Opening Remarks by The Hon. C V. Hope Strachan, discount cialis MP Minister of Financial Services at The Nassau Conference 2015 Association of International Banks and Trust Companies “Strengthening Our Competitiveness” Wednesday, cialis 21st September 2016, 8:45 am; Melia Hotel, Cable Beach.
Ms. Wendy Warren, Chairperson
Deputy Chairs, ___________________________
Mr. Michael Halkitis, Minister of Finance
Mr. John Rolle, Governor of The Central Bank of The Bahamas
Ms. Antoinette Russell, AIBT Chair
Ms. Tanya Macartney, Executive Director of The Bahamas Financial Services Board
Board Members of the Association
Distinguished Ladies and Gentlemen
Firstly, I would like to thank the organizers of this Nassau Conference for inviting me to bring remarks under the theme “Strengthening Our Competitiveness”, a continuation from what we began last year.
The Ministry of Financial Services is once again pleased to be the Platinum Sponsor of this year’s Nassau Conference, a platform that provides industry leaders and professionals the opportunity to come together in dialogue on matters concerning financial services. The Association of International Banks and Trust Companies founded in 1976 has been the voice of international financial services in the Bahamas for decades, facilitating interaction between stakeholders in the Banking and Financial Services Sector. We in the Ministry of Financial Services, are pleased with AIBTs continued work and are proud to be included among the many sponsors of this important conference.
Bahamas Commitment to International Global Regulatory Standards
I would firstlike to make it absolutely clear that the Government of TheBahamas is fully committed to maintaining a Trustworthy, Competent and Compliant jurisdiction. We will not tolerate the use of The Bahamas financial services sector as a conduit for the conducting of illicit or illegal activities. We are keenly aware of the challenges faced by International Financial Centers globally and the efforts to undermine the importance of small, successful financial centers like the Bahamas as well as some of our regional counterparts. Some of these challenges are blacklisting, and de-risking in correspondent banking despite the individual and collective adherence of countries in the region to comply with global regulatory initiatives in anti-money laundering, corruption, the countering of financial terrorism as well as the tackling of tax evasion. Global connectivity has increased the need for heightened security and effective controls to mitigate against financial risks
And, while The Bahamas continues to demonstrate its cooperation and commitment, and while our current position and strengths are widely recognized, our country’s position as a respected and trusted international offshore financial centre is constantly being challenged and threatened. Now more than ever, we must not be discouraged, we must continue to displaythe resilience and strength that has brought us this far.
Financial Services In The Bahamian Economy
Ladies and gentlemen, as you already know, Financial Services is the second pillar of the Bahamian economy, second only to tourism and accounts for more than 15% of the GDP of The Bahamas and more than 20,000 jobs directly and indirectly. This represents more than 13% of total employment in the country. The job opportunities presented in the financial services sector significantly support the middle-class in The Bahamas, as they are among some of the highest paid jobs available. Financial institutions also invest heavily in the intensive training of their employees, increasing their intellectual professional capital and indeed the professional human resource capital of The Bahamas.
The financial services sector also generates more than $200 million in substantial government revenues, and 19% of the country’s tax base,this according to the latest publicly available figures. It is therefore, easy for us to understand how vital the financial services industry is to The Bahamas. It is also anticipated that these figures will increase tremendously as we advance to automate the various government departments (namely The Registrar General’s Department, Business Licensing Unit, National Insurance and the Immigration Department) in order to increase efficiency and to facilitate the ease of doing business in The Bahamas.
The financial services sector contributes to the Bahamian economy as a whole, by providing access to global capital markets and facilitating investment opportunities that would not otherwise be attainable. This also creates an environment that encourages entrepreneurial activities fostering economic growth.
Ladies and gentlemen, given the vital importance of The Financial Services Industry to the economic survivability of our country, as stakeholders, we must do everything in our power to ensure adherence to, and compliance with international regulatory standards, while also striving for service excellence. This will assist us in maintaining and improving our economic stability.
How have we done this so far, and what are our next actions?
Initiatives Taken –Current And Pending Actions
International Financial Centres all over the world are vulnerable to illegal financial activity. Over the past 15 years, The Bahamas has managed this risk by taking steps to ensure that the necessary legal and regulatory framework on AML and CFT are enacted and adhered to. We have ensured that our tax information exchange regime remains in line with global standards; We continuously monitor the financial services sector through regulatory supervision to mitigate against potential threats; and most importantly we remain engaged with industry and other stakeholders, working collaboratively, to achieve our common objective of maintaining and promoting the industry and ensuring compliance with our legislative and regulatory initiatives. Only legitimate funds seeking to be managed out of The Bahamas under the rule of law, and conducive to the preservation of our financial services system are welcome.
Industry attention to compliance is underscored by:
- Budgetary increases by institutions in the areas of compliance and corporate governance, including increased staffing levels in these areas;
- Larger training budgets and an increased number of conferences held in the Bahamas focusing on, or including, sessions on compliance and corporate governance; and growth in the number of members of the Bahamas Association of Compliance Officers (BACO), I am proud to say, boasting the largest organization of compliance professionals in the region. BACO is a private sector organization that promotes the certification of its professional members in global compliance best practices and standards.
Ladies and gentlemen, make no mistake, the Bahamas has always been committed to complying with international best practices. In its phase two ‘Peer Reviews’ by the Organization for Economic Cooperation and Development’s (OECD) Global Forum the Bahamas was in fact, deemed “largely compliant” with the OECD’s existing standard of exchange of information on request.
Some of the key outcomesof the Bahamas’ regulatory reforms are that:
- In 2000 The Bahamas eliminated bearer shares;
- Since 2001: Requirement for the filing of a register of directors and officers for all companies at the registrar general department;
- The law mandates that financial institutions have Know Your Client (KYC)/Client Due Diligence (CDD) as well as Counter Financing of Terrorism (CFT) policies and procedures in place. Further, regulators have issued guidelines to industry outlining best practices for verifying customer identity and for developing anti-money laundering procedures and measures to prevent terrorist financing;
- Suspicious Transaction Reporting (STR) for the filing, reporting and investigating of STRs is outlined in a regulatory framework;
- The Regulators conduct independent inspections and regulatory examinations of financial service providers including corporate service providers for compliance with AML/CFT laws;
- The 2000 legislative restructuring included the Evidence (Proceedings in Other Jurisdictions) Act and the Criminal Justice (International Cooperation) Act. The former regulates cooperation by Bahamian courts in civil matters while the latter regulates such cooperation in criminal matters.
TAX TRANSPARENCY AND COOPERATION
In 1998, the OECD sought to have 40 plus countries, including The Bahamas, adopt the G20 standard on Transparency and Cooperation in Tax Matters. The Bahamas, in a 1999 presentation to the OECD, insisted on a level playing field. This principle was formally accepted by the OECD in 2002.
The Government of the Bahamas held firm to this principle and kept faith with the industry. In 2009, The Bahamas, moved to implement the standard immediately following global consensus and the achievement of its key pre-condition of a level playing field. On March 20, 2010, The Bahamas achieved the G20 standard on Transparency and Cooperation in Tax Matters. And today, The Bahamas facilitates international co-operation in tax matters through 33 Tax Information Exchange Agreements (TIEAs).
Bahamas successfully implemented the Foreign Account Tax Compliant Act (FATCA) based on a Model I intergovernmental agreement (IGA) known as the Model I IGA. On 3 November 2014, The Bahamas and the US signed the Model I IGA to Improve International Tax Compliance between the United States and The Bahamas governments. The second round of the FATCA uploading process into the tax information exchange portal, and reporting to the competent authority for compliance with the IGA was conducted in August.
The OECDs Common Reporting Standard is next international tax initiative that we must comply with. The Bahamas has agreed to implementation in 2018. The Bahamas will implement the standard on a bilateral approach. Extensive preparation to achieve this has already began. The Ministry of Financial Services as the coordinating Ministry, in conjunction with the Ministry of Finance, Attorney General’s office, and the Bahamas Financial Services Board have been working diligently to ensure we meet the 2018 deadline. An implementation plan has been formulated and I am happy to announce that the first round draft legislation, regulations and guidelines are currently under review (You will receive more information in the CRS session).
To this end, in adopting any measures we must be sensible in ensuring the viability of its implementation to the continued survival of our industry, while remaining compliant with our international obligations. My ministry is committed to ensuring that we do not jeopardize the position of The Bahamas Financial Services Industry.
It seems however, that this is not enough. As some of you may have heard me say at BFSBs Annual General Meeting, last week The Economist Magazine launched an attack on us through an article they published entitled “The Holdout: Bahamas cocks a snook at the war on tax dodgers” The thrust of the article paints the Bahamas in an extremely negative light as a “tax Haven” and a safe place for “undeclared funds.”
Aside from the misrepresentations in the article about the Bahamas which are obvious, the Article purports to represent the OECD’s view that The Bahamas, by choosing the bilateral approach to AEOI/CRS and the 2018 implementation date is dragging its feet to obtain competitive advantage and to attract unclean money to our shores. Nothing can be further from the truth. The Bahamas could only choose the bilateral approach and a 2018 implementation date because it was a genuine alternative offered by the OECD. The choice was made after careful consideration of all of the facts and circumstances relative to the jurisdiction, our economy and tax regime. Moreover, the decision was made with a clear understanding that the bilateral approach allowed us to adhere to all of the overarching principals and objectives of the OECD relative to automatic exchange of information and the common reporting standard. It stands to reason that if there was no alternative approach to signing onto the multi-lateral convention The Bahamas would not have been able to make such a choice. The discontent and outright attack on The Bahamas for having made the choice is not only disingenuous but extremely unfair. Could it be that a choice is not really a choice? Other countries have chosen the bilateral approach, but are not being targeted for negative ridicule for having done so. Unfortunately, ladies and gentlemen, we now know that this attack will be sustained from other quarters having since received almost half a dozen such requests for further information regarding the financial services sector from various media outlets represented by the International Consortium of Investigative Journalists (ICIJ).
We continue to face increased competitiveness as an international financial centre from our regional neighbours. The dynamic regulatory environment, the so called levelling of the playing field on a global scale and the resulting contraction of offshore business from major countries of the world has increased the necessity for competition among jurisdictions. The Bahamas has continued to build upon its successes while also seeking to be innovative in its approach to new products and services through a strong, strategic marketing plan. The success of the Investment Condominium (ICON) cannot be underscored enough. The enthusiastic interest in this product has increased and established it as a staple on the investment funds menu. To date 45 ICONs have been established. This is one of the reasons why the Ministry of Financial Services along with the Bahamas Financial Services Board has continued its intense marketing program in promoting the sector. This year we have once again engaged in a partnership with the Society of Trust and Estate Practitioners otherwise known as STEP to sponsor some of the conferences, particularly STEP Caribbean (St. Lucia) which was held in May, STEP Global Congress which was held in Amsterdam in July, STEP LatAm (Panama) to be held at the end of this month. BFSB will also be holding a Landfall Event in Mexico in October that will also be attended by my Ministry, and it is also the intention of The Ministry of Financial Services to meet with international firms/headquarters on an individual basis in targeted European cities such as London, Geneva and Zurich. We believe that substantial benefits have been derived and will continue to be derived from these efforts. We must stay ahead of the game if we are to lead. Our objective is to highlight the products and services we offer as we continue to promote The Bahamas as a jurisdiction of choice, leading in innovation, experience and professionalism.
It has been proven that Ministerial involvement is an invaluable part of these promotional activities as it demonstrates even more convincingly to the international community, the commitment of The Bahamas Government to its Financial Services Industry.
Ease of Doing Business
World Bank Group Doing Business 2016 data scored the Bahamas as 59. The Bahamas slumped from 97th to 106th place for the Ease of Doing Business in this year’s World Bank table out of 189 nations, Jamaica is 64th. We improved from 125th to 60th spot when it came to ‘enforcing contracts’, and managed to improve rankings in just three categories; ‘trading across borders’, where the Bahamas rose from 63rd to 97th spot, ‘starting a business’ we rank 118th -Jamaica is 9th,‘registering property’category – where the Bahamas slumped – from the 179th spot to 183rd, and once again, we received our highest ranking in the ease of ‘paying taxes’category where we jumped from 31st to 24th in the world. Sadly, we dropped in eight out of the 10 categories.
We must do better to increase efficiency and to facilitate the ease of doing business in the Bahamas. Comparatively, businesses and governments across the Caribbean and Latin American region are positioning themselves to be competitive and best in class. And while areas have been identified for reform to improve the ‘Ease of Doing Business’in the Bahamas, good customer service remains and issue. More importantly, we must understand the connectivity of all these factors to the growth of our economy, one affects the other. When there is increased competition, the only differentiating factor is the experience.
Ladies and Gentlemen
We must not be complacent and we must continue to defend our right to exist as a International Financial Center. We are global competitors and though it is often said that there is a level playing field in reality this is not the case for smaller jurisdictions like The Bahamas. The best way for us to silence the critics and naysayers is to ensure that we continue to meet our commitments as we have done in the past. . Our global regulators will continue to move the goal post, but we will not falter. Let us continue to work together as we face these ongoing challenges. I am convinced, that this is the formula for our continued success. We are committed to maintaining a legitimate, clean and compliant jurisdiction. I will continue to support the financial services industry to ensure that the resources necessary to achieve success are made available.
I wish you a successful seminar. Thank you.