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Remarks by the Minister of Financial Services

Speaking at the Foreign Account Tax Compliance Act symposium held yesterday in Nassau, Minister Ryan Pinder said that the financial services industry must be prepared to face the new US rulings. Read his full address here. 

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TheBahamasInvestor.com
Tuesday, November 6, 2012
Tuesday, November 6, 2012

Remarks by Minister of Financial Services Ryan Pinder at the Foreign Account Tax Compliance Act (FATCA) symposium held in Nassau Monday, November 5, 2012:

Introduction
Welcome today to this informational seminar on the United States legislation, the Foreign Account Tax Compliance Act (FATCA). The Internal Revenue Services describes the FATCA as “an important development in US efforts to improve tax compliance involving foreign financial assets and offshore accounts.” Generally, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by US taxpayers, or held by foreign entities in which US taxpayers hold a substantial ownership interest.

Although this is a broad statement, I am sure you will hear from the international experts further detail on what is required, what the obligations are, and what you need to do to prepare.

I want to note in my introductory remarks that we as an industry must be prepared to accept that what we are subject to under FATCA will only be the start of the new normal. The global paradigm is shifting to an expectation of transparency globally. We have been witnessing this evolution over the last 15 years from when legislative changes were made for anti money laundering purpose since the early 2000s, to the implementation of TIEAs, to the imposition of OECD and FATF recommendations, and now FATCA. We, however, as a longstanding jurisdiction who has developed a significant level of local expertise, an independent financial center, we cannot only compete in this new normal, we can be industry leaders.

Private sector and government responsibilities in the implementation of FATCA we all have certain responsibilities, both government and private sector.

This initiative is, however, primarily a private sector initiative, you have certain responsibilities to ensure your internal procedures are compliant with what is required by FATCA, you have a responsibility to vet your current and legacy clients, and you have a responsibility to ensure certain intake procedures are implemented for new clients. These are challenging events, and I want to commend the organizers for hosting this informational seminar to help prepare the private sector of the industry. These types of initiatives will continue to ensure that as much information is disseminated in the public main as possible.

The government also has a responsibility, however, it is a defined responsibility. As to the implementation of FATCA, the government has the responsibility to determine the best method in which information is to be transmitted to the United States authorities. In other words, if an inter-governmental agreement is the recommended course of action, and if so, which model of agreement is best for The Bahamas and best for the financial services industry of The Bahamas. One thing that I can assure you of is that the decision will be based on careful expert analysis, and thorough consultation with the private sector. I will not be forced into reckless or premature comments. This is one of the most important issues facing the financial services industry today and in making the decision on which course of action the government will pursue in reporting, we will treat it as such.

We know that the Treasury Department has released a Model I intergovernmental agreement based on the agreement the United States reached with the EU 5. We anticipate a Model II intergovernmental agreement based on the agreement reached with Switzerland. Like many of our regional competitors, we wait the release of this Model II agreement before making any statements on conclusions. It is not anticipated that a government will be able to conduct significant negotiations to deviate from the respective models of intergovernmental agreements, there will likely be some negotiation however.

Different Sectors of Financial Services Industry
In our consultations and evaluations I am appreciative of how different financial services institutions are capable of preparation for FATCA. For example, many of the international institutions will have directives from their parent institutions on the preparation for FATCA. Local institutions, many Bahamian owned, do not have the luxury of directives and programs provided by parent or global institutional frameworks. The government is appreciative of this fact, and in consultations will ensure that this aspect of preparation is highlighted. It is important to understand the various levels of preparation in the private sector, which sectors of the industry are least prepared, and what options exist to ensure adequate preparation by all.

Although recognizing that preparation and implementation of FATCA is a private sector responsibility outside the defined role of government, the Ministry of Financial Services will work with the vulnerable areas of the industry to assist with a strategy for implementation. These areas of the industry that I term vulnerable sectors should come together and try to work on a common solution, this will help spread the cost and work through a broader base of institutions. My Ministry has conducted some preliminary investigations in to programs and platforms that financial services institutions might utilize to assist with their respective FATCA procedures and implementation. We would be happy to consult with this group, through coordination with the Bahamas Financial Services Board, to introduce potential platforms to the industry.

Conclusion
In conclusion, the implementation and compliance with FATCA is one of the most pressing matters with respect to compliance matters in the financial services industry. It is a matter that must be addressed. As discussed, the private sector has significant responsibility for implementation, and the government has a certain responsibility as well. Proper consultation and disciplined analysis is required in order to make a reasoned decision. One thing I do have confidence in is that we have the talent in the industry to do the right thing. We have compliance officers and leaders in the financial services industry that can not only face this issue, but to solve it and implement the due diligence and reporting requirements of FATCA in a proper manner.

Opening Accountants' Week in Nassau today, Minister of State for Finance Michael Halkitis (pictured) said that the government was committed to fiscal recovery and reform of the financial sector.

Bloomberg: President Obama defies history on economy and wins with a coalition vote.

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