As published on tribune242.com, Thursday 11th April, 2019.
The Bahamas must be “a pioneer rather than follower of trends” if it is to reverse the financial services industry’s constant “attrition”, a risk and compliance specialist warned yesterday.
Emmanuel Komolafe, pictured, told Tribune Business that this nation needed to focus on “redefining our value proposition” as a means to boost the jurisdiction’s competitiveness following a period when it has been distracted by multiple European Union (EU) and Organisation for Economic Co-Operation and Development (OECD) “blacklisting” threats.
Arguing that The Bahamas needed to “do a better job of telling our story”, Mr Komolafe said it still “has a lot going for it” through its tax neutral platform, base of skilled financial services professionals, US proximity and lifestyle quality, and a sound regulatory regime.
He added, though, that the jurisdiction needed to become more “agile and innovative” by being first to market with a new product or service that acted as a game-changer by attracting new, compliant business to these shores.
Speaking after The Bahamas was one of the biggest fallers in this year’s Global Financial Centres Index, dropping 18 places from 67th to 85th spot out of 112 jurisdictions reviewed, Mr Komolafe warned it “would not be prudent to bury our heads in the proverbial sand” and ignore the findings even though they largely revealed nothing new.
“There’s hardly anything in the report that we don’t know,” he told Tribune Business, pointing to the Central Bank’s annual financial sector surveys that have constantly revealed year-over-year drops in industry employment, number of institutions, assets under administration/management, sector spend and its overall economic impact.
“We can see there’s been some attrition in the industry and, in all fairness, we have to get past survival mode and look at how we can thrive or, at a minimum, halt this attrition at some point,” he told Tribune Business.
“We have FATCA (the Foreign Account Tax Compliance Act), the CRS (Common Reporting Standard), which all mean we have to redefine the value proposition and be innovative - redefining, rebranding the industry to take advantage of new opportunities.
“To be innovative we have to be pioneers rather than followers. A case in point is going back to this digital assets Bill. There’s been discussion about it for quite some time, and it’s good to have draft legislation released, but while we’ve been talking about it others [Bermuda] have already passed legislation,” Mr Komolafe continued.
“We have to be more agile, more innovative. Agility has to come into play so that we are swift - not to rush into anything - but it has to be that we’re pioneers not just following a trend. It’s important to stay off blacklists, but when you’re talking about competitiveness slipping 18 spots is significant.
“We cannot ignore perception, as people come to our jurisdiction based on what they perceive. That’s important. We have to do a better job of telling our story and enhancing the value proposition of The Bahamas. We have a lot going for us, and need to speak to that as much as we can.”
The Bahamas has previously shown it can innovate following the gradual erosion, and ultimate loss, of its long-standing tax anonymity and secrecy competitive advantages. The SMART (Specific Mandate Alternative Regulatory Test) fund transformed investment funds into a private wealth management tool, while The Bahamas became among the first common law jurisdictions to adopt a civil law product in the shape of foundations. And the ICON was created to enable this jurisdiction to target the Brazilian and Latin American markets.
The Global Financial Centres Index just unveiled by London-based think-tank, Z/Yen Partners, in collaboration with the China Development Institute, showed that The Bahamas’ rating fell by only six points year-over-year - dropping from 591 in 2017 to 585 last year.
The index, which assessed 112 financial centres based on 133 criteria, and received 2,373 responses, indicated that while The Bahamas may have done little wrong, other financial centres continue to make sufficient reforms and improvements to bypass and leapfrog this nation.
While it was ranked one spot below the Isle of Man, another major international financial centre (IFC), the likes of Glasgow, Warsaw, Budapest and Sofia were placed further ahead and The Bahamas was among the greatest fallers in terms of rankings.
The Bahamas was also rated eighth out of nine financial centres in the Latin American and Caribbean region, beating only Buenos Aires. And it was grouped among 15 financial centres said to be suffering from “the greatest reputational disadvantage”.
“This indicates that respondents’ perceptions of a centre are less favourable than the quantitative measures alone would suggest,” the Global Financial Centres Index added. Others falling into this group included the likes of Cyprus, Monaco, Glasgow, Nairobi, Riga, Sofia and Busan.
Mr Komolafe argued that The Bahamas could ill-afford to ignore these findings, even though there were no stunning revelations among them. “Whenever we fall in ranking on any list that speaks to our competitiveness or reputation as a jurisdiction, we ought to pay attention,” he told Tribune Business.
“Are we still competitive? Of course we are; otherwise we will not have a financial services industry today. Can we do better? Absolutely..... It would not be prudent to bury our heads in the proverbial sand and take the view that all is well and there is no room for improvement.
“It appears that while we have focused on getting and staying off various adverse listings, there hasn’t been as much emphasis on enhancing our competitiveness and enhancing our value proposition. While some of our legislative and regulatory actions may have been necessary, they have also impacted the ease and cost of doing business in The Bahamas.”
Mr Komolafe said The Bahamas’ 18-place drop may suggest other “jurisdictions seem to have done more to enhance their competitiveness beyond just compliance with international standards”.
He added: “The report also noted the ‘respondents’ perceptions of centres such as ours are less favorable than the quantitative measures alone would suggest’. The Bahamas was included in the list of 15 jurisdictions with reputational disadvantage.
“It is common knowledge that The Bahamas has been included on adverse listings by the FATF, EU, OECD, US Treasury and The Netherlands over the past year. Could this have impacted perceptions of the jurisdiction? Possibly. Is it fair? Many will argue that it isn’t based on how much we have done over the years to strengthen our legislative and regulatory framework. That being said, we cannot ignore perceptions of our jurisdiction as an international financial centre.”