New and amended legislation, a strengthened regulatory structure and a cohesive and confident private sector has positioned The Bahamas as an even stronger, more competitive international financial services center, in the wake of recent OECD, FATF, FSF and FINCEN developments and discussions.

Long-established as one of the foremost international financial centers and a key operational base for many of world’s most recognized and respected banking and financial organizations, The Bahamas has preserved its crucial tax neutrality advantage in the new financial architecture that has emerged in the country. In the process, it has become an even more attractive jurisdiction in which to do business.

" We fully recognize that we function in a globally integrated market for international financial services," said Ian Fair, Chairman of the Bahamas Financial Services Board (BFSB), a unique private sector-driven joint venture between government and country’s wide-ranging financial services sector.

"The Bahamas will stay at the forefront of this increasingly competitive global environment for the conduct of international financial services’ business by keeping pace with evolving trends for greater transparency and co-operation with onshore centers. This is consistent with our historic views and legislative actions with respect to criminal activities and counter money laundering and our determination to be recognized for our professionalism and attraction of blue chip business."

Events and developments in The Bahamas since the middle of 2000 point to the country’s resolve to redefine its financial services landscape and retain its well-deserved image as a sophisticated and progressive, yet responsible jurisdiction.

During this period The Bahamas undertook an extensive examination of its laws, regulatory structures and cross-border relationships. Simultaneously it conducted a series of multi-lateral exchanges with governments in the UK, Europe and North America as well as their regulatory agencies and international financial institutions with operations in The Bahamas in order to assess how best to respond to supranational initiatives.

Particular attention was given to the legislative framework in which the industry operates. Close consultation between government policy makers and the industry has resulted in the enactment or amendment of a significant legislative package which is widely supported by BFSB and the financial services industry.

It has also resulted in The Bahamas receiving QJ status from the U.S. government effective January 1, 2001.

" We have shown a responsible response to international concerns," said Mr. Fair. " We have always felt that we are among the first class jurisdictions but the supranational initiatives caused both government and the industry to take a close and aggressive look at what we must do to keep pace with the evolving international standards for bank regulation and supervision while not undermining our legitimacy as a preferred center for tax planning and other financial services."

Bahamas Government Insists On Maintaining A Level Playing Field

The Bahamas response to the supranational initiatives is based on the principle of constructive cooperation, with robust defence of legitimate national interests. Insisting on a process which is fair and transparent, The Bahamas believes there should be a common standard adopted by all cooperating onshore and offshore centers, including those located in G7 and OECD countries.

Adherence to this principle is designed to ensure that cooperation with any initiative does not erode The Bahamas’ competitive position in the international market for financial services. Accordingly, while cooperation with these initiatives resulted in important changes in the local legislative environment, The Bahamas is not wavering in its commitment to maintain its leading role in the global market for financial services.

International financial services account for such a substantial portion of the Bahamian economy that " we will take whatever steps necessary to ensure its integrity and recognize any-balanced, non-discriminatory initiative whose objective is the sustainability of a reputable financial services sector" the Bahamian Government Advised The OECD.

The OECD now accepts that The Bahamas is entitled to demand a level playing field and had also recognized that its initiative should be properly limited to illegal tax mitigation.

Most important , the OECD is no longer suggesting that The Bahamas must impose income tax. This is crucially important to The Bahamas since it preserves the fundamental competitive advantage of offering financial services in a tax neutral environment.

The Bahamas: At The Forefront Of Counter Money Laundering

The Bahamas shares the objectives of the FATF and has an ambitious legislative and administrative program which is at the forefront of OFCs fighting money laundering. By example, The Bahamas was the first international financial center to criminalize money laundering and has continually amended the original legislation to provide for the registration of confiscation orders in drug trafficking cases.

The enactment of legislation to form a Financial Intelligence Unit at the end of 2000 to investigate and prosecute money launderers further exemplifies government’s resolve in this area.

The Bahamas is moving swiftly towards a position where it can insist on its removal from the " non-cooperative" list. Ironically, in an incongruous development, the FATF wrote to The Bahamas shortly before the "un co-operative listing with commendation for its progress in strengthening its anti-money laundering regime.

Far-Reaching Legislative Initiatives

Nine pieces of new and amended legislation were enacted in The Bahamas at the end of 2000, underscoring the Government’ s commitment to the adoption of regulatory, administrative and legislative steps to strengthen the financial sector. Many of these changes are congruent with existing domestic plans to upgrade local infrastructure. Enacted legislation includes:

  • Financial Intelligence Unit Act, 2000
  • Criminal Justice (International Co-operation) Act, 2000
  • Central Bank of The Bahamas ( Amendment ) Act, 2000
  • Banks and Trust Companies Regulations Act, 2000
  • Banks (Amendment ) Act, 2000
  • Proceeds of Crime Act, 2000
  • Financial Transactions Reporting Act, 2000
  • Corporate Financial Service Providers Act, 2000
  • International Business Companies Act, 2000

Strong Support From Private Sector

BFSB has been at the forefront of consultations with the Government on this legislative package and has continued to be the catalyst for industry initiatives to further strengthen and enhance the sector’s competitive international positioning.

" It was important for us an industry to demonstrate an equally determined, thoughtful and all encompassing program of initiatives and actions that will ensure the we emerge as stronger, forward-thinking and even more professionally-sound jurisdiction," said Wendy Warren, the newly-appointed Executive Director for BFSB.

A Strategic Development Committee of BFSB, specially-formed to address the recent challenges, meets regularly to formulate recommendations for the continued development of the industry, especially with respect to new products/services and legislative changes such as protected cell legislation, e-commerce initiatives and foundation legislation.

The industry has also embraced self-regulation as a complementary measure to tighter legislative and regulatory requirements. A Standards & Practices Committee (SPC) is now in place with a mandate to develop for the entire industry international performance standards by the middle of 2001.

SPC will promote and encourage adherence by BFSB members to best international standards and practices generally, and in particular, in relation to "KYC" and counter money laundering systems, procedures and practices, being adopted world-wide and already being followed by international professional groups, as well as member banks of AIBT and the Clearing Banks Association.

A " Big League" Jurisdiction

Bahamian Prime Minister, The Honorable Hubert Ingraham said recently, " Our desire to "play in the big leagues" with the "big boys" requires our laws, supervision and regulation of the financial services industry to be of "big league" quality.

" We are satisfied that this new legislative package, coinciding with the expansion and strengthening of supervisory and regulatory human resource capacities in the Bank Supervision Unit of the Central Bank, The Bahamas will be in full compliance with the new international standards and practices governing the international financial service sector."

Some fallout is expected as the result of compliance with international standards. " Every jurisdiction, including OECD members, has a fringe element," said Mr. Fair. " We know it is in our best interests to rid ourselves of these elements, just as we – and we were the only jurisdiction to do so – shed ourselves of BCCI several years ago, before the scandal unfolded elsewhere"

For the more than 150 member firms of BFSB, representing all sectors of country’s financial services industry, there is high degree of confidence that while The Bahamas has restructured itself to be compliant, it is now even more strongly positioned as leading edge financial services setting for international business.

BFSB is a prime example off how The Bahamas has adopted a cohesive, multi-disciplined approach to the increasingly complex issue facing the financial services industry globally.

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