The Public Hospital’s Authority, The University of The Bahamas and currently serves as Chairman of The Police Complaints Inspectorate and Deputy Chairman on The Airport Authority.