The Bahamas: A Firmly Focused IFC

Recently celebrating its 50th Anniversary, the financial services industry has proven its prominence to the Bahamas economy as the second largest pillar of the Bahamian economy, contributing approximately 10 to 15 per cent of the country's Gross Domestic Product (GDP) [1]. Successive governments have consistently demonstrated the country's commitment to good governance by fostering a robust regulatory framework. The country's membership in the United Nations, CARICOM, and many other governing agencies supports its trustworthy democratic government system. Expertise in the local financial sector, coupled with the continued demonstration of the country's commitment to international best practices and its strategic location, allows the Bahamas to remain innovative and progressive in its offering.

Among the many factors that substantiate The Bahamas' appeal as an IFC are:

• Resilience.
• Regulatory excellence and trustworthiness.
• Wealth management and structuring expertise.
• Global connectivity and accessibility.

Resilience To Global Economic Fluctuations

As a stable democracy for over half a century and renowned for its robust regulatory regime, The Bahamas is an attractive IFC. However, what truly sets it apart is its resilience to economic fluctuations, which provides a steadfast and secure environment for financial activities. This resilience positions The Bahamas as a compelling jurisdiction for portfolio diversification and adept risk management strategies.

Covering 80 square miles, New Providence, the capital island, serves as the nucleus for economic activity. The island’s compactness fosters an intricate interplay among the government, regulators, and financial services community, begetting agility and responsiveness in times of adversity. Unlike larger financial centres where bureaucratic hurdles obstruct communication, The Bahamas benefits from a tightly knit financial ecosystem, facilitating accessibility and promoting stakeholder collaboration for sustained success.

Beyond its size, The Bahamas' geographical location and political stability bolsters fortitude. The Bahamas maintains amiable and cooperative relations with countries throughout the Americas and worldwide. Its passport is globally accepted and regarded. Its geographic distance from major world events shields it from immediate economic impacts, affording room for a well-calculated strategic response to economic fluctuations. This insulation allows for the identification of solutions to safeguard the financial services industry effectively.

The Bahamas' resilience is further reflected in its dexterity in recognising market demands and developing tailored financial products, which are integral to its financial ecosystem. Antoine Bastian, an Unrestricted Investment Fund Administrator and Chief Executive Officer of Genesis Fund Services, emphasises that The Bahamas has always been at the forefront of leadership and innovation regarding its financial services' product offerings. "Like any other emerging country, The Bahamas is determined to diversify its economy for a greater, wider, and more long-lasting community impact while growing its financial services industry."

With far-reaching implications for the economy and a direct influence on the lives of Bahamians and residents alike, green finance emerges as the next wave of innovation for The Bahamas. The innovative Carbon Change and Carbon Market Initiative Act, 2022, the Carbon Trading Act, 2022, and other initiatives, have been introduced to foster a robust blue economy that propels conservation and promotes sustainable investing.

According to Mr. Bastian: "The Blue Economy strives to build a sustainable economy around oceans, seagrasses, mangroves, coastal lands, lakes, and rivers, and to ensure that there are strong conservation and sustainable development goals and programs that impact all aspects of the community. The Bahamas is simply at the precipice of creating a blue economy for tomorrow that not only speaks to innovation in our traditional sense but also from the very natural resources that make The Bahamas a great and beautiful country."

Regulatory Excellence And Trustworthiness

The Bahamas' integrity as an IFC is cultivated through oversight by international governing bodies like the International Monetary Fund (IMF), the Financial Action Task Force (FATF), and the International Organisation of Securities Commission (IOSCO). The privy council, as The Bahamas’ highest court, ensures regulatory stewardship. The Bahamas is dedicated to meeting international compliance standards in anti-money laundering (AML), know your customer (KYC), continued due diligence (CDD), and counter-terrorist financing (CTF), to maintain a robust and well-regulated financial system. Bahamian regulators are well-regarded, and active partners with international peer groups and agencies supervising the sectors from a risk-based approach.

The Securities Commission of The Bahamas (SCB) was the first independent country in the region with IOSCO ‘A’ Signatory status, the highest level of compliance with international standards for the jurisdiction’s securities regime. Aside from securing the ‘A’ status with IOSCO, SCB takes innovation seriously to further the evolution of its funds industry. For example, an unrestricted fund administrator on the island has oversight capabilities that administrators in other jurisdictions do not have. They have the SCB's imprimatur to register and launch Professional and SMART Funds (not Standard Funds), which brings clear speed-to-market benefits to the manager and streamlines the whole process. It's a prime example of its risk-based regulatory approach that reflects the need to be compliant but not restrictive.

The same ethos exists with the Insurance Commission of the Bahamas (ICB). "Regulatory excellence at the Insurance Commission of The Bahamas is not just a goal," says Dana Munnings-Gray, ICB's Superintendent of Insurance (Acting). "It's our guiding principle. Our commitment to upholding international standards is unwavering, serving as the bedrock of trust and reliability in our jurisdiction. Our regulatory approach places the utmost importance on transparency and collaboration."

"Furthermore, our active participation in international policy-setting associations demonstrates our strong emphasis on expertise and experience. We recognise and appreciate the significance of proactive risk management in safeguarding the interests of both stakeholders and policyholders. We stand on professionalism and collaboration with industry while not shying away from our innate responsibility to ensure compliance with the regulatory framework. In essence, regulatory excellence and trustworthiness are not just watchwords for us; they are at the core of The Bahamas’ regulatory framework. As we strive to uphold these principles, we reaffirm The Bahamas' position as a premier jurisdiction for insurance and financial services, built on a foundation of integrity, transparency, and collaboration."

Best In Class: Wealth Planning And Structuring

The Bahamas' proven history as a prime wealth planning and structuring destination facilitates bespoke solutions that cater to clients' unique needs and preferences. These services and products include private banking, investment management, funds, fiduciary and corporate services, brokerage, structured products, and many more. The Bahamas' sophisticated asset protection and structuring services allow clients to optimise their holdings, manage risk appetite, and enhance the efficiency of their financial structures. Clients in The Bahamas have access to a broad spectrum of global investment opportunities, ensuring diversified portfolios and exposure to different markets, asset classes, and non-traditional products (digital assets). Innovative products such as smart funds, ICON, and Bahamas Executive Entity, a growing captive insurance market, and the active embracement of financial technology (FinTech) have also enhanced clients' wealth planning and structuring options.

"We have a broad toolkit," states Dr Iyandra Bryan, Chief Operating Officer at Quantfury Trading Limited, a global FinTech brokerage firm based in The Bahamas," and the industry knows how to apply these tools to create bespoke structures in all areas of wealth and asset management as well as increasingly for the nascent digital asset sector." According to Dr. Bryan, The Bahamas' commitment to adaptability and innovation to stay at the forefront of global financial trends also reflects its best-in-class approach.

Structures established in the Bahamas are internationally recognised, reassuring individuals and businesses that their wealth management strategies will hold up across borders. The Bahamas is admired for its trust and estate planning services, offering a secure and flexible framework for preserving and passing on wealth across generations.

Global Connectivity And Accessibility

The Bahamas is a natural bridge between the East and the West, with its proximity to the world's largest economy positioning it favourably as a financial hub for established and burgeoning markets. Situated just off the coast of Florida, The Bahamas boasts a distinguished roster of global financial institutions, housing over 200 banks and trust companies and more than 400 financial services entities. Its lush tropical surroundings and access to top-tier amenities and entertainment make it a paradise where investors can work, live, and play. The existence of a pre-clearance facility in The Bahamas increases investor connectivity. It highlights the importance of the jurisdiction as a gateway to the Americas, ensuring its global connectedness.

Paul Winder, Global Head of Wealth Planning at Deltec Bank & Trust Limited, a financial services institution operating for over 70 years in The Bahamas, notes that beyond The Bahamas' global connectivity to international finance, "entrepreneurs and innovators are continuously welcomed, demonstrated by the presence of many investment managers or business leaders with a global, no-borders view. The Bahamas is the preeminent international financial centre where investors can access the full range of trusts, foundations, and intergenerational structures for fiat- and crypto-based assets.”

Investor types and modes of conducting business have changed. Investors can now conduct business and execute transactions on mobile devices or any preferred medium, having instant access to their financial resources. Individuals no longer have to “follow their money”. They can now have their money follow them to where they prefer to play or reside. Along with its myriad of professionals in the financial services sector, the natural beauty of the Bahamas is an attractive lure to do business in The Bahamas.

As the debate around IFCs continues, The Bahamas remains steadfast and unwavering in its dedication to excellence in financial services. A resilient jurisdiction reinforced by a solid regulatory framework, The Bahamas emerges as a comprehensive and successful IFC. Its wealth management and structuring distinction solidifies its position, while its global connectivity and accessibility are indispensable enablers for its continued success. With these qualities, The Bahamas continues to chart a course towards solidifying its status as the ultimate destination for financial services as a prominent one-stop jurisdiction.

[1] Central Bank of The Bahamas Gross Economic Contribution of the Financial Sector in The Bahamas (2022)

Niekia Horton
Niekia is the CEO and Executive Director of Bahamas Financial Services Board. She is an experienced senior executive with over two decades of experience in the financial services industry.