29/01/21

BAHAMAS: Updated Legislation Clearly Defines Financial and Corporate Service Providers.

Press release from Securities Commission of The Bahamas on Friday 29 January, 2021.

Nassau, The Bahamas, 29 January 2021 – The Financial and Corporate Service Providers
Regulations gazetted in The Bahamas on 30 December 2020, along with the Financial and
Corporate Service Providers Act (FCSP) approved on 4 November 2020, establish a modern, full
regulatory, internationally compliant framework with the Securities Commission of The Bahamas
as regulatory authority. The legislation updates the two-decades-old legal framework of the
prevailing Act in three important areas:

  • It provides legal clarity for both corporate and financial service providers;
  • It provides much needed legal clarity to the non-bank financial services falling under its remit, in the process creating new entrepreneurial opportunities; and
  • It has a significantly greater focus on customer protection and safeguarding the public
    than the previous Act.

Similar to the Digital Assets and Registered Exchanges Act, 2020 (DARE) which also received
Parliamentary approval on 4 November, the SCB began its extensive engagement with the
industry in 2016 to develop a modern framework for financial and corporate service providers
that is in keeping with international best practices and standards. With 340 financial and
corporate service provider licensees in The Bahamas, the legislation directly impacts Bahamian
entrepreneurs, perhaps more than any other financial services legislation.

While the legislation covers corporate services activity, it also captures many of the non-bank
financial services activities in which Bahamian entrepreneurs are engaged in but are not required
to be licensed by the Central Bank of The Bahamas, nor registered under the Securities Industry
Act, 2011, with the Commission.

The FCSP clearly defines the businesses and activities that require a person to be licensed as a
financial or corporate service provider. Under the FCSP’s activity-centric approach, each financial
service will have specific rules tailored to the risks and other needs it represents.

Financial Services covered by the legislation include money lending, money broking, payday and
cash advances, credit extension, bill paying services, debt collection, financial leasing, financial

and advisory or consultancy services, financial intermediation services, trading in commodities
and other financial instruments, custody of digital assets and wallet services providers.

Christina Rolle, SCB’s Executive Director pointed out the significance of the custody of digital
assets and wallet service providers, dovetailing with DARE legislation. “The DARE Act establishes
the legal framework for a new industry, and the FCSP expressly defines and captures these
related services,” she said.

“Together, they represent specific opportunities for entrepreneurial Bahamian fintech firms to
enjoy the credibility of being licensed and functioning under a comprehensive regulatory regime
and participate in the fintech industry that is being forged with DARE.”

The Financial and Corporate Service Providers Regulations, 2020, (the Regulations) support the
legislation, and place some of the highest standards of professional conduct on licensees,
particularly with regard to client relations.

“Licensees will be required to take all reasonable steps to ensure that information provided to
clients is presented fairly and clearly” said Ms. Rolle. “The Regulations also require that licensees
protect clients’ personal data in keeping with the provisions of the Data Protection (Privacy of
Personal Information) Act. Further, the Regulations will require licensees to ensure their data
protection measures adequately address the collection and storage of personal data, prevent
unauthorized access to personal data, and allow for the correction of erasure of inaccurate data.”

The FCSP requires licensees to comply with the Financial Transactions Reporting Act, 2018 and
the Anti-Terrorism Act, 2018, protecting the industry and the reputation of the jurisdiction from
the contagion of money laundering, or abuse of terrorism financing.

It also defines for the first time certain criminal financial schemes, making The Bahamas one of
the leading jurisdictions to introduce legislation to expressly criminalize this type of activity.

“These may take the form of pyramid schemes, Ponzi schemes and advance-fee schemes, among
others,” said Ms. Rolle. “The FCSP criminalizes the promotion or marketing of these financial
schemes and empowers the Commission to dissolve them where circumstances so warrant. It
also empowers the Commission to investigate and enforce against persons engaged in promoting
or perpetuating financial schemes.”

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