The Bahamas: A Closer Look Leads To A Clear Choice

The goal of a level playing field for international financial centres has been fraught with the imposition of international regulatory standards of compliance and transparency. The idea is that one set of rules should apply to all with no exceptions. While that's great in theory, it hasn't necessarily been done in practice. At least it appears that way, with a double standard existing where some larger, more developed countries who formulate the rules do not necessarily adopt the standards they impose. In this way, the goal of the level playing field eludes us.

The Bahamas has long advocated for a level playing field.  Despite what other jurisdictions may be doing, we continue to meet the requirements for compliance and transparency. It's not just a matter of being perceived and acting as a cooperative international partner. It's to protect the integrity of our jurisdiction and, in doing so, position ourselves to compete for business through innovation and adjustments to our business environment, products, and services.

The Bahamas Provides A 360 Offering

After a year of the COVID-19 pandemic and the ongoing scrutiny of international bodies, the issue for global financial centres is the retention of trust and confidence of the clients being served.  Therefore, clients and service providers must know their jurisdiction – its essence, character, and offerings in the same way that financial institutions are required to know their clients.

In assessing a jurisdiction, due diligence must be done on the integrity and inherent nature of the country as well as its suite of product and service offerings, overall governance, and regulatory environment and capability.  When you put The Bahamas under the lens and examine for these conditions, its solid and well-established platform of services, its value proposition as a jurisdiction and its strategic risk management response have not only enabled it to survive but come through even stronger as a more compelling jurisdiction for financial services.

Well Regulated Jurisdiction Leads To New Opportunities

The fast pace of global regulatory change is a reality faced by all international financial centres. However, even with these changes,  opportunities do arise for jurisdictions. The Bahamas strives to be nimble and best in class as we address global standards, initiatives, and best practices. While 2020 and 2021 have been unprecedented years for many industries, for local financial and corporate service providers in The Bahamas, the year brought in a host of new and amended regulations which carry the potential to transform the very landscape of the industry.

The Financial and Corporate Service Providers Act, 2020 enhances the legal and regulatory ​framework for those providing corporate and administrative services. Meanwhile, the new Banks and Trust Companies Regulations Act, 2020 consolidates and modernises the law regulating local banks and trust companies to enhance governing powers for The Central Bank of The Bahamas. The introduction of the new Investment Funds Act, 2019 now requires fund managers to be appointed to investment funds, allows for the appointment of international fund administrators, and generally rationalises the responsibilities of all the key parties. The EU's Alternative Investment Funds Management Directive provisions were a catalyst for the reinvention of the investment funds industry in The Bahamas.

From a level playing field perspective, within the past few years, The Bahamas has passed a compendium of legislation to meet international standards regarding economic substance, removal of preferential exemptions, and automatic exchange of tax information to meet the EU and OECD's criteria on tax matters which resulted in the European Union removing The Bahamas from its list of uncooperative jurisdictions for tax purposes in March 2020. Most recently, on March 4 of this year, the Government of France removed The Bahamas from the French list of non-cooperative states and territories in tax matters. In addition, The Bahamas maintains 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, counter financing of terrorism and counterproliferation legislative, regulatory and enforcement landscapes have been thoroughly reviewed and strengthened with The Financial Action Task Force removing The Bahamas from its anti-money laundering and counter-terrorism financing watch list in December 2020.  All of these efforts aid in reducing the risk profile of The Bahamas as an international financial centre, making it an attractive jurisdiction for financial services.

Innovating To Compete And Grow

Market responsiveness has also long been a part of The Bahamas' DNA as a forward-thinking international financial centre. It has been the basis of allowing us to respond and compete in a level playing field environment by creating innovative, client-centric products and services in a modern, compliant regulatory regime.

More recently and impressively, The Bahamas has deliberately moved to establish itself as an alternative for world-class regulation in the FinTech space. The newly introduced Digital Assets and Regulatory Exchange Act, 2020 (DARE) was developed to change how we approach developments in this area. DARE is not a single stand-alone solution but rather the broad features of the jurisdiction, such as private banking and funds coming together to recognise why it and a broader-based FinTech capability is required.

FTX, the world's third-largest cryptocurrency exchange, is now the first registered under DARE.  It recently opened a headquarters in The Bahamas, then raised US$420 million in series B funding, pushing the company to a US$25 billion valuation. FTX owner Sam Bankman-Fried thinks more of these firms could be looking to put The Bahamas on the map as ground zero for crypto firms. He was quoted in Bahamian media that he chose to bring FTX to The Bahamas because of the country's robust regulatory framework in the digital assets space.

“We’ve been really impressed by the regulators and by the government here,” Bankman-Fried said in an interview with Nassau-based Guardian Business. "They passed the DARE Act, and it provided one of the first comprehensive regulatory frameworks for cryptocurrencies in the world.  It’s all we’ve asked for in a regulatory partner.”

Christina Rolle, Executive Director for the Securities Commission of The Bahamas, the regulator which ushered in the DARE Act, says there is an increasing stream of applications for various businesses and products provided for by DARE. "These go beyond digital exchanges and include activities such as transferring or exchanging of digital assets and products such as stable coins,” she said. “This is a significant trend because it speaks to how this jurisdiction continues to show its capacity to adapt to a changing world and create opportunities for legitimate business.”

She added, "The resilience of securities, investment funds and capital markets business throughout the COVID-19 pandemic years is another trend we have been watching closely.  These industries have held strong throughout the pandemic and maintained position or showed some growth. This has helped to offset some of the economic losses the country suffered since the onset of the pandemic and highlighted the impact and potential of this industry for the diversification of our national economy.”

Location Matters

In recent years, as  more individuals have chosen to “follow their money” with respect to where they live and work, this movement, combined with the country's substance and governance requirements, have become vital in The Bahamas becoming a preferred choice for family offices or for those who yearn for an excellent quality of life whilst being able to manage their global affairs.

More family offices are deciding to make a home in The Bahamas and, in so doing, must consider regulatory standards within the jurisdiction. The Bahamas’ Commercial Entities (Substance Requirements) Act, 2018 (as amended) (CESRA) provides a roadmap for family offices to follow in this regard.  Not only does CESRA provide direction as to the level of staffing, office premises and the like which are required for a family office to serve as a 'headquarters' and conduct core income-generating activities in The Bahamas, it also provides direction on the specific governance requirements which the family office must meet. 

Suppose, for example, a family office elects to be treated as a headquarters within The Bahamas, in addition to the core income-generating activities. In that case, it must also demonstrate that there is substance as to its direction and management within The Bahamas as well.  To that end, CESRA mandates that board meetings for the purpose of taking strategic decisions, among other things, be held in The Bahamas with a quorum of directors physically present for such meetings; books and records for the family office must be maintained locally as well.  CESRA also directs that the board members have the necessary knowledge and expertise to discharge their duties.

The availability of a range of financial institutions, qualified professionals, and the opportunity to establish residence and with the right to work within The Bahamas provides a framework around which compliant, practical and effective management systems for family offices may be established.

KYJ – The Clear Choice Is The Bahamas

Knowing your jurisdiction – its essence, character, and offerings – should lead to a clear choice of where you should do business and perhaps even settle in life. When one scrutinises The Bahamas from a KYJ perspective, what emerges is an international financial centre committed to the principles of a level playing field for all, cultivated by a culture based on experience, innovation, government commitment, an ideal location, exceptional lifestyle, and a diverse product portfolio.

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.