Bahamas: The Bahamas: Committed To Compliance, Embracing Innovation

Last Updated: 21 February 2019
Article by Tanya McCartney

In today's ever-changing global regulatory environment, it is not business as usual, it is business re-engineered to adhere to global regulation whilst catering to the needs and demands of High Net Worth (HNW) clients.

International regulatory standards have made the compliance process more complex when conducting business in international financial centres such as The Bahamas. However, they have also improved the international environment of unwanted exchanges and business relationships, while changing how we cater to the needs of investors.

For international wealth planners, there is no doubt that IFCs will continue to play a very important role in the delivery of wealth planning tools to meet the needs and objectives of HNW individuals who seek to diversify investments. It is against this backdrop that the Bahamas has taken the initiative to brand itself as the 'Clear Choice' for financial professionals, maintaining its place as one of the world's foremost wealth management centres.

While private wealth management serves as a foundation, a full range of product and service offerings are available, including private banking, estate planning, asset management, fund administration, captive insurance and other corporate and financial services. Additionally, it provides services to international capital market and maritime industries.

Times are different from when the Bahamas' financial services industry started over 85 years ago. We recognise the need to be innovative in our approach; this is essential as financial services is integral to the sustainability of our economy. It is our second industry, the first being tourism, and accounts for more than 15 per cent of our GDP.

Commitment to Compliance

Compliance with the Organisation for Economic Cooperation and Development (OECD) and EU criteria on tax governance has required The Bahamas to institute changes to the legal and regulatory regimes that govern its financial sector, in line with those applied globally. In doing so, the jurisdiction has been engaged in meaningful discussions with these international bodies and has drafted new legislation to ensure the achievement of the right balance of compliance with the international standards, business and economic sustainability.

This includes:

  • The passing into law the Multinational Entities Financial Reporting Act, which sets out a comprehensive framework for Country by Country reporting in line with the Base Erosion and Profit Shifting (BEPS) initiative.
  • The initiation of Automatic Exchange of Information (AEOI) with 35 jurisdictions (19 of which are EU jurisdictions), in accordance with the Common Reporting Standard (CRS), with the first exchanges having taken place in September 2018.
  • Passing the following legislation in parliament this month to address concerns raised by the European Union: Commercial Entities (Substance Requirements) Bill, 2018 which addresses EU concerns regarding entities having economic substance; and Beneficial Ownership Register Bill, 2018. Removal of Preferential Exemptions Bill, 2018 to address the concern of ringfencing.

These measures and commitments send a loud and clear message to the international financial services' community that the Bahamas is serious about adhering to global standards and remaining a clean and compliant jurisdiction committed to the principles of transparency and cooperation

Embracing Innovation

The Government of The Bahamas. as a policy priority, has sought to establish a new legislative framework to encourage and facilitate new, cutting edge business ventures to establish themselves in the dominion. The Commercial Enterprises Act (the Act) was established to incentivise foreign and domestic investment in specified commercial enterprises. In short, the Act seeks "to liberalise the granting of work permits to an enterprise that wishes to establish itself in the Bahamas, and requires work permits for its management team and key personnel". There has also been a relaxation of Exchange Controls on capital transactions, namely on capital (investment) and current account (trade) transactions. The changes came into effect as of February 1, 2018.

The Act provides that a specified commercial enterprise can be established with an investment of not less than US$250,000; or a joint venture or partnership between a Bahamian and a non-Bahamian. This enterprise may conduct business from any location in The Bahamas subject to zoning ordinances. The Minister responsible for Financial Services, in consultation with the Minister of Finance, may prescribe that any Island or any part of any Island as a 'specified commercial enterprise zone' for the purposes of rationalising infrastructural investment, efficient land use or the encouragement of clusters of commercial development, subject to economic incentives required to give effect to such zones.

Fundamentally the purpose of this Act is to attract greater foreign direct investment in strategic sectors which have the potential to create new jobs and expand opportunities in the economy of The Bahamas.

The goal is to make it easier for persons investing in specialized areas such as arbitration, technology, call centres, international and maritime trade and captive insurance to obtain work permits more quickly and efficiently, with the ultimate aim of transferring knowledge, talent and techniques to the local workforce.

The Bahamas Securities Industry

It is also an exciting time for the securities industry in The Bahamas. A complete overhaul of legislation governing investment funds' regulatory framework is nearing completion by the Securities Commission of the Bahamas (SCB). The overhaul includes an updated Investment Funds Act (IFA) as well as some forthcoming changes to the overall securities industry legislative regime.

Investment Funds Overhaul

The Investment Funds Act 2003 was largely structured to be in line with the operations of fiduciary administrators and did not necessarily account for the appropriate regulation of the various roles within a fund structure. Consequently, the SCB's mission has been to address those gaps that would help support institutional as well as private wealth business.

It is anticipated that overhauling the IFA "will accomplish key improvements to the regulatory structure which will enhance The Bahamas' competitive appeal". The Bill contains key changes related to:

  • Changes in the definitions of Bahamas versus non-Bahamas based funds.
  • Changes in the triggers for licensing of funds.
  • The ability to appoint international administrators without requiring that they be licensed.
  • The introduction of licensing requirements for fund managers and regulatory oversight of custodians.
  • The establishment of an Alternative Investment Funds Management Directive (AIFMD) regime with a view to the Bahamas qualifying for an EU Passport.

Updates to Securities Industry Rules

There are other rules impacting the securities industry that are near completion or in various stages of development. The Securities Industry (Business Capital) Rules, 2018, which were developed by the Commission to specifically address funding for small and medium businesses, are now being finalised. Other key securities laws being developed include the Compliance Officer Rules, takeover code, and corporate governance rules.

The Compliance Officers Rules will establish and clarify requirements and related qualifications and obligations of compliance officers, as well as create standards that must be met in the outsourcing of the compliance function. The takeover codes will provide a framework for how takeovers will occur and will ensure the protection of minority shareholders in takeover circumstances.

The proposed corporate governance rules will create standards that all public issuers are expected to adopt and will form the basis by which the Commission will assess the effectiveness of the corporate governance framework for public companies, including state owned enterprises.

IOSCO's Multilateral Memorandum of Understanding (EMMoU)

SCB's application to become a signatory to the International Organization of Securities Commission's (IOSCO) Enhanced Multilateral Memorandum of Understanding (EMMoU) is receiving favourable consideration and is awaiting formal approval from the IOSCO Screening Group.

The EMMoU includes additional powers which regulators must be able to exercise. These powers are referred to by the acronym ACFIT and they include:

  • The power to obtain Audit Papers.
  • Powers by the regulator to Compel Attendance for testimony.
  • The ability of a regulator in one jurisdiction to assist or provide information to another regulator on the freezing of assets.
  • The power and ability of a regulator to obtain existing records and logs from internet service providers.
  • The power and ability to obtain and share existing telephone records and logs.

Fintech

Noting the growing interest in the jurisdiction as it relates to initial coin offerings (ICOs), crypto exchanges, and other digital token arrangements, the Commission has initiated discussions for the development of a regulatory framework aimed at providing clarity to participants in the crypto space. It is also taking cognisance of the emergence of Risk-Based Supervision (RBS) as an approach to regulatory supervision of financial institutions globally.

The Commission has designed a risk-based supervisory framework, which includes continuous Anti-Money Laundering/ Combating the Finance of Terrorism (AML/ CFT) risk identification and monitoring, along with supporting templates.

Bahamas Value Proposition

As one of a very few truly independent and sovereign territories operating as an IFC, the value that The Bahamas offers is in:

  • Delivering superior service in structuring and tailoring financial services products to meet client needs.
  • Providing expertise and innovative ideas in the area of trust and private banking, capital markets and most recently, family office business.
  • A common law judicial system with the highest Court of Appeal being the UK Privy Council.
  • Flexibility in streamlining processes, technology and infrastructure.
  • A large cadre of professional, educated and skilled workforce.
  • A prime destination that is within easy reach from almost anywhere around the world with its proximity to the United States

Originally published by IFC Economic Report, Winter 2018/2019.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Oct 2019, Business Breakfast, Rio de Janeiro, Brazil

The event will showcase the jurisdiction for those wishing to expand their investment and financial services capabilities. In this regard, the delegate audience we are aiming to attract includes fund financial services advisors, commercial and corporate attorneys, corporate administrators, asset managers, law firms, consultants, accounting firms and private wealth advisory services.

17 Oct 2019, Speaking Engagement, Sao Paulo, Brazil

The event will showcase the jurisdiction for those wishing to expand their investment and financial services capabilities. In this regard, the delegate audience we are aiming to attract includes fund financial services advisors, commercial and corporate attorneys, corporate administrators, asset managers, law firms, consultants, accounting firms and private wealth advisory services.

18 Nov 2019, Business Breakfast, Dubai, United Arab Emirates

The event will showcase the jurisdiction for those wishing to expand their investment and financial services capabilities. In this regard, the delegate audience we are aiming to attract includes fund financial services advisors, commercial and corporate attorneys, corporate administrators, asset managers, law firms, consultants, accounting firms and private wealth advisory services.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions