The Bahamas Financial Services: Commitment, Continuity and Consistency

The Bahamas, while only 37-years-old as an independent country, is rich in history with the oldest democracy and one of the longest established international financial services sector in the region.

In the world of international business and finance, The Bahamas’ commitment, continuity and consistency provide a firm foundation on which business and clients can rely.

The advantages of doing business in The Bahamas are clear:

• Our history as a trusted partner for the international business community and families worldwide, due in large part to the outstanding record of political stability, progress and stewardship, status as an independent territory providing an efficient basis of common law, and the longstanding commitment and continuity of its people and government to the industry and their clients.
• Our ideal location at the cross roads of the Americas in a time zone that is convenient for most of the major centres in the Americas. Our physical resources of land, premises and fit‐for‐purpose infrastructure all located in one of the most idyllic settings in the world.

To be certain, The Bahamas continues to focus on being a high quality destination for owners of capital. In the midst of one of the most tumultuous times in the finance industry, the government and private sector jointly refined their shared vision for the way forward: “To be a globally competitive international business centre for private wealth management, capital investment in the Americas and emerging markets, and residency”. This vision brings to bear the unique strengths of The Bahamas.

This vision is fulfilled through many major international companies who operate from The Bahamas, such as Freeport Container Port, the largest and deepest transshipment port in the region including the north eastern United States. A further example is a recent capital investment of B$1.7 billion in the Bahamas Oil Refinery Company (BORCO) located on Grand Bahama Island These operations on Grand Bahama complement the many international banks and investment companies that have established themselves in country.

Further evidence of the confidence in the Bahamian economy, notwithstanding the impact of the recent global recession, is a US$2.9bn investment into a hotel resort, supported largely through funding by Chinese institutions.

Compelling and Competitive Platform for Private Clients

When the Organisation for Economic Cooperation and Development (OECD) launched an initiative in 1998 that sought to improve transparency and information exchange in tax matters, The Bahamas, as a sovereign nation, sought in 1999 and, again in 2002, to protect its economic interests and fiscal autonomy in all negotiations with the OECD. The Bahamas considered the establishment of a level playing field, where all OECD members and major finance centres agreed to implement the same standards, to be critical to its economic interests.

By mid-March 2009, a significant leveling of the playing field was achieved with the commitment by all OECD countries and major financial centres to the OECD standard for information exchange. Subsequently, on 25 March 2009, The Bahamas Government, with the support of the private sector, agreed to begin to negotiate suitable arrangements that meet the OECD standard for information exchange.

All of the 22 agreements signed by The Bahamas since then are in accordance with the OECD standard as reflected in its model TIEA and Double Taxation Agreement (DTA), Article 26. As such, the basis on which The Bahamas will cooperate with countries is no greater than those countries that adopted DTA, Article 26.   In fact, the OECD Global Forum has confirmed that TIEAs do not provide for spontaneous or automatic information exchange; DTA protocols can provide for such spontaneous and automatic exchange of information.

This is consistent with The Bahamas’ strong commitment 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.

In particular, through its bilateral 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”.

Further, the well-established confidentiality for those who live or conduct business in The Bahamas will continue. Most importantly, The Bahamas will retain a legislative and administrative system that respects both the privacy of its clients and preserves the banking confidentiality in its financial services sector.

The Bahamas’ Approach to G20/OECD

The Bahamas has demonstrated that as a sovereign nation it is an active contributor to the discussion on a range of global matters and that it is determined to act in a responsible manner. In particular, The Bahamas is an active participant in the international dialogue concerning the regulation of international financial services.

Specific to the dialogue on cooperation in tax matters, The Bahamas has been an effective member in the Global Forum and on its various sub-committees. Based on its energetic engagement, in September 2009, The Bahamas was elected to membership of the OECD Peer Review Group -- a group comprising selected members of a re-vamped OECD Global Forum. The selection of Bahamian Prime Minister The Hon. Hubert Ingraham to chair the Boards of Governors of the International Monetary Fund (IMF) and World Bank Group (WBG) also reflects favorably on The Bahamas in international circles.

To be certain, the Government of The Bahamas is committed to safeguarding this important segment of the Bahamian economy by ensuring that The Bahamas remains a well regulated jurisdiction which meets evolving standards for offering international financial services.

 A Wealth Management Centre

The Bahamas’ strength is rooted in its long history in providing financial services since the 1930s, and has been reinforced by the jurisdiction’s ongoing commitment to maintaining and growing 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.

Established and Progressive

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 jurisdiction also continues to demonstrate foresight through responsive, progressive developments to meet the requirements of an increasingly sophisticated financial services marketplace.

In this regard, substantive and minor amendments are expected to be enacted early in 2011 to further enhance the value proposition of the Bahamas Trustee Act. A Bahamas Executive Entity Bill (BEE) will also be available shortly, complementing the well-recognised environment for trust services in The Bahamas.

A new Securities Industry Act was also tabled in the closing hours of 2010. This bill will transform the manner in which the securities industry functions and will greatly enhance the marketing position of The Bahamas.

In addition the Arbitration Act 2009 and Arbitration (Foreign Arbitration Awards) Act 2009 both became law in 2010.  

Welcoming

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 the Government maintains a flexible immigration policy, which recognises that the national development objectives are pursued through a policy suited to the needs of international firms, individuals and families.

A Hub for Capital Investment

The Bahamas is a safe, well-regarded portal for global investment, particularly into the Americas. It is also a favourable location for corporate offices, ownership of intangible assets, the establishment of finance related businesses and light industrial activity.

The Government is committed to building an economic environment in which free enterprise can flourish. In this regard, the National Investment Policy is designed to support an investment friendly climate and guarantees the complementary nature of Bahamian and overseas investments.

The Bahamas’ commitment to political and economic stability has figured prominently in the jurisdiction being recognised as a sound environment for Foreign Direct Investment with an Investment Grade Government Debt rating (Standard & Poor’s and Moody’s).

The Bahamas is ideally located at the crossroads of the Americas. It is in the same time zone as New York with enviable proximity to the US, and Central and South America. Its physical resources are conducive to conducting international business both efficiently and effectively. These include:

• Information communications technology – three separate, fully redundant, self-healing fibre optic cables for global connectivity.
• Modern office facilities.
• Data protection legislation at the OECD Standard.
• Business continuity options.
• Cost competitiveness.
• Six major airports including the YVR managed Lynden O. Pindling International Airport in Nassau and Freeport International Airport. (Overall there are more than 60 airports throughout the islands of The Bahamas)
• Ease of access, air linkages and Freeport’s transshipment and free trade zone status are functional attributes that very few regional competitor jurisdictions can match.
• Available land throughout The Bahamas, including more than 10,000 acres earmarked for industrial and commercial development in Grand Bahama.
• Investment incentives under a number of Acts include exemption from the payment of customs duties on building materials, equipment and approved raw materials and real property taxes for periods up to twenty years. Investors may acquire publicly owned lands for approved developments on concessionary terms; and acquire low cost space for lease for industrial enterprises. Government will provide special training and retraining for Bahamian workers to ensure the continuing availability of a highly skilled labour force.

The Way Forward

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.

As the rules for global trade and financial services were transformed over the past 24 months, The Bahamas continued to fulfill its commitment to clients and the international community.

We expect the years ahead to continue to be one of transition as the global economy and the financial services industry adjust to the new paradigm. The Bahamas remains unequivocally engaged in the pursuit of an ever‐improving platform for owners of capital to conduct their international business, to manage their private wealth and to make The Bahamas their home.