In her role as CEO of the BFSB Wendy Warren is devoted to increasing the quantity and quality of financial services in The Bahamas. In a frank interview with the Caribbean Review she considers what The Bahamas must do to maintain its position on the global financial stage.
IFC: How is business in The Bahamas?
Wendy Warren: All hands are on deck and focused on sustaining the business sector through the challenges dominating western economies. Efforts are ongoing to prepare the various sectors to take advantage of growth in various countries, first in this region and in growth economies in the East, such as China. The financial sector remains profitable but has not been exempt from the impact of cost constraints and consolidation.
IFC: Is The Bahamas diversifying into new niche areas?
WW: Market responsiveness has played a key role in maintaining the strongest possible competitive position for The Bahamas in financial services. Evolving international standards and client requirements have become everyday factors in financial services and it is paramount that legislation and regulation reflect marketplace demands and, where possible, stay ahead of the curve of change.
The Bahamas has been very active in this regard.
The Bahamas Executive Entity Bill 2011 for example is designed specifically to carry out executive functions in wealth structuring. It is an innovative vehicle tailored for private clients and it is anticipated that it will become an attractive tool for high net worth individuals and families seeking to manage their wealth. It will also provide a valuable tool in the industry for corporate governance and succession planning.
The Arbitration Act 2009 and Arbitration (Foreign Arbitration Awards) Act 2009, both of which became law in 2010, recognise the global trend toward dispute resolution and places The Bahamas in a position to deal effectively with these matters.
Another example is the Securities Industry Act & Regulations. The new legislation will enhance the reputation of The Bahamas in the international financial services and capital markets industries, and will meet the ‘principles and objectives’ set by the International Association of Securities Commissions (IOSCO). Included in reforms under the SIA are the registration of industry participants by function rather than practice; provisions for information sharing for regulatory purposes; enhancement of the SCB’s regulatory and investigative powers; simplification of the disciplinary process; and greater minority shareholder protection. Of note, entities incorporated or registered under the Companies Act as well as the International Business Companies Act, 2000 will be eligible to apply for registration to conduct securities business under provisions of the new Act.
IFC: What is / will be the impact on The Bahamas of US compliance demands such as FATCA and the HIRE legislation?
WW: Operating from the closest non-contiguous financial centre to the United States, the international institutions which have operations in The Bahamas are well aware of the costs and implications of servicing clients connected to the USA as a result of FATCA, US Securities Rules, HIRE FBAR and other information filings. As does the Government. It is recognised that compliance is a key factor in any cross border wealth management business activity, whether it relates to the United States or any other country. BFSB and the various professional industry associations have undertaken a series of initiatives to ensure that local practitioners are kept abreast of developments such as FATCA, for example, and the Big 4 accounting firms, in particular, have been aggressive in keeping clients informed and in ensuring they are prepared to meet compliance issues.
IFC: How is the relationship between the OECD Global Forum and other global governance bodies and The Bahamas?
WW: 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, The Bahamas in September 2009 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 Rt Hon Hubert Ingraham, to chair the Boards of Governors of the International Monetary Fund (IMF) and World Bank Group (WBG) for 2011 also reflects favourably 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.
IFC: What is the importance or otherwise of TIEAs and the OECD Peer Reviews?
WW: With 28 tax information exchange agreements under its belt, The Bahamas has surpassed the G20 standard for tax cooperation and transparency. The OECD acknowledged that The Bahamas has “substantially implemented” internationally agreed tax standards. As such, clients can be assured that The Bahamas will only exchange information on agreed and transparent protocols. Through its tax information exchange agreements (TIEA), The Bahamas commits to cooperate only upon written requests where specific information is provided. This requirement for specific information is critical to prevent so-called “fishing expeditions.”
Given the scope and intensity of the review, The Bahamas' commitment to international standards has been reinforced. The Global Forum reaffirms this stance by indicating that "The Bahamas' commitment to international standards is not in doubt".
The importance of each of these reports to support the long term sustainability of the financial services sector cannot be overstated. Global financial intermediaries are risk adverse and will not hesitate to react where they form a view that a jurisdiction in which they operate fails key global governance criteria. The Bahamas has distinguished itself as having implemented this well publicised international standard and avoided any potential repercussions associated with numerous reported weaknesses, fundamental gaps, and with those prevented from moving forward to Phase II.
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.
IFC: What influence does The Bahamas and other Caribbean IFCs have on the world financial stage?
WW: While there is a size disparity between us and other Caribbean IFCs and major onshore centres, The Bahamas as a sovereign nation has placed its stamp on the global debate when it called for a “level playing field” before the OECD in 1999.
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 based on its stated principle of the level playing field. Further, through its involvement with the IMF, The Bahamas secured their involvement in the independent assessment of IFCs; many believe that the IMF is more representative than organisations such as the OECD.
No matter the arguments, it has become widely accepted that international financial centres do play a legitimate and integral role in the international community, in many cases acting as conduits for global trade and facilitating international capital flows.
IFC: Do you think the future of financial services for the Caribbean lies with the BRIC countries and less so with the traditional centres of wealth in the US and Europe?
WW: The Bahamas recognises the importance of engaging with BRIC countries. At the same time, the prominence and importance of relations with the US and Europe has not diminshed in any way. It is not a choice between the US, Europe and others. It is really a matter of exploring economic opportunities wherever they exist. However, we believe the need to engage with these new economic tigers goes well beyond financial services. The key for us, at this stage, is to be able to present a comprehensive picture of The Bahamas as a place for business, pleasure and residence.
IFC: What does the future hold for The Bahamas as an IFC?
WW: We believe it is critical that the jurisdiction remains focused on market development while moving through the change process that is not only taking place globally but within The Bahamas as well. The latter is not only mandatory to keep pace with international developments but equally important to build relationships and create positive momentum for the vision that is now driving business development.
Furthermore, while we are global thinkers, individuals and businesses still operate within regions. This is the basis of the vision statement that has been adopted in The Bahamas for financial services, and which has been enthusiastically embraced by industry and government.
The vision – “To be a globally competitive international business centre for wealth management, capital investment in the Americas and emerging markets, and residency” -- brings to bear the unique strengths of The Bahamas:
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.