Updates In The Bahamas Financial Services Industry

While in Zurich and Geneva, BFSB promoted the Bahamas’ financial services to bankers from host banks, Credit Suisse and Bank Leu, among others. Pictured are Gregor Maissen, Managing Director, Credit Suisse (Bahamas) Ltd.; Ian Fair, BFSB Chairman; Julian Francis, Governor, Central Bank of The Bahamas; Reto Donatsch, General Manager, Bank Leu, Zurich; and Barry J. Malcolm, BFSB Executive Director.

"As we moved through Zurich, Geneva and Lugano, it became increasingly apparent that the Swiss are keenly interested in doing business in The Bahamas" said BFSB Executive Director Barry J. Malcolm. "We were told on more than one occasion that with its sound regulatory framework and broad range of financial services, The Bahamas will join Switzerland as a dominant international financial centre." Nicola Mordasini, Member of the Executive Board of Gotthard Bank, Lugano affirmed that "Offshore private banking is, to a certain extent, under attack by several authorities." He said it is necessary to have a sound financial centre, with sound legislation. "I think The Bahamas is one of the countries with Switzerland which now presents this advantage" Mr. Mordasini said.

Mr. Malcolm added that the Swiss now view The Bahamas as "…an ideal centre to which they can locate." Richard Pease, head of the Geneva-Romande branch of STEP said The Bahamas has been a favourite jurisdiction for Swiss bankers for some years. "There is a depth of talent that you find in The Bahamas that you do not necessarily find in a number of the competitive jurisdictions. Also, new legislation and the support the government is giving to financial services only strengthens that position" Mr. Pease said.

Based on market feedback received, members of the delegation are upbeat about the prospects of new business migrating to The Bahamas from Switzerland. Attorney Michael Paton, senior partner, Lennox Paton, said the opportunities for The Bahamas are much greater than he imagined. "They’re very interested in The Bahamas because of our independence. That is a key distinguishing feature that everyone has relayed to me. I think they’re very interested in exploring moving clients’ assets that may be somewhere else right now into Bahamian companies and banks" Mr. Paton said. Anthony Klonaris, senior partner, Callendars and Co. concurred: "I’ve come into contact with Swiss attorneys who very shortly will be bringing to our shores people who have an interest in establishing new trust companies or banks; and, of course, with the coming of a new trust company or bank will come employment opportunities."

BFSB is now planning a promotional tour to South America for November of this year.

The Bahamas Government’s billion-dollar budget for 1999/2000 was introduced in the House of Assembly on May 26. A major highlight of the presentation was Finance Minister William Allen's report on the state of the economy.

Positive economic growth has been sustained for the sixth consecutive year, with the last three years showing growth of 3% or more. Records have been achieved in investment inflows ($491 million) and external reserves ($438 million). Additionally, the country’s employment rate has fallen below 8% for the first time on record.

"..the financial soundness of The Bahamas is at an all-time high" Finance Minister Allen Minister Allen further reported that the economy of The Bahamas has reached "…a new era of sustainable growth", with the average living standard rising to the rank of 32nd in the world. This effectively places The Bahamas ahead of other independent countries in the hemisphere, with the exception of United States and Canada.

The financial services industry was credited for its significant net contribution to the foreign exchange reserves of the economy, with the Minister pointing out that the sector continues to "evolve as a substantial contributor to the productive output and economic development" of the country. In particular, the Bahamas Financial Services Board was recognised for its success in creating a definitive "Bahamas Brand" through its aggressive promotion of the industry. The Bahamas’ unquestioned ability to capitalize on external developments impacting the competitive balance in the world’s financial services industry is producing an enormous amount of growth opportunities for ongoing development of the industry. Minister Allen added that the next wave of major economic expansion will include "important initiatives in the financial and other international services sector." The Government has pledged its continued support to the industry and, specifically, to the education and training of nationals wishing to join the financial services sector. Education and training received the highest allocation in the budget estimates.

The Caribbean Financial Action Task Force has appointed a Working Group to address recent initiatives by the OECD on harmful tax competition. In addition to The Bahamas, the Working Group comprises representatives from Barbados, the British Virgin Islands, Cayman Islands, Jamaica, and Panama. The group agreed on the strategy of a unified response to the OECD, with member countries now preparing background papers and recommendations.

The Central Bank of The Bahamas has taken the lead in drafting The Bahamas’ response, incorporating the views of the private sector, specifically the accounting, banking & trust, and legal sectors.

Established in the early 1990s, the Caribbean Financial Action Task Force comprises 22 Caribbean Basin countries – all of which have agreed to common counter-measures addressing criminal money laundering. CFATF works closely with the Financial Action Task Force (FATF) established since 1989 by the Group of 7 in Paris. The CFATF Secretariat, based in Trinidad & Tobago, monitors self-assessment by member countries of the implementation of FATF and CFATF recommendations, and coordinates an ongoing programme of "mutual evaluation" by members. In 1996, it introduced a Money Laundering Typology Programme directed not only at domestic financial institutions but also including a) the casino and gaming industry b) offshore banks, financial intermediaries, IBCs and c) non-bank financial institutions. It works closely with international organisations such as the United Nations Drug Control Programme (UNDCP), OAS, CARICOM, Caribbean Customs Law Enforcement Council (CCLEC), the Centre Interministeriel de Formation Anti Drogue (CIFAD), Association of Caribbean Chiefs of Police (ACCP), and the Commonwealth Secretariat.

The Bahamas has been an active member of the CFATF since 1996, and has signed its Memorandum of Understanding. It has participated in the mutual evaluation exercise for other member countries, and itself was successfully evaluated in 1998.

Cited as a valuable tool in the fight against international crime, The Money Laundering (Proceeds of Crime) Amendment Act 1999 was passed in the House of Assembly on May 19 along with a string of other crime fighting bills. The amendment brings the Act in line with the tracing and forfeiture of proceeds of the Drug Trafficking Act (Section 21). It provides for the enforcement of external confiscation orders in The Bahamas, for recognised crimes of money laundering, with respect to agreements made with other countries. Minister of Foreign Affairs Janet Bostwick noted that the fight against drug trafficking must be "global in its scope" to ensure effectiveness. The Bahamas was the first offshore jurisdiction to introduce legislation making money laundering a criminal offence. The Money Laundering (Proceeds of Crime) Act and Money Laundering (Proceeds of Crime) Regulations were first passed in 1996.

Scheduled for a year-end launch, the Bahamas International Securities Exchange will accommodate separate listings and trading of both domestic and international securities.

The BISX Steering Committee, chaired by BFSB Director Larry Gibson, has made substantial progress on the preparatory work for the exchange. Already, the Memorandum & Articles relating to the incorporation of BISX have been completed and the Business Plan further refined for presentation to the Founding Shareholders by the middle of August.The hardware system has been purchased, with the procurement and customisation of software services expected to be completed by the end of the summer.

Further, final interviews for the "operations team" (consulting firm/general manager) were completed on June 17th.This international team will have responsibility for defining and marketing BISX’s international product offerings, and completing prepratory work for commencement of domestic trading by year end.

The Securities Industry Act passed by Parliament earlier this year has now been signed into law, effectively paving the way for the formal launch of The Bahamas International Securities Exchange. The legislation enables full operation of the securities exchange, and provides specific powers to the Securities Commission whose role is to monitor the industry.

BISX will be an electronic exchange, with members of the public trading via a broker-dealer. Already, the Securities Commission has established clear standards for broker-dealership registration.

Doctors Hospital Health System Ltd. (previously known as Doctors Hospital) announced an Initial Public Offering during May, offering the public about 30% (3 million shares) of the health care establishment. Doctors is the latest in 15 companies to "go public" and has announced plans for listing on the new Bahamas International Securities Exchange. It was the first public offering from a full range hospital/health care facility.

BFSB is planning publication of a comprehensive guide to the financial services industry. The guide will be a compendium of information on all aspects of the industry in The Bahamas and will function as a membership directory for BFSB as well. In addition to relevant background information on The Bahamas and its economy, the contents will include developments impacting the industry.

Detailed sections of the guide will be devoted to banking and trust, corporate and shipping registry, mutual funds, insurance, industry support services, and the Bahamas International Securities Exchange. The guide will be a primary marketing tool both for the industry and BFSB. Distribution of the inaugural issue will be 50,000, with targeted markets in key countries around the world.

More than 200 delegates from the U.K., Europe, the United States, the Caribbean and Canada attended the inaugural STEP Caribbean Conference held in Nassau on April 19-20. Under the theme "Offshore Planning Into The Millennium – What Does The Future Hold?", the Conference not only attracted the largest number of delegates ever for a conference of this nature, but well-known, internationally-recognised trust and estate practitioners as speakers and presenters. Delegates were treated to a wide range of views on the potential of issues and developments such as the 1998 OECD Report on Harmful Tax Competition, the Edwards Report on the Channel Islands and the Isle of Man, the European Union’s tax harmonisation initiatives, and the British Foreign and Commonwealth Office’s 1999 White Paper on the future of its overseas territories.

BFSB was the Presenting Sponsor for the Conference. "We felt that sponsoring the event would serve two purposes," said BFSB Executive Director Barry Malcolm. "First, it would provide us with an opportunity to showcase our jurisdiction to an important and influential group of international financial planning intermediaries. And, second, we knew it would expose our domestic practitioners to a broad range of views on issues confronting the industry internationally. It was a tremendous educational experience."

The industry www site being launched by BFSB as part of its multi-dimensional marketing programme is expected to be up and running by the end of the summer. Local company Thyme Online was selected from an impressive short list of candidates who bid as service providers for http://www.bfsb-bahamas.com/

Thyme Online is providing an all-inclusive service, ranging from design and hosting of the web site to establishing key domestic and international "links" complementary to the promotion of the financial services industry of The Bahamas.

After almost two years in the drafting, the new Trustee Act was passed by The Bahamas Parliament in 1998, replacing the Trustee Act, 1983 as well as other laws relating to the operation of trust companies in The Bahamas. The Government of The Bahamas sought broad-based input of the industry as it developed a flexible, ground-breaking piece of legislation.

Recognising the global status of the local financial services industry, the Trustee Act 1998 amended existing trust laws of The Bahamas, modernising and consolidating in direct response to market demands.

The Act clarifies the role of trust settlors, the rights of beneficiaries to information about trusts, and the rights and duties of professionals. Addressing many of the practical difficulties trustees experience in contemporary trust administration, it enhances the use of the trust as an investment vehicle. Trustee investment powers are widened, and provisions made for special purpose trusts.

The legislation is serving as a model for other jurisdictions around the world, and has been receiving positive feedback from practitioners in both the United Kingdom and United States. "We have been using it extensively and have found few, if any, glitches so far" says Joseph Field, Bryan Cave LLP of London. "Among other things, the Trustee Act of The Bahamas covers gaps in English Common Law and thoroughly defines issues such as trustee powers."

The explosive growth of the private wealth market worldwide is without a doubt the single most important factor behind regulatory issues confronting the industry today. Emerging affluent investors control a substantial amount of wealth; in the U.K. alone, estimates are that this could approach $2 trillion by the year 2005. And, these investors are at the low end of the wealth band. At the top, the high net worth investors (HNWI), provide even more significant opportunities for wealth planning and management services. The challenge will be to stay ahead of the competition by developing instruments and services that meet the growing sophistication of the market – in line with the changing regulatory landscape. The days of "no tax and no questions" are coming to an end. Regulators around the world are making a concerted effort to "catch up" with the growth in international financial services.

The international financial services industry has an important role to play as a catalyst in the global economy. "All of us involved in international commerce must gain acceptance as proper and responsible participants", espoused BFSB Chairman Ian Fair in his Luncheon remarks on the occasion of the recent STEP Conference. "Jurisdictions must embrace some form of international best practice standards of regulation and disclosure, while protecting legitimate commercial and client confidentiality."

Rapid technological change also is underpinning development in the industry, particularly in the area of exchanges. The borderless parameters of the electronic world create new opportunities and new ways of doing business for the international financial services industry. Mr. Fair continued, "…by remaining open and responsive to these new possibilities, and by overcoming certain competitive, confidentiality, regulatory and technological obstacles,The Bahamas can position itself to effectively provide services as continental centres such as New York or London."

The Bahamas Financial Services Board will join the International Bar Association as primary sponsors of a Seminar being organised by the Bahamas Bar Association and the Organisation of Commonwealth Caribbean Bar Associations. To be held at SuperClubs Breezes on July 16th, the programme will feature Professor Mason Gaffney of the University of California as luncheon speaker. Professor Gaffney will address the topic "Opportunities for International Financial Centres in the 21^st Century". Other seminar topics include Stock Exchanges in Emerging Markets, Mutual Fund Basics, Introduction to Insolvency Law, Issues in the Privatisation of Public Service Functions, and Introduction to Joint Ventures. The overall theme of the Seminar is "The Fundamentals of International Legal Business Practice."

According to Finance Minister William Allen, The Bahamas Government intends "…to maintain world-wide confidence in Bahamian technology and business operations" as part of its overall plan to sustain a strong economy. The National Y2K Advisory Council, chaired by the Minister, has established a website to keep the public aware of its wide ranging compliance activities – bahamasgov.org/y2K.

Recently, the independent consulting firm GartnerGroup rated The Bahamas among the top countries well prepared for the millennium bug.

The Bahamas Government has introduced legislation for the establishment of an insurance scheme for the protection of depositors’ funds. The Protection of Depositors Act, 1999 was introduced in the House of Assembly on May 12th, and will create "an additional level of confidence in the banking system", according to Minister of Finance William C. Allen, adding "another layer of regulatory supervision over the banking system."

The Act provides for the establishment of a Depositors Insurance Fund, membership in which will be compulsory for banks conducting business in Bahamian currency. Deposit insurance schemes serve to help resolve failures quickly and efficiently, reducing system impact.

At the April 1998 Summit of the Americas in Santiago, heads of state of 34 nations approved the start of negotiations aimed at creating the FTAA by the year 2005. The process was initiated in 1994 at the first Summit of the Americas, and is the largest regional integration effort ever undertaken, involving both developed and developing countries. The objective: to realize free trade and investment in goods and services, allowing large and small nations to compete on an equal basis. A fully implemented FTAA would unite nations with a combined GDP of more than $9 trillion and a market of over 750 million people.

Officials of the Government have said repeatedly that should The Bahamas become a signatory to the FTAA it will not be at the risk of jeopardising its financial services industry, and that the current low-tax environment will be maintained. In fact, as global economies emerge, participation in one of the world’s largest "economic zones" can only assist The Bahamas in preparing for rapid technological and economic advances. Finance Minister William Allen most recently expressed the view that increased hemispheric activity resulting from the FTAA "...should enormously enhance the regional markets for the international services which The Bahamas provides now as its stock in trade."

The Bahamas is monitoring the process closely, and also participates as a Vice Chair of the FTAA’s Negotiating Team on Services, one of nine such groups appointed by the Hemispheric Vice-Ministerial Trade Negotiations Committee.

Speakers at the Institute of Bankers Seminars held 17-21 May commended the job The Bahamas has been doing in keeping abreast of global developments. Highlighted was the maturity and highly competitive nature of the local financial services industry in terms of products and services, along with the positive impact of modern technology and progressive marketing on the industry. Held under the theme "Banking Transformation 2000 & Beyond", session coverage also included recent attacks on fiduciary structures, and risk management techniques for protection of both the client and the fiduciary. The Association of International Banks & Trust Companies sponsored this component of the program, with guest speakers from Dean & Heimos of Denver, Colorado.

Best Funds Distributors joins the ranks of BFSB members moving into the brand new Montagu Sterling office complex at Fort Montagu.

CIBC Bahamas Limited launches new Integrated Banking System, after 2 1/2 years of researching and evaluating suitable core systems and revamping the business process. The multi-million dollar upgrade revoluntionises the way CIBC’s systems support customer needs.

Colina Financial Services in April opened new offices in Marsh Harbour, Abaco. The company had already expanded into Freeport, Grand Bahama.

Commonwealth Bank announces that its 8th branch, a new $4.5 million facility on Wulff Road, will come on stream early in the millennium. CB recently reported an over subscription of a private placement share offering that brought its footings to nearly $600 million. Assets of $433 million at the end of 1998 had mushroomed to $462 million by the end of the first quarter 1999.

J.S. Johnson & Co. is celebrating 80 years of significant presence in the insurance industry.

For the 4th consecutive year, MSI Preferred Investment Fund outperforms banks and other traditional Bahamian financial investments, with returns of almost 10%.

Royal & SunAlliance Insurance takes on strategic partnership with Assurex International. Royal is rated among the top 10 insurers in the world today, and 8th among the top 170 global business insurers in terms of premiums written. With offices in more than 50 countries, the company conducts business in over 130 countries.

W&P Bank & Trust has been acquired by Geneva Private Bank & Trust (Bahamas) Ltd. and not Geneva Private Portfolio Management Limited as reported in the March newsletter.

Colina Financial Group takes on sponsorship of the lead page of the Business Section of the Nassau Guardian. The group plans to use this medium to provide financial news and to further its educational programme on finance and investment issues. The section includes a Daily Trading Report prepared by First Bahamas Capital Limited.

The Guardian’s Business Section also features FINDEX – The Bahamian Stock Index – prepared by Fidelity Capital Markets Limited. (FINDEX is featured in The Tribune as well.)

S.G. Hambros Bank & Trust (Bahamas) Ltd. publishes stocks listings in the Nassau Guardian as well. These include listings from The Bahamas, New York, and Canada.

• Banco Santander Trust & Banking (Bahamas) Ltd.
• Chancery Corporate Services Ltd.
• Edwin Coe
• Real Estate International (Bahamas) Ltd.
• Sentinel Bank & Trust Limited

Complementary to its overriding mandate of promoting the financial services industry of The Bahamas, BFSB plays a vital role as an information clearing house for enquiries received from abroad. These letters, calls, faxes, emails cover a range of topics about doing business in The Bahamas and, specifically, issues relating to the financial services arena.

BFSB Executive Director Barry J. Malcolm joined Member firm Desmond Edwards & Co. in its presentation of a 2-day promotional blitz at the Plaza Hotel in New York on June 14-15. Under the title "The Bahamas: The International Financial Services Centre for the Millennium", the programme was organised to present the advantages of The Bahamas to a select group of over 60 law practitioners in the New York area. Opening remarks were provided by H.E. Sir Arlington G. Butler, KCMG, Bahamian Ambassador to the United States.

Mr. Malcolm spoke on "The Bahamas:The International Financial Service Centre", with other topics including International Business Companies; Trusts and Estate Planning; Sun, Sand and Sea: The Second Home Market; and Capital Markets: Bahamas International Securities Exchange. Other presenters included Senator Desmond Edwards and J. Denise Lewis-Johnson of Desmond Edwards & Co.; Senator Darron Cash, Ernst & Young; Dr. Earl Cash, Higgs & Johnson; and Charles Evans, A&E Investments Ltd.

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