Any country heavily engaged in financial services bears the responsibility and a commitment to the international community of which it is intricately involved, the financial institutions operating within its borders, the clients which it serves and its citizens which rely on the sustainability of the industry for continued economic development. The Bahamas is such a country.
The Bahamas has always sought to provide superior financial products and services and a world class client experience. It has proven itself to be nimble and responsive to global changes – always mindful of the need to adhere to international standards with respect to compliance, cooperation and transparency. This is complemented by the fact that the Bahamas is not only somewhere that offers bespoke private wealth management, it is also a beautiful place to live and work in.
The Bahamas is the leading international financial centre in the Latin America and Caribbean region respected for its expertise in fiduciary services. The financial services sector has been impressively resilient and progressive in the face events such as Hurricane Dorian, the current COVID-19 pandemic, international initiatives, and in midst of the continued and sometimes challenging evolution of the global industry.
None of the forgoing challenges have impeded the country’s financial services industry from conducting business and delivering bespoke solutions to meet changing diverse client needs. Robust business continuity plans that are in place with all financial institutions have allowed business to continue doing business during Hurricane Dorian last year and now as the world deals with COVID-19. The foresight evidenced by vigorous business continuity measures have clearly been in play in cushioning the implications of these events and reinforces why the country is seen by many as an ideal location for financial institutions and the services they provide to their international client base. This adaptability has been especially evident in the Bahamas’s response to international initiatives which has ensured adherence with the highest standards of compliance with every internationally agreed standard of conduct.
Strides in International Cooperation and Regulation
The Bahamas prides itself on being a compliant jurisdiction that follows international best practices, and therefore continues to work diligently to demonstrate its commitment at the highest political level ensuring that, as a jurisdiction, we comply with international standards on information exchange, tackling harmful tax practices, dismantling artificial tax structures, and prevention of financial crimes.
Within the past few years, The Bahamas has passed a compendium of legislation to address concerns regarding economic substance, removal of preferential exemptions, and automatic exchange of tax information to meet the EU and OECD’s criteria on tax matters. The legislation includes: the Commercial Entities (Substance Requirements) Act, 2018; the Removal of Preferential Exemptions Act, 2018; the Multinational Entities Financial Reporting Act, 2018; the Register of Beneficial Ownership Act, 2018 and its subsequent amendments in 2019 (expanding the definition of legal entity to include Partnerships) and 2020 (expanding the definition of legal entity to include the Non-Profit Organization limited by Shares and the Segregated Accounts Companies); and the Exchange of Financial Account Information Act 2016.
The Bahamas maintains that it is attaining the highest standards in the fight against money laundering, terrorist financing and other identified risks, and therefore has been making significant strides in the fight against financial crime. The Anti-money Laundering/Countering The Financing of Terrorism/Combatting Proliferation Financing AML/CFT/CPF legislative, regulatory and enforcement landscapes have been thoroughly reviewed and strengthened.
The following legislation, among others, was enacted to address deficiencies in existing law and to strengthen the AML/CFT/CPF regime: the Financial Transactions Reporting Act, 2018 and the Financial Transaction Reporting Regulations 2018; the Proceeds of Crime Act, 2018; the Anti-Terrorism Act 2018; The Financial Transactions Reporting (Wire Transfers) Regulations, 2018; and the Travellers Currency Declaration Amendment Act, 2018. This suite of legislation was passed in an attempt to place the country in compliance with the FATF 40 recommendations. In 2019, The Bahamas improved its compliance with the FATF’s 40 recommendations, from 18 ‘compliant or largely compliant’ in 2015 to 30 ‘compliant or largely compliant’ in December 2019.
A good example of the jurisdiction’s adherence to international best practices is economic substance.
“Like many IFCs across the globe,” said Kevin Moree, from McKinney Bancroft and Hughes, based in Nassau and BFSB’s new Chairman, “The Bahamas has enacted legislation which requires certain entities to have substantial economic presence within its jurisdiction. For numerous reasons, including its location, stable government and economy, expertise in financial services and reliable judicial system, The Bahamas often features in business and estate planning structures".
The Commercial Entities (Substance Requirements) Act (CESRA) came into force on 31 December, 2018 and applies to Bahamian entities incorporated, registered, or continued under the Companies Act (including foreign entities which have been registered under that Act); International Business Companies Act’ Partnership Act; Partnership Limited Liability Act; and Exempted Partnership Act. Other Bahamian corporate vehicles, including foundations, are not subject to CESRA and therefore are not required to have substantial economic presence in The Bahamas or submit a CESRA report.
“What qualifies as substantial economic presence will vary on a case by case basis,” said Mr. Moree, “but essentially entities which are subject to the substance requirements and are not tax resident in a jurisdiction other than The Bahamas must have adequate assets, qualified personnel, physical office space and control in The Bahamas. With respect to having adequate control in The Bahamas, while there is currently no Bahamian jurisprudence on this topic it is anticipated that the seminal UK cases, which are persuasive but not binding in The Bahamas, will be instructive”.
Location And Expertise
Two of the key elements of the Bahamas Value Proposition and what distinguishes the jurisdiction are location and expertise. They are the reasons ActivTrades, for example, chose The Bahamas as its hub to service its South American client base.
“Besides the natural beauty of the islands, there were other reasons behind our choice,” said Brendan Davis. “Chief among these is the availability of a well-educated and skilled workforce. The Bahamas is internationally renowned as a centre for financial services and we assumed it would be possible to recruit locally based individuals with experience in the industry. Because of the relative complexity of the products we offer and diversity of our client base, our staff tend to be multilingual, university level educated, and with work experience in the finance sector. Our assumption proved to be spot-on, as today we employ nearly 30 locally-based finance professionals, who among them are proficient in seven different languages.
“Another important factor was the legal regime; the Bahamas legal system is based in English Common Law and for us, this was extremely important. However, the factor that weighed the most in our decision to establish a hub in The Bahamas was the presence of a reputable and globally respected regulator; that was paramount, and we found it in the Securities Commission of the Bahamas”.
He added, “The success story of brokers in The Bahamas is founded on the geographical location of the islands and the excellent transport links with the Americas and Europe; there are several direct flights to the main business centres on both sides of the Atlantic”.
A Growing Hub For Family Offices
For reasons similar to ActivTrades in selecting The Bahamas as a regional hub for its business, the jurisdiction is also gaining popularity among family offices as families try to gain greater control over their financial affairs.
“Family offices have risen in popularity to play a vital part in the cohesive and coherent management of their business interests, along with the domestic and personal affairs of their members,” according to Linda Beidler-D’Aguilar, Partner at Glinton Sweeting O’Brien, Counsel & Attorneys-At-Law.
“Although people are always wrangling over the kind of governance that family offices and their associated structures should have, there is no question that present political and regulatory conditions suggest that substance prevails over form. Anyone who wants to establish an offshore family office must take ‘permanent establishment’ regulations (which govern fixed places of business that usually generate direct-tax liabilities in the jurisdictions where they are situated) and controlled foreign company (CFC) rules into account. He or she must also contend with rules that relate to tax, residency and immigration, while overseeing and managing things competently. The Bahamas’ legislative and regulatory regime gives such people the opportunity to create effective and efficient structures for family offices that comply with financial regulations”.
She added, “Service providers --including financial institutions, lawyers, and accountants-- skilled professionals and staff are readily available in the islands. The Bahamas' proximity and direct flights to major cities such as Miami, New York, Toronto and London, as well as the opportunity for families and their trusted advisors to take up residence and purchase property there, are highly advantageous for long-term strategic planning”.
The Bahamas: The Clear Choice
The Bahamas’ strong regulatory regime and its historic determination to ensure its integrity as an international financial centre, as evidenced by its most recent commitments, reflect the mindset of a jurisdiction focused on protecting and cultivating its key assets. Regulation, as it relates to international initiatives, is the canvas upon which The Bahamas’ wealth management expertise, innovative client-centric products and services, and unique geographic tropical location combine to make it an increasingly clear choice for institutions and individuals seeking a premier provider of financial services.
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.