The Bahamas- Committed to Compliance, Embracing Innovation.

International regulatory standards have made the compliance process more complex when conducting business in international financial centres such as The Bahamas. However, they have also improved the international environment of unwanted exchanges and business relationships, while changing how we cater to the needs of investors.  

For international wealth planners, there is no doubt that IFCs will continue to play a very important role in the delivery of wealth planning tools to meet the needs and objectives of HNW individuals who seek to diversify investments.  

It is against this backdrop that The Bahamas has taken the initiative to brand itself as the ’Clear Choice’ for financial professionals, maintaining its place as one of the world’s foremost wealth management centres.

While private wealth management serves as a foundation, a full range of product and service offerings are available, including private banking, estate planning, asset management, fund administration, captive insurance and other corporate and financial services.  Additionally, it provides services to international capital market and maritime industries.

Times are different from when The Bahamas’ financial services industry started over 85 years ago. We recognise the need to be innovative in our approach; this is essential as financial services is integral to the sustainability of our economy.  It is our second industry, the first being tourism, and accounts for more than 15 per cent of our GDP. 

Commitment to Compliance

Compliance with the Organisation for Economic Cooperation and Development (OECD) and EU criteria on tax governance has required The Bahamas to institute changes to the legal and regulatory regimes that govern its financial sector, in line with those applied globally. In doing so, the jurisdiction has been engaged in meaningful discussions with these international bodies and has drafted new legislation to ensure the achievement of the right balance of compliance with the international standards, business and economic sustainability. 

This includes:

• The passing into law the Multinational Entities Financial Reporting Act, which sets out a comprehensive framework for Country by Country reporting in line with the Base Erosion and Profit Shifting (BEPS) initiative.
• The initiation of Automatic Exchange of Information (AEOI) with 35 jurisdictions (19 of which are EU jurisdictions), in accordance with the Common Reporting Standard (CRS), with the first exchanges having taken place in September 2018.
• Passing the following legislation in parliament this month to address concerns raised by The European Union:
  • Commercial Entities (Substance Requirements) Bill, 2018 which addresses EU concerns regarding entities having economic substance; and Beneficial Ownership Register Bill, 2018. Removal of Preferential Exemptions Bill, 2018to address the concern of ringfencing.

 These measures and commitments send a loud and clear message to the international financial services’ community that The Bahamas is serious about adhering to global standards and remaining a clean and compliant jurisdiction committed to the principles of transparency and cooperation

Embracing Innovation

The Government of The Bahamas. as a policy priority, has sought to establish a new legislative framework to encourage and facilitate new, cutting edge business ventures to establish themselves in the dominion.  The Commercial Enterprises Act (the Act) was established to incentivise foreign and domestic investment in specified commercial enterprises. In short, the Act seeks “to liberalise the granting of work permits to an enterprise that wishes to establish itself in the Bahamas, and requires work permits for its management team and key personnel”.  There has also been a relaxation of Exchange Controls on capital transactions, namely on capital (investment) and current account (trade) transactions. The changes came into effect as of February 1, 2018.

The Act provides that a specified commercial enterprise can be established with an investment of not less than US$250,000; or a joint venture or partnership between a Bahamian and a non-Bahamian. This enterprise may conduct business from any location in The Bahamas subject to zoning ordinances. The Minister responsible for Financial Services, in consultation with the Minister of Finance, may prescribe that any Island or any part of any Island as a ’specified commercial enterprise zone’ for the purposes of rationalising infrastructural investment, efficient land use or the encouragement of clusters of commercial development, subject to economic incentives required to give effect to such zones. 

Fundamentally the purpose of this Act is to attract greater foreign direct investment in strategic sectors which have the potential to create new jobs and expand opportunities in the economy of The Bahamas. 

The goal is to make it easier for persons investing in specialized areas such as arbitration, technology, call centres, international and maritime trade and captive insurance to obtain work permits more quickly and efficiently, with the ultimate aim of transferring knowledge, talent and techniques to the local workforce.

The Bahamas Securities Industry

It is also an exciting time for the securities industry in The Bahamas. A complete overhaul of legislation governing investment funds’ regulatory framework is nearing completion by the Securities Commission of the Bahamas (SCB). The overhaul includes an updated Investment Funds Act (IFA) as well as some forthcoming changes to the overall securities industry legislative regime.

Investment Funds Overhaul

The Investment Funds Act 2003 was largely structured to be in line with the operations of fiduciary administrators and did not necessarily account for the appropriate regulation of the various roles within a fund structure. Consequently, the SCB’s mission has been to address those gaps that would help support institutional as well as private wealth business. 

It is anticipated that overhauling the IFA “will accomplish key improvements to the regulatory structure which will enhance The Bahamas’ competitive appeal”.

The Bill contains key changes related to:

• Changes in the definitions of Bahamas versus non-Bahamas based funds.
• Changes in the triggers for licensing of
• The ability to appoint international administrators without requiring that they be
• The introduction of licensing requirements for fund managers and regulatory oversight of custodians.
• The establishment of an Alternative Investment Funds Management Directive (AIFMD) regime with a view to The Bahamas qualifying for an EU

Updates to Securities Industry Rules

There are other rules impacting the securities industry that are near completion or in various stages of development. The Securities Industry (Business Capital) Rules, 2018, which were developed by the Commission to specifically address funding for small and medium businesses, are now being finalised. Other key securities laws being developed include the Compliance Officer Rules, takeover code, and corporate governance rules.

The Compliance Officers Rules will establish and clarify requirements and related qualifications and obligations of compliance officers, as well as create standards that must be met in the outsourcing of the compliance function. The takeover codes will provide a framework for how takeovers will occur and will ensure the protection of minority shareholders in takeover circumstances.

The proposed corporate governance rules will create standards that all public issuers are expected to adopt and will form the basis by which the Commission will assess the effectiveness of the corporate governance framework for public companies, including state owned enterprises.

IOSCO’s Multilateral Memorandum of Understanding (EMMoU)

SCB’s application to become a signatory to the International Organization of Securities Commission’s (IOSCO) Enhanced Multilateral Memorandum of Understanding (EMMoU) is receiving favourable consideration and is awaiting formal approval from the IOSCO Screening Group.

The EMMoU includes additional powers which regulators must be able to exercise. These powers are referred to by the acronym ACFIT and they include:

• The power to obtain Audit
• Powers by the regulator to Compel Attendance for
• The ability of a regulator in one jurisdiction to assist or provide information to another regulator on the freezing of
• The power and ability of a regulator to obtain existing records and logs from internet service
• The power and ability to obtain and share existing telephone records and

Fintech

Noting the growing interest in the jurisdiction as it relates to initial coin offerings (ICOs), crypto exchanges, and other digital token arrangements, the Commission has initiated discussions for the development of a regulatory framework aimed at providing clarity to participants in the crypto space. It is also taking cognisance of the emergence of Risk-Based Supervision (RBS) as an approach to regulatory supervision of financial institutions globally.

The Commission has designed a risk-based supervisory framework, which includes continuous Anti-Money Laundering/Combating the Finance of Terrorism (AML/CFT) risk identification and monitoring, along with supporting templates.

Bahamas Value Proposition

As one of a very few truly independent and sovereign territories operating as an IFC, the value that The Bahamas offers is in:

• Delivering superior service in structuring and tailoring financial services products to meet client needs.
• Providing expertise and innovative ideas in the area of trust and private banking, capital markets and most recently, family office business.
• A common law judicial system with the highest Court of Appeal being the UK Privy Council.
• Flexibility in streamlining processes, technology and infrastructure.
• A large cadre of professional, educated and skilled workforce.
• A prime destination that is within easy reach from almost anywhere around the world with its proximity to the United States

About BFSB

The Bahamas Financial Services Board, which was launched in April 1998, represents an innovative commitment by the financial services industry and the Government of The Bahamas to promote a greater awareness of The Bahamas' strengths as an IFC.

Dr. Tanya C McCartney
Dr. Tanya McCartney is a UK trained barrister and chartered banker who since 2016 has served as the CEO and Executive Director at the Bahamas Financial Services Board. Over the past two decades Tanya has distinguished herself as a hardworking professional with expertise in the law, regulatory and gaming compliance, risk management, banking, and international financial services. She holds a Doctor of Business Administration from Edinburgh Napier University (Scotland, U.K.) for a programme of work entitled “Perspectives on Leading change: Exploring Change Readiness Strategies used in the Bahamian Financial Services Sector”. Tanya was appointed to the Senate of the Commonwealth of the Bahamas in 2001 being one of the youngest persons ever appointed to the Upper House where she served for five years. She vied for a seat in parliament in the 2002 general elections. She is a former President and founding member of the Bahamas Association of Compliance Officers. She is the co-chairman of the Bahamas Chapter of the global Association of Certified Anti-Money Laundering Specialists. Tanya is also an adjunct professor in the School of Business at the University of the Bahamas. She has served on several government boards over the years including The Public Hospital’s Authority, The University of The Bahamas and currently serves as Chairman of The Police Complaints Inspectorate and Deputy Chairman on The Airport Authority.