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Features - July 2006



The Bahamas Investor

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Confidentiality still a cornerstone of private banking

Confidentiality still a cornerstone of private banking

Recent legislative changes should preserve the future of the private banking industry

The Bahamas Investor Magazine
July 1, 2006
July 1, 2006
Ivanhoe Sands

New and revised financial services legislation, coupled with groundbreaking product advancements, has granted The Bahamas a pole position in the international private banking arena. And despite a widely held misconception, confidentiality remains an attractive and active component of the banking services available in this jurisdiction.

In The Bahamas, client confidentiality was a cornerstone of the private banking industry for decades. However, its future was put to the test when international pressure–largely driven by the Organization of Economic Co-operation and Development (OECD)–prompted The Bahamas to revamp its banking laws and regulations. The Financial Action Task Force (FATF) was created by the OECD to monitor and investigate offshore financial centres to ensure that they cooperated in the international battle against money laundering and the funding of terrorist organizations. The FATF investigation concluded that The Bahamas’ anti-money laundering laws were inadequate and non-cooperative. Subsequently, The Bahamas was blacklisted by the OECD, which also noted that the country was engaged in “harmful tax competition.”

With its reputation and regulatory status under threat, The Bahamas responded with an array of new and revised legislation, including:

• The Financial Transactions Reporting Act 2000 (FTRA)
• The Financial Intelligence (transaction reporting) Regulations 2001
• The Financial Intelligence Unit
• The Central Bank of The Bahamas Act (for activities regulated under the revised Banks and Trust Companies Regulation Act)
• The Financial and Corporate Services Providers Act, and a host of other legislation regulating the activities of other financial bodies and services.

The resolve of the financial services authority of The Bahamas in bringing about regulatory change in 2000 has enhanced the country’s position as a reputable player in the international banking field. The Bahamas’ banking practices and standards, regulation and supervisory controls are now on par with that of the global banking community.

While the OECD’s investigation did result in placing international banking activities under the microscope, the preservation of client information remains an important component of the private banking services offered in The Bahamas. Although the elements necessary to identify, disclose and report may appear on the surface to be restrictive and extreme, confidentiality is still maintained in that the requirement for disclosure is not a frivolous process–several channels must be exhausted before disclosure under Bahamian law is permitted.

The legislative and regulative changes affecting the international financial community of The Bahamas has, however, placed the private banker in a more advantageous position. Mechanisms are now in place that will expose illegitimate players and attract clients who appreciate and have a healthy understanding of the regulatory climate of the global financial community.

A focus on asset protection
Private banking in The Bahamas is no longer viewed as an illicit or unsavoury component of banking. The major changes reviewed above actually compelled The Bahamas to refocus its efforts toward asset protection rather than tax avoidance. Clients are now also more sophisticated; and while confidentiality still plays a part in private banking affairs, the prevailing trend involves a shift toward asset protection.

Clients are increasingly concerned with protecting their principal investment and achieving a solid return. Thus, the future and continued success of private banking in The Bahamas will entail solutions and services that can be tailored to anticipate the financial needs of the client.

We can see that, in ever changing markets, clients will continue to seek capital protection and growth along with confidentiality. In order for The Bahamas to maintain a leading role in the global financial community, its future must be rooted not only in traditional banking activities but also in providing an evolving and sophisticated environment to assist clients in addressing global changes. As such, the recent legislative changes, coupled with the dedication of the regulators, should preserve the future of the private banking industry in The Bahamas for years to come. While there will always be changes, we are confident in the ability of the public and private sectors of The Bahamas to meet such challenges.

Ivanhoe Sands
Ivanhoe Sands is Managing Director at Credit Agricole Suisse (Bahamas) Ltd. A native of Abaco, he spent five years as a dealer and 25 years as dealer manager in Foreign Exchange, Interest Rate Markets and derivatives in New York and Nassau. He entered the private banking field in 2000 and has been heavily involved in the merger of Credit Agricole with Credit Lyonnais to form Credit Agricole Suisse.

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