Almost ten years after what some described at the time as the "renaissance" of the offshore financial services sector in The Bahamas, we find ourselves again at the helm of a magnificent and well-designed ship seeking new and stable ports of call in an otherwise turbulent and dynamic international financial arena. However, the difference today is that we are being called upon to also re-design the ship concurrent with the charting of a new course.

The initiatives of the Organization for Economic Cooperation and Development ("OECD") against harmful tax regimes, i.e. offshore financial centres or tax havens, and the efforts against money laundering and drug-trafficking have resulted in significant pieces of legislation being introduced and enacted to pre-empt sanctions threatened by members of the OECD. Accordingly, for the first time in the history of the existence and development of the international financial services sector in the country, the Government of The Bahamas has expressed an intent to enter into a tax information exchange agreement with the United States of America, and possibly other countries to follow. By all indicators, this signals the dismantling of the tradition and practice of confidentiality in financial transactions. As the waters in this new environment are tested and the scope of disclosure of fiscal (tax) information is determined, practitioners in the sector are formulating strategies both to embrace the evolving playing field and to protect their clients.

It is safe to opine that the financial services sector strongly endorses the local and international initiatives against the crimes of drug trafficking and the money laundering of revenue earned from illicit activity. However, the requirement of disclosure should not extend to legitimate transactions, breaching the Common Law principle of confidentiality in private transactions. Indeed provisions, existing under the Mutual Legal Assistance Treaties entered into by the Government of The Bahamas with Canada, the United States of America, and the United Kingdom, allow for the exchange of pertinent information precisely in such instances of drug-trafficking and money-laundering.

The new regulatory landscape will include increased investigative powers for the Central Bank of The Bahamas, assisted by a newly established Financial Intelligence Unit. The reporting of financial transactions over a certain amount will be mandatory, as will be the introduction of strict due diligence, "know your customer", rules. Further, the requirement to retain on record the identity of the beneficial owners of international business companies registered in The Bahamas is reinforced by the elimination of bearer shares.

As the dust settles on the new regulatory landscape, The Bahamas’ competitive advantage will be addressed in the quality and diversity of services and products offered in the financial sector. Critical to this advantage will be the pricing of services and products, as the comparison will no longer be with other "offshore" jurisdictions but also any major financial center around the world. Value for cost will be the new weapon of the international clientele. We in The Bahamas have always boasted of the scope and depth of the country’s professional infrastructure, the state-of-the-art telecommunications system, and the accessibility of the country by the various modes of transportation. The new challenge will be in developing competitive pricing of products and services, a progressive, transparent and simplistic tax regime complemented by a network of bilateral double taxation agreements, and a Government that is as quick to facilitate the demands and opportunities of a dynamic financial market as it is to impose regulations on that market. These are challenges which The Bahamas will comfortably face and chart a course to overcome.

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