The Bahamas: Recent Developments In A Dynamic IFC

Keeping On Top Of World Events

The global dysphoria on the subject of taxes has certainly not been avoided in The Bahamas. The tax-related demands of the Global North over the past 20 years have driven Bahamian politicians to walk a tightrope, balancing the role of adopting new global tax ideologies that are focused on keeping The Bahamas as a relevant financial centre, while at the same time, striving to convince industry stakeholders that a change in tax ideologies is prudent from a long-term perspective. The Bahamas’ ambition has been to rethink the ideas of tax ideologies and tax reform in a modern, global and transparent way.

While this article is not intent on providing a chronology of The Bahamas' time on and off the FATF and EU grey- and blacklists respectively, the intent is to celebrate The Bahamas’ vigilance and determination to progress a financial services sector that is a part of the global plan for the eradication of tax evasion, money laundering, terrorist financing and counter-proliferation (AML/CFT/CFP). The completion of the National Risk Assessment and subsequently the National Identified Risk Framework Strategy, was the cause of legislative amendments and new enactments to help the sector by creating a more robust and compliant financial services industry. The Beneficial Ownership Register Act 2018 is a case in point – although the Register of Beneficial Ownership is not accessible to the general public, and only a designated officer of a regulatory authority may request a search.

Financial services in The Bahamas today, and service providers as a whole, have now adapted to the normality of an increasingly demanding regulatory environment that is meshed together with global ideologies of tax and AML/CFT amendments and additions.

Creativity In The Crypto-world

The Bahamas has done more than simply acquiesce to global demands of AML and tax transparency. Successive governments have been creative in their approach to continue developing and growing the financial services sector. Like the ground-breaking SMART Fund models in 2003, The Bahamas demonstrated more innovation, agility and resilience in the financial-service sector by the introduction of the Digital Assets and Registered Exchanges (DARE) Act 2020. The Securities Commission of The Bahamas (SCB), in consultation with other regulators and industry professionals, embraced the idea that crypto-currencies and digital assets were going to be a part of the economic global landscape, and that The Bahamas was going to be part of it. The desire to properly regulate a burgeoning financial-services sector was an important aspect of jumping into the digital-assets space, and becoming one of the first jurisdictions with a strong legislative and regulatory programme in the digital-asset space. Despite the negative press of the FTX fall-out, The Bahamas has seen significant growth in the sector and is amending the DARE Act with the aim of making a greater appeal to those managers, exchanges and investors to be a part of a well-regulated and comprehensive legislative programme.

The new amendments are timely and should include some of the crypto-policy recommendations issued by IOSCO that are “designed to improve global standards of regulation of crypto-assets...set out how clients should be protected and how crypto-trading should meet the standards that apply in public markets.” 

Why Political Stability Is Vital

The growth in financial services is testament to the stability of The Bahamas’ democracy. From one governing party to another, policies are not changed or scrapped, but rather enhanced and developed for the better of the country at large. In 2018, the Government of The Bahamas established a new Policy Framework for the Public Private Partnership Initiative (PPPs). The intention was to create a formal and transparent methodology of enhancing, updating, or creating public assets with private management, while at the same time using public and/or private capital. After a general election in 2021, the new governing party continued the PPP policy. The bold Nassau Cruise Bond offering in 2020 was the first major transformative initiative. The overall total debt and equity raised by the Nassau Cruise Port PPP initiative was approximately USD $300 million. This phenomenal capital raise has directly and significantly contributed to an economic boom and the inflow of money from tourism to The Bahamas. The offering for the port demonstrated the government’s ability to modernise the downtown core of Nassau and successfully upgrade the nation’s number-one industry, without the need to borrow or tax its citizens.

Carbon Credits

Environmental initiatives provide some of the clearest evidence of The Bahamas’s resilience and flexibility. The Carbon Credits Initiatives Act has put The Bahamas at the forefront of the global carbon finance movement. Under the terms of Article 6.4 of the United Nations’ Paris Agreement, and particularly the United Nations’ Carbon Offset Platform[1], which promotes the avoidance and removal of greenhouse emissions from the atmosphere via projects in the developing world, The Bahamas Government's enactment of these dynamic pieces of legislation now provides a regulatory framework for the accreditation and transactions of blue-carbon credits. The Bahamas has also enacted the Carbon Credit Trading Act 2022, which enables the Securities Commission of The Bahamas to regulate the trading of carbon-credit securities related to this new asset class, and also allows broader rights participation in the fast-growing voluntary carbon markets.

While the current legislation allows entities or individuals to manage the monetisation of blue-carbon sales or trading, the Government remains the owner of the sovereign assets and, under the current arrangement, will receive 92.5 per cent of all proceeds of carbon-credit sales after operational costs. The proceeds will be used to fund The Bahamas’ Sustainable Development Goals as defined by the United Nations CCC.

By monetising its blue and green carbon assets through credit issuance, The Bahamas will unlock new financial flows to support, among other things, marine and coastal conservation, ecosystem restoration, clean energy and resilient infrastructure, all of which increase its carbon sequestration capacity and reduce greenhouse gases. At the same time, the effects of a carbon-credit economy can create new sustainable businesses and job opportunities in the fields of environmental science and marine biology, oceanic carbon measurement, mangrove and seagrass stewardship, and beyond.

Growth And Change In A Fickle Market

With the support of global partners and stakeholders, The Bahamas is actively cultivating a financial service that includes carbon trading and carbon finance, conservation management, and sustainable economic development. This new initiative has the potential to reconfigure the economic landscape of The Bahamas because these activities are all aligned closely with UN Sustainable Development Goals such as poverty eradication, quality education and life below water.

Overall, in this fast-paced and fickle financial services environment, The Bahamas’ government, regulators and service providers are adapting continuously to the tides of global change, and are continuing to demonstrate an out-of-the-box approach to maintaining a resilient IFC. At the same time, The Bahamas is ensuring that growth and change are predicated on a robust, compliant and modern legislative infrastructure that keeps the financial services industry stable, progressive and proactive.

[1] See https://offset.climateneutralnow.org

Antoine Bastian
Antoine W. Bastian currently serves as the Executive Chairman and CEO of Genesis Fund Services Limited, a licensed Investment Fund Administrator in the Bahamas and the CEO of GFS Financial Services LTD, an affiliate fund administrator in Singapore. Antoine Bastian earned his B.Sc. in Accounting from Indiana University in 1989. After university, Antoine joined Deloitte and Touché, Nassau Bahamas and subsequently qualified as a Certified Public Accountant. Shortly thereafter, Antoine was a mutual fund administrator with MeesPierson Fund Service and after that a manager at St. Matthew Investment Fund Accounting Limited... a Bahamian fund administrator that was associated with Michael J. Liccar & Co, based in Chicago, Illinois. Subsequent to this position, Antoine served on the Board of The Private Trust Corporation Limited and as Manager of its Mutual Fund Department, Genesis. In 2004, the department was relaunched as an independent entity, Genesis Fund Services Limited. Antoine also currently serves on numerous boards, inter alia, the Bahamas Financial Services Board, The Nassau Cruise Port Board, and the Yes Foundation. He also serves as the priest warden and a member of the vestry at the Church of the Most Holy Trinity.