The Bahamas continues to focus on being a high quality destination for owners of capital. This focus is captured in the shared vision of the government and private sector for the way forward: “To be a globally competitive international business centre for wealth management, capital investment in the Americas and emerging markets, and residency”.
This vision brings to bear the unique strengths of The Bahamas:
The Bahamas is not resting on its laurels by relying solely on these core assets; rather, it is working towards improving the value proposition of the country. From the implementation of modern insurance legislation and regulations and a new Arbitration Act, to the modernisation of infrastructure including the construction of the new Lynden Pindling International Airport in New Providence, scheduled for completion in 2011, many critical steps are underway.
G20/OECD Standard of Transparency and Tax Information Exchange
The transformation of the global economy has not left The Bahamas’ international financial services industry unchanged. With 10 tax information exchange agreements (TIEAs) under its belt, and 13 additional agreements initialed, The Bahamas intends to meet the OECD standard well in advance of the G20 deadline of March 2010. The decision to endorse the OECD standard reinforces The Bahamas’ unwavering commitment to be a trusted jurisdiction for clients, and to be a responsible member of the international community.
The Bahamas remains strongly committed to the principle that persons have a right to privacy with respect to the conduct of their affairs. Moreover, respect for the rule of law always has been fundamental to the success and strength of the financial services industry in The Bahamas. As such, clients can be assured that The Bahamas will only exchange information on agreed and transparent protocols. All of the agreements signed by The Bahamas are in accordance with the OECD model TIEA and Double Taxation Agreement. As such, the basis on which The Bahamas will cooperate with countries is the same as all countries that adopt Article 26. In particular, through the agreements, The Bahamas commits to cooperate only upon requests where specific information is provided. This requirement for specific information is critical in furtherance to The Bahamas’ stated position to prevent so called ’fishing expeditions’.
In the 2002 Bahamas-United States (US) TIEA similar arrangements which limit the exchange of information to specific requests that meet predefined criteria were agreed. These arrangements, which have been in place over the last six years, have been respected by the US and The Bahamas. Likewise, legislation that gave effect to The Bahamas-US TIEA continued to preserve client confidentiality by denying any request
The Bahamas Financial Services Board expects the enabling legislation for the new TIEAs will provide the same safeguards. These arrangements will allow The Bahamas’ international financial sector to continue to develop in an environment that adheres to internationally agreed standards.
Over a decade ago, the OECD sought to have The Bahamas implement its standard for transparency and tax cooperation. The Bahamas’ response to the OECD standard was to insist that all countries implement the same standard at the same time as The Bahamas.
Notwithstanding significant changes in the world of finance, The Bahamas continues to fulfill its commitment to clients and the OECD, as the OECD standard is being implemented in all major countries providing financial services to a global clientele.
A Wealth Management Centre
The Bahamas’ strength is rooted in its long history in providing financial services since the 1930s, and reinforced by the jurisdiction’s ongoing commitment to maintain and grow its presence as a provider of high quality financial services. This historic involvement has created a jurisdiction that can easily be defined as established, progressive and welcoming for financial services and residency.
Its established role and expertise in private banking and trust services also has given birth to a comprehensive and compelling array of financial services that includes private banking, estate planning, asset management and fund administration services; The Bahamas also provides services to the international capital markets, and to the insurance and maritime industries. Corporate registry and legal and accounting services are at the core of the multitude of services available in The Bahamas.
The integrity and continuity offered by institutions located in The Bahamas provide a secure environment. With personnel committed to the local community, continuity of service is more predictable and stable in The Bahamas and is the basis of its many longstanding institutional and client relationships. The Bahamas’ long tenure in financial services also has created a growing storehouse of skills and experience that is trusted by the international financial community.
The top four global accounting firms operate from The Bahamas and there is a large pool of lawyers trained in English common law. And, its English speaking society easily facilitates its integration into the global business community.
The jurisdiction continues to demonstrate foresight through responsive, progressive developments to meet the requirements of an increasingly sophisticated financial services marketplace.
Providing specific legislation addressing the manner in which Private Trust Companies (PTCs) may be established and operated in The Bahamas is an example of the jurisdiction’s responsiveness and rounds out a series of steps undertaken in recent years to respond, in a comprehensive and competitive manner, to the estate planning needs of clients.
The SMART fund is another example, based on the recognition that a one-size fits-all-solution is not suitable for many clients. SMART Funds provide an excellent tool for families which utilise trusts, foundations or family offices to access the alternative investment world.
These legislative initiatives, along with the Foundations Act, Purpose Trust Act and the amendment to the Perpetuities Act, have solidified the country’s wealth-management services.
The Bahamas is not only home to more than 250 banks and trust companies which enjoy long-standing relationships with clients from around the world. In recent years, as more and more individuals have chosen to ’follow their money’ with respect to where they live and work, The Bahamas also has become the preferred choice for many who have adopted this way of life.
With a streamlined application process for Economic Permanent Residency (EPR), the ability for individuals to work and live in The Bahamas has become even easier and more attractive. A predictable and user-friendly EPR application process, combined with the country’s physical resources and infrastructure, enhances the Bahamas’ environment as a location for individuals and Family Offices as well as for more institutions to consider the establishment of subsidiary operations in the country.
It should be noted that Government maintains a flexible immigration policy which recognises that national development objectives can be pursued through a policy suited to the needs of international firms, individuals and families.
Permanent Residency, for example, allows the holder to pass freely through immigration and to remain in The Bahamas for the number of days the holder desires. The norm is that spouses and children may be endorsed on the permit for a one-time government fee. Persons with permanent residence are for all intents and purposes treated like Bahamians except for the right to vote.
Annual residency and a residency card are also available and do not require an investment in the country.
The existing investment threshold for economic permanent residence is USD500,000 on a residence. Permanent Residency with the right to work in one’s own business is often afforded to the owners of capital who simply want to manage investments, whether through a family office or their home office, or to manage their business based in The Bahamas. This status means an individual automatically qualifies for the right to work in The Bahamas.
A Well-Regulated Jurisdiction
Regulation in The Bahamas has also served the industry well. Policy makers and regulators are committed to open and ongoing dialogue with the private sector. This has created an environment designed to encourage the continued growth of the sector through adherence to internationally accepted regulatory principles, and efficiency in their administration.
Since the banking industry itself is the cornerstone of the country’s financial services industry, the Central Bank of The Bahamas plays a lead role among the country’s regulatory agencies and enjoys full autonomy. Its stature within The Bahamas is reinforced by its longstanding presence in the jurisdiction; the Central Bank, in fact, has been regulating banks and trust companies in The Bahamas since 1965. The Central Bank along with the Securities Commission of The Bahamas and the Insurance Commission adhere to the standards established by the relevant international agencies and participate actively, as opportunities are presented, within these agencies. For example, the Securities Commission became a full member of the International Organisation of Securities Commissions (IOSCO) within months of being established in 1995.
This philosophy of operating in a globally integrated market for financial services saw The Bahamas lead the way in criminalising money laundering in 1996; and it has continued to give keen attention to this area to ensure the country’s counter-money laundering legislation is continually advanced to meet global best practices and standards.
The Way Forward
The year ahead certainly will be one of transition as the global economy and the financial services industry adjusts to the new paradigm. Nonetheless, arising from its long-standing investment in people, policies and the environment, The Bahamas will continue to be a leader in financial services and domiciliation/residency. It will ensure that favourable attributes for locating and servicing operational subsidiaries and assets of corporate entities wishing to undertake business or make private capital investment in the Americas are fully explored and understood by the owners of capital.
Wendy Warren is managing director of Caystone Solutions. Wendy served for 11 years as CEO and Executive Director of the Bahamas Financial Services Board (BFSB). BFSB works with The Bahamas government, regulators and private industry to ensure The Bahamas provides global clients with best in class financial services. Beginning her professional career in 1988, Wendy has worked in a variety of roles in the fund administration, wealth management and audit fields. She has served on various boards and committees including Bahamasair Holdings, Bahamas Electricity Corporation, Bahamas Trade Commission, the Financial Services Consultative Forum and the Bahamas Association of Mutual Fund Administrators. Wendy is a Chartered Accountant and holds a Bachelors Degree in Accounting from the University of Waterloo, Canada.