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Adapting to changing times

Adapting to changing times

The Bahamas embarks on a programme of reform and modernization to revitalize financial services

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The Bahamas Investor Magazine
June 26, 2018
June 26, 2018
Attorney-General Carl Bethel

Today, The Bahamas, like so many other international financial centres, stands at a crossroads. We can do nothing and be condemned to become the maudlin old man of the Caribbean region, tearfully muttering the words of “Auld Lang Syne” to an empty cup; or we can embrace inevitable change, make it our own and rise to the challenges posed. Irresolution, foot-dragging and delay are not options. Well enough is no longer good enough.

The very real threats of blacklisting, consequent reputational damage and the loss of correspondent relations through the de-risking initiatives pose clear and present dangers.

Even without such new and emerging threats, the fact is that the size of the financial services sector as a percentage of the gross domestic product has, over the last several decades, fallen to a mere 3 per cent of GDP based on the latest estimate of the International Monetary Fund, from historic highs of at least 15-20 per cent. While employment levels have remained fairly consistent in the sector over time, the unvarnished fact is that, while the GDP of The Bahamas’ economy has grown significantly over that period, growth in the financial services sector has not been so robust.

New mandate
In response to new mandates, the government is determined to make all changes necessary to dramatically improve the ease of doing business in The Bahamas; to remove any clouds of regulatory uncertainty and to restore to our jurisdiction the primacy and prestige it once enjoyed in financial circles, and so richly deserved.

To promote the ease of doing business, the government has tabled and will promulgate in Parliament a new business regime, designed to attract targeted commercial enterprises, primarily by the removal of certain rigidities, particularly in immigration matters.

Steps are also being taken to permit the creation of a “one-stop-shop,” or more accurately, a one-stop depository for Know Your Client and due diligence information for any person interacting with governmental licensing or regulatory agencies.

Hence, information received in connection with an application for investor approvals might also, with necessary consent, be shared with the Department of Immigration by secure means in order to support a work permit or residency application; with the National Insurance Board for payments of social security, or with the Road Traffic Department to obtain a driver’s licence. The intent is to minimize duplication of efforts and bureaucracy throughout any interactions with government agencies, and to speed up all approval processes.

Further initiatives towards this end are also being contemplated and will be unveiled in due course.

Legislative reform
In the realm of financial supervision there have been several legislative initiatives designed to bring The Bahamas into full compliance with our international obligations and to ensure an abundance of legal and regulatory experience and capacity. This is not only to weather the present issues, particularly money laundering and terrorism, but also to be able to adapt to new and emerging concerns, such as proliferation offences, human trafficking and cybercrimes.

The new Proceeds of Crime Act will provide a legal framework to enable law enforcement to effectively address all “identified risks” presently defined to include AML/CFT, corruption, cybercrime, proliferation related to the financing, possession, use (in The Bahamas or anywhere else in the world) of chemical, biological or nuclear weapons or materials, human trafficking and any indictable offence.

The new law will enhance freezing and forfeiture measures and provide policy-based national coordination of aspects of the law (not including the actual legal process) through the creation of a Steering Committee and Council.

The new Financial Transaction Reporting Act, which is still in the consultation stage with industry partners will, once enacted, implement a system of “risk-based” supervision across a wide spectrum of the financial and commercial economy, inclusive of traditional financial institutions and Designated Non-Financial Businesses and Professions. The new framework will be targeted, sector by sector, with the assistance of guidance notes and a soon to be implemented aggressive training scheme for front office staff, MLROs and compliance officers.

Once enacted, a new Anti- Terrorism Act will achieve compliance in domestic law with all United Nations recommendations and mandates particularly in the fight against terrorism-related and proliferation offences.

Efforts to move to the actual enforcement of laws now governing due diligence and financial record- keeping by not-for-profit organizations are continuing (in some respects in consultation with the Bahamas Christian Council, and other denominational leaders). Further adjustments in the law to capture friendly societies and statutory incorporated entities or companies are also foreshadowed.

Necessary steps
The creation of a new architecture of legal supervision and compliance is a time-consuming and onerous task, which must be undertaken and driven to completion after due consultation and with the consent and involvement of all industry partners and civil society leaders.

These steps are necessary not only to meet global expectations but also to do everything necessary to ensure that The Bahamas itself is safe from the perils of terrorism, money laundering and other serious criminal activities.

The Bahamas is committed at the highest political level to taking all reasonable and necessary steps to modernize our jurisdiction, improve competitiveness, expand the capacity of the Bahamian workforce to take advantage of new and emerging opportunities in the world market and to achieve necessary full compliance with international best practices in the provision of financial services.

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