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Offshore hubs “should watch” changing US law

US civil litigation expert warns that increased regulation means that the law in the US relating to securities and asset recovery is changing, which could have far-reaching implications for offshore financial centres. 

Tuesday, November 1, 2011
Tuesday, November 1, 2011

Recent upheavals in US case law could have far-reaching implications for offshore financial centres, according to civil litigation expert Thomas L Long.

Long, a lawyer with leading US law firm Baker Hostetler, warned that the law in the US relating to securities and asset recovery is changing. “It is a global economy. Increasingly the courts, regardless of jurisdiction, are beginning to assess the fact that the decisions they make in one country affect the economy elsewhere just as much,” he said.

The lawyer, whose over 30 years of experience in civil litigation includes the tracking and recovery of funds from offshore hedge funds, told members of the Bahamas’ legal and financial communities that recent case law, such as the Bernie Madoff ponzi scheme case, is redefining how the US views financial activity involving overseas institutions.

“The way the law stands today, I would feel comfortable [in The Bahamas] but if you have anything going on in the US, you better watch this and be careful,” he advised.

Yesterday’s presentation, which was organized by professional services provider KRyS Global and law firm Lennox Paton, took place at the British Colonial Hilton and also featured a panel discussion with KRyS Global chief executive officer Kenneth Krys and Brian Simms, senior partner at Lennox Paton.

Krys warned that, if an offshore financial institution’s connection with the US could be established, it would render the company subject to stringent US law, saying: “Most financial institutions deal in US dollars. If they do anything in the US it makes sense to try and pursue them there. [When recovering assets] you want to go places where you get a big bang for your buck.”

Host of the event and managing director of KRyS Global Ed Rahming also commented: “Offshore financial institutions have always been exposed to risk. In the last 10 years that risk has been a bit more highlighted.”

Against this unsettled backdrop, Bahamian financial services providers are already preparing for the Foreign Account Tax Compliance Act (FATCA), which comes into effect January 1 2013 and will require foreign financial institutions to disclose information on all their US clients.

Failure to disclose details of any US transactions could render an institution liable for a 30 per cent withholding tax.


In a second round of streamlining initiatives, the Swiss bank claims that the cuts should bring annual cost savings of 2 billion francs ($2.24 billion) by 2013, according to Reuters news service. The move comes ahead of strict new regulations and disappointing third-quarter results.

Global credit rating company Standard & Poor's has downgraded the Bahamas' credit rating due to a change in its rating methodology, according to Bahamas broadcaster ZNSNetwork. Watch a video of the report below, including an interview with Lisa Schineller, primary credit analyst with S&P.

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