Previous
Government and the financial services industry working together
WELCOME BAHAMAS - NASSAU, CABLE BEACH & PARADISE ISLAND - 2005
Government and the financial services industry working together
New outlook, new products
A few years ago, the Bahamian government and the private sector began cooperating to create a legislative and regulatory regime that would not only allow the financial services industry to survive, but to grow from strength to strength in the 21st Century.
This cooperation stemmed from a commitment not to be bullied by outside forces and to convince investors that The Bahamas has a well-run, transparent financial services industry that offers an ever-widening range of new products. As announced by Allyson Maynard Gibson, Minister of Financial Services and Investments, "The Bahamas has a place as a financial centre alongside jurisdictions such as London, New York, Switzerland, and Singapore."
The need for an aggressive public relations effort in a relatively short time frame came after The Bahamas began grappling with attacks from the US Treasury and the Organization for Economic Cooperation and Development (OECD), along with its Financial Action Task Force (FATF).
At that time, in the late 1990s, The Bahamas was being investigated by FATF, which is concerned with such things as money laundering and the movement of funds related to drug trafficking and other major crimes. Add to this the OECD's charge that The Bahamas was an unfair tax haven.
In essence the islands' financial services, second only to tourism as a generator of employment and foreign exchange, was being seriously threatened. "It became a national challenge," says Wendy Warren, CEO and executive director of the Bahamas Financial Services Board. "The result had not only the public and private sectors working together,? she explains, "but the private sector working more closely together as well."
The manner in which The Bahamas' reputation was being assailed drew cries of foul from those in both government and financial circles. "Ill conceived," was one minister's criticism of the OECD initiative. "Malicious" was another. "Countries shouldn't deal with other countries in this way in the 21st Century."
Complaints aside, The Bahamas was forced to quickly amend and introduce new laws that guaranteed more transparency, permitted the exchange of information and conformed to international regulatory standards. As a result, The Bahamas now has anti-money laundering legislation as good as, or better than, any in the world.
"Our financial services industry was being greatly altered," says Minister of State for Finance James Smith. He points out that, in the past, The Bahamas was known for its private banking and asset administration and trust business, all of which required secrecy and confidentiality. "We still lead the Caribbean region in private banking," he contends, "but to expand our financial services industry we have to go after other types of business," such as captive insurance.
Reacting quickly
In June 2001, the FATF confirmed that The Bahamas was being cooperative in the fight against money laundering. Also, by passing an anti-terrorism bill immediately after 9/11, The Bahamas was one of the first countries to react to the threat of terrorism.
En route to fulfilling the regulators' requirements, there were some heart-stopping moments. For example, Julian Francis, Governor of The Central Bank of The Bahamas, tells of "a very scary point when we got towards the end of 2000 and QJ (Qualified Jurisdiction) status had not yet been granted by the United States." (QJ status allows Bahamian companies to trade in US securities without being subject to a US 30 per cent withholding tax.) "I'm not sure that many people understood how critical that was," says Francis.
The urgent need to legislate caused government to pass laws that some in the financial community believed were too restrictive. Consequently, the new laws have gone through some fine-tuning while maintaining their core structures.
A level playing field
One concession demanded by The Bahamas team was that the OECD apply its policies across the board. The country made it clear that it was willing to do whatever the 19-nation organization was prepared to do, as long as it was applied to everyone, including its own members.
Although The Bahamas has signed a commitment in favour of the OECD, it said it wouldn't go further than that until other jurisdictions were made to comply with OECD rules on tax competition. "Once you're seen as vulnerable under attack, your attackers are likely to push until you capitulate," says Francis. "We're just asking for a level playing field."
At the same time, The Bahamas is moving to modernize its domestic economy, enabling it to better meet the challenges of globalization. This will probably include changing the Bahamian tax system, reducing the present heavy reliance on import duties.
Re-engineering the economy
Francis, in an address to business leaders at the Bahamas Business Outlook Conference in January, 2005, urged a thorough re-engineering of the Bahamian economy, including the privatization of publicly owned corporations and making the approval process for foreign investment more transparent.
"There needs to be established standards, which would preclude involvement by government in the economy when certain conditions are met and/or certain criteria satisfied," he said.
Francis suggested that the relationship between the private and public sectors should change, especially with respect to the approval of new direct foreign investment proposals - which number in the hundreds every year.
"The time has come," he said, that The Bahamas "should very seriously consider moving away from the process by which the Cabinet must" review and decide in a very detailed way on each particular matter which comes to the table."
He noted that such a change would not be easy but that it could yield big dividends. Francis added that The Bahamas, unlike some other countries in the region, was poised to move ahead very strongly.
CONTACT INFORMATION
E-Mail: Click here
Internet: https://
Disclaimer:
Information in editorial and listings is subject to change at any time.