THE YEAR IN REVIEW....major accomplishments

The Bahamas Financial Services Board stands proud of its achievements during the past year, with established objectives firmly met:

• defining The Bahamas "brand" in the financial services community;
• developing and coordinating promotional strategies and programmes for the financial services sector;
• informing and educating key stakeholders globally on services offered by The Bahamas;
• repositioning The Bahamas as the "centre of choice";
• developing lines of communication with key trade and business media - globally and domestically;
• creating awareness and support domestically for the industry.

During 1999, BFSB published a quarterly newsletter and introduced a Web site, both part of its marketing plan. Promotional tours included the Spring visit to Zurich, Lugano and Geneva in Switzerland, the Fall trips to London, Bristol, Manchester and Birmingham in the U.K., and to Johannesburg and Cape Town in South Africa. Media relations incorporated supplements and editorial placements in major international publications. BFSB event sponsorships ranged from the STEP Caribbean Conference (Spring) to the Bahamas Bar Association’s International Legal Business Practices Conference (Summer) to IBC’s Offshore Trust Services Conference in Miami (Fall). The official launch of the Bahamas International Securities Exchange was a BFSB-coordinated initiative throughout the year, supporting development of The Bahamas as a complete international financial centre.

BFSB membership - incorporating all segments of the financial services industry - expanded almost 35%, from 113 in January to 152 by year end. Serious prospects targetted for 2000 would indicate that BFSB will be able to maintain steady membership growth next year.

Copies of the Executive Director’s detailed end-of-year report will be forwarded to all BFSB members.

During the 20 months since its inauguration, the Bahamas Financial Services Board has elevated the profile and enhanced the perception of The Bahamas as a leading international financial services centre. A strong membership base of leading institutions in the country’s financial services industry has been established. Programmes to meet increased competition and to take advantage of market business opportunities are ongoing.

A number of challenges will continue to face the financial services industry in the year 2000. These include: OECD Initiatives, European Union Tax Harmonisation, Combatting Money Laundering, Client Confidentiality, and maintaining internationally recognized Regulatory Standards. The Government and the private sector of The Bahamas, embracing a common vision, will continue to work together to meet the challenge of responding effectively to these issues in the months ahead.

BFSB member Chase Manhattan Private Bank & Trust Company (Bahamas) Limited is expanding its banking operations in The Bahamas. The company recently assumed administrative responsibility for approximately 1,000 fiduciary accounts for Latin American clients - previously serviced by a Chase trust company in Jersey, Channel Islands. The transfer is expected to be completed by March 31, 2000.

The transitioning of the L.A. accounts to Nassau will provide these clients with more immediate access to integrated solutions for their complex wealth management needs. General Manager Daphne Delaney points out that the accounts being transferred "..are the most significant of the Private Bank’s Latin American client relationships."

Additionally, all new trust and corporate relationships for the Latin American market are being booked in The Bahamas, with exponential growth already being recorded for 1999 over 1998 –a result of increased client assets under management as well as increased new business revenue.

The Chase Manhattan Corporation has assets of more than $357 billion, with operations in 48 countries worldwide. Its decision to expand Bahamas operations is a strong testament to the success of the country in positioning itself in the international financial arena.

For the second consecutive year, BFSB was an Executive Sponsor of the September conference organised by the US-based International Business Communications.

An innovative component of the event was an "Ask The Experts" Q&A session at the end of each day - which summarised presentations and discussions, and provided the added benefit of input from industry practitioners.

Sessions dealing with Risk Management in the International Trust Industry proved most interactive and of direct benefit to participants. These included a presentation by BFSB Chairman Ian Fair on the Importance of Due Diligence as well as Industry Risks relating to the EU, G8 and OECD Initiatives.

The Bahamas received high commendation from presenters for its stand on OECD pressures. (See article on page 6) In particular, John G. Goldsworth, Editor of the industry publication Trusts and Trustees, made public - and congratulatory - reference to the country’s clear stand in not accepting the ‘harmful tax haven’ criteria as defined by the OECD.

With over 20 representatives, The Bahamas’ delegation was the largest at the Offshore Trust Summit. The Bahamas also provided the largest number of presenters and expert resources. In addition to BFSB Chairman Ian Fair of MeesPierson (Bahamas) Ltd., speakers included Carmen Butler, Cititrust (Bahamas) Limited; Earl A. Cash, Higgs & Johnson; Katie L. Cottis, MeesPierson (Bahamas) Limited.; Allyson Gibson, Gibson & Company; and Gregory Moss, McKinney, Bancroft and Hughes.

The International Monetary Fund (IMF) has praised the Government for its current policies and performance, citing sustained real growth, negligible inflation, investor confidence, and unemployment at its lowest level since the 1970s. In recent press comments, the Governor of The Central Bank confirmed that the economy of The Bahamas continues"..to do extremely well". He indicated that the country is poised to have "virtual full employment" within the next two years - emphasising the critical importance of ongoing development of the workforce. An educated, skilled labour force - providing a high level of continuity, consistency and commitment - is one of many strategic advantages offered by The Bahamas as an international financial centre.

More than 40 applications have been received from a broad cross section of the business and financial services community to become founding shareholders of the Bahamas International Securities Exchange (BISX).

Each of the applicants has committed $125,000 per share to become founding members and to raise the $5 million that is required as seed capital for BISX. The private placement offering was launched on October 5, less than a month after BISX was incorporated as a Bahamian company. Its initial Board of Directors was drawn from the original BFSB steering committee, which had guided efforts throughout the year.

At the launch BFSB Executive Director Barry J. Malcolm stated "..BISX wants to attract a diverse group of shareholders with the vision, resources, interest and commitment for the long-term development of a central securities market in The Bahamas."

Finance Minister William Allen has predicted that the development of the Exchange will lead to a 5% growth in the Bahamian economy. According to Minister Allen, the Exchange will "add dynamism to financial intermediation and add capitalisation to new and existing enterprises".

The applications presently are under review at the Securities Commission, the agency responsible for regulating the conduct of all engaged in the securities industry. Board member Larry Gibson observed that BISX, operating under the requirements of the Securities Industry Act and Regulations, will do much to enhance transparency of companies offering public shares. Such companies will be required to provide quarterly financial information and in general "...will be held to a higher standard now", according to Mr. Gibson.

BISX delivers a number of "firsts": it will be the first securities exchange of the new millennium; the only central exchange worldwide offering a complete range of services in both the domestic and international capital markets; and it is the first demutualised exchange from inception.

once again demonstrated why it is ranked with the world’s leading financial centres. After the major impact by Hurricane Floyd, the financial services industry was back to full strength in less than 3 working days. The sector was recognized also for its tremendous contribution to the hurricane relief efforts, both individually and through organisations such as the Association of International Banks & Trust Companies.

The second phase of BFSB’s 1999 Promotional Tour schedule covered a four-city trip to the United Kingdom, October 31 through November 4. A nine-member delegation was led by BFSB’s Chairman, Ian Fair and Executive Director, Barry Malcolm. It included BFSB members Gregory Bethel (Fidelity Merchant Bank & Trust Limited); Katie Cottis (MeesPierson Bahamas Limited); Clifford Culmer (BDO Mann Judd); Larry Gibson (Colina Financial Group); Pamela Klonaris (Callenders & Co.); Betty Roberts (Deltec PanAmerica Trust Company); and David J. Rounce (Leadenhall Trust Company Limited). In London, Bristol, Birmingham and Manchester BFSB teams met with STEP representatives, addressing 4 specific areas of interest:

• The importance of due diligence in the provision of trust and other financial services;
• Developments with the relatively new Trustee Act of The Bahamas;
• The Bahamas’ response to recent OECD initiatives on "harmful tax competition"; and
• The Bahamas International Securities Exchange (BISX)

Over the five-day period, meetings and informal presentations were held with more than 50 practitioners. Extensive media interviews also took place with Euroweek, the Financial Times, International Money Marketing, Offshore Financial Review, The Guardian, and The Times. Meetings were held also with several institutions interested in exploring opportunities in the financial services industry in The Bahamas.

Prior to the start of the STEP meetings, BFSB members participated in a business luncheon and welcome reception hosted by Lloyds of London for the new Bahamas High Commissioner to London,Basil O’Brien. Some 70 underwriters and brokers who are currently doing business in The Bahamas, or have a strong interest in the country, attended. There was a frank exchange on the need to explore refinements to existing insurance legislation and other developments necessary to grow the captive insurance industry.

New legislation to replace the Insurance Act 1969 has been drafted. This will seek to establish a Superintendent of Insurance Companies with wider powers for more effective supervision of the industry. In making this announcement, Minister of Finance Bill Allen said the rapid growth rate of the middle class and the expanding creation of wealth will force the industry to create insurance products to meet new economic circumstances. "The sophistication of the insurance industry must match the sophistication of the evolving economy", he charged.

BFSB Directors participating in the Commonwealth Business forum (See article on Page 5) also took the opportunity to stage two Business Development Seminars. The first was held on November 11 in Johannesburg, and attended by some 40 business persons. The Rt. Hon. H.A. Ingraham, Prime Minister of The Bahamas, led the discussions, with BFSB members reporting on the many business and financial services opportunities in The Bahamas.

The following day, a similar seminar was hosted in Cape Town, with 25 business people in attendance. Finance Minister William Allen was the keynote speaker at this meeting. Both events provided an excellent opportunity to brief South African investors on the potential for doing business in The Bahamas. Significant interest was generated, with follow-up initiatives already under-way.

The BFSB www site is fully on-line at - HTTP://WWW.BFSB-BAHAMAS.COM/

Initial focus has been on incorporating organisation data, with ongoing work now on building dynamic pages for News and Reference information. Bfsb-bahamas.com will have direct links to the sites of its member institutions and to a wide number of other industry sites. The soon-to-be-published Bahamas Financial Services Guide will be available online in the Reference/Archives segment of the site in a searchable and browseable for-mat.

It is intended that the site will be a valuable service, answering an anticipated high volume of online enquiries on The Bahamas’ financial services industry. Ongoing development of the site will include membership linkages, discussion forums and a targetted registration mechanism for site visitors.

The Bahamas Financial Services Guide: A definitive handbook on all financial and related services, this BFSB publication will be a complete reference guide of information, written and compiled by practitioners in the industry. It will provide industry companies the opportunity for promotion through a medium with broad international reach and appeal.

An impressive delegation from The Bahamas participated in the November 9-11 meeting of Commonwealth countries in Johannesburg, South Africa. The forum attracted over 600 representatives from 54 member countries and focussed on how both the developed and developing nations can best participate in the globalisation process. The Commonwealth has a combined population of 1.8 billion people.

In addition to Government and Opposition members accompanying the Prime Minister, the delegation also included BFSB Directors Ian Fair, Barry J. Malcolm, Larry Gibson and Gregory Bethel. Of particular relevance to the BFSB delegates were sessions dealing with "The Impact of Globalisation on the Financial Services Industry."

The Bahamas Prime Minister chaired a special public and private sector dialogue segment on liberalisation and integration of capital markets, under the session on "Mobilising Finance and Capital Flow: Banking and Financial Services". The Prime Minister addressed delegates on "Challenges for Banking and Financial Services", with particular emphasis on the need for increased prudential supervision and effective risk management policies under a regime of deregulation. He also took the opportunity to comment on the OECD initiative against harmful tax competition, and to defend The Bahamas’ position as a legitimate inter-national financial centre

The Prime Minister stated "...globalisation can only work in a supervisory environment that assures the safety and soundness of the international financial system - yet encourages competition among market participants."

In line with its theme, the Forum promoted the view that trade liberalisation generally has resulted in "expanded output and employment opportunities for all." Other key issues discussed at various sessions included:

• recognition that efforts must be made to promote mutual benefits from the globalisation process for both developed and developing countries;
• need to expand and deepen cooperation between governments and legitimate private sector institutions;
• challenges for stock exchanges in developing countries, and the need to develop capital markets to mobilise domestic savings;
• privatisation of public corporations and engagement of the private sector in national development;
• foreign direct investment as an essential element in the economic development process;
• expansion of electronic commerce;
• need for special and different treatment of small countries in world trade.

The Bahamas Financial Services Board has entered into special arrangements with Mondaq Business Briefing, publishers of The International Offshore and Financial Centres Handbook to publish this quarterly newsletter electronically.

Mondaq’s distribution network will enable BFSB to profile The Bahamas’ financial services industry to millions of corporate users of major online databases such as Reuters, Bloomberg, Dow Jones, and Lexis Nexis. All four issues of BFSB Newsbriefs have been supplied to Mondaq, who also plan to publish select BFSB news releases and other Board promotional material.

The Bahamas will be featured prominently in the IOFC Handbook 2000/2001, scheduled for release next June.

Addressing the Bahamas Shipowners Association meeting in London during October, Trade Ambassador James Smith confirmed that the Bahamas is the world’s third largest ship registry, based on tonnage. Ambassador Smith is Chairman of the Bahamas Maritime Authority. The Bahamas Government established the BMA as a semi-autonomous public corporation in recognition of the importance of efficiency over bureaucracy and to provide maximum flexibility in responding to the needs of shipowners.

In late August the Hon. William C. Allen, Minister of Finance and Planning, travelled to Paris, France to meet with officials of the Organisation for Economic Cooperation & Development (OECD). The purpose of this exchange was to present the views of The Bahamas on the OECD Report on Harmful Tax Competition. The Minister expressed concern about the "unevenness in the focus and conclusion" of the Report and The Bahamas’ non-acceptance of the harmful tax haven criteria developed by the OECD’s Committee on Fiscal Affairs.

The presentation to the Forum focussed heavily on The Bahamas’ position as an international financial services centre in the business of legitimate economic activity, as opposed to a haven developed to facilitate evasion of taxes in other countries. The Minister stressed that use of a financial centre for an unlawful purpose does not make it "illegitimate". Rather, the integrity of a centre comes into question only if it does not take appropriate and required action to eliminate conditions for illegal activity. The Bahamas has become known and recognised as a centre which functions within clearly defined international standards and regulatory structures —- under government and industry policies designed to ensure the integrity and future of the industry.

A recent edition of "The International" praised financial services centres in the region for installing "rafts of legislation covering anti-money laundering and financial services regulation". The Bahamas was the first international jurisdiction to criminalise money laundering in 1996.

The International Maritime Organisation (IMO) has put in place necessary requirements and standards for seafarers – The Standards of Training, Certification and Watchkeeping for Seafarers (STCW) Convention. International certification in the various sea-borne trades will better prepare local seafarers to compete in the global maritime arena. The newly established Bahamas Maritime Training Institute (BMTI) will make the necessary training easily accessible to all Bahamians.

The Bahamas has been elected to the Council of the IMO, under Category C, placing 8th overall in contention for 16 such positions on the Council. Category C countries are "...those with special interest in maritime transport or navigation", according to a release by the Ministry of Foreign Affairs.

BFSB’s mandate dictates that it must be proactive in promoting the development of all sectors of the industry. This necessitates ongoing consultations with both the private and public sectors to ensure the right "products" to meet ever-changing demands of the global marketplace.

Recently, two Working Groups were established: one to review current International Business Companies (IBC) legislation and a second to consider E-Commerce legislation.

Other working groups convened during the year included the Careers Primer, Web Site, and Bahamas Financial Services Guide Steering Committees.

Members wishing to serve on any of the Working Groups or Steering Committees should contact BFSB Executive Director Barry J. Malcolm.

Just a reminder that BFSB brochures and other promotional materials are available to you for distribution at seminars and conferences both here and abroad. Let us know when you plan to participate in any international meetings, and we will ensure that you have all the necessary materials.

• Guaranty Trust Bank Limited
• Holowesko & Co.
• I.C. Mutual Ltd.
• Lions Gate Management

CIBC (Bahamas) Ltd. has broken ground for its eleventh branch in The Bahamas. This newest addition, to be located at Marathon Mall, is expected to be completed by mid year 2000, and will be fully on-line

Bayside Development, described as one of the most luxurious office complexes in the Caribbean is expected to be completed by Spring 2000. It will house Oceanic Bank and Trust Limited, Pictet Bank and Trust Ltd. and Teekay Shipping, all principals of the $25 million office complex. A third building on the ocean-front site on West Bay Street is expected to attract other select international financial services institutions.

Global Bahamas Holdings Ltd. reported a third quarter net profit of $1.735 million, a return on capital of 18%. Assets stood at $109.4 million.

Bank Leu Limited is located now in The Bahamas Financial Centre, downtown Nassau. The oldest Swiss Bank, Bank Leu is a Credit Suisse Group company providing private banking, trust and corporate management, and tax & estate planning services.

Also downtown is Leopold Joseph (Bahamas) Limited. The company moved into newly refurbished offices in the Euro Canadian Centre. Leopold Joseph provides a broad range of banking, investment management and trust services to individuals and businesses.

MeesPierson Fund Services Bahamas officially opened its new offices in the Montague Sterling Centre, East Bay Street. MPFS administers over 150 funds with assets in excess of $5.5 billion dollars.

1. To maintain and enhance the reputation of the Bahamas as an offshore international financial centre;

2. To prevent the use of banks and trust companies in The Bahamas for criminal purposes;

3. To adhere to the principles of banking confidentiality/secrecy as embodied in Bahamian legislation

It shall be the responsibility of every member to accord the fullest cooperation to the Central Bank in following all guidelines and regulations which may be prescribed to implement the operation of this Code, and in all cases of doubt or difficulty to confer with and seek the advice of the Central Bank. In particular, members shall confirm to the requirements of the Central Bank with regard to the acceptance of large cash deposits.

Members shall determine the identity of the beneficial owners of all accounts and will not open or maintain accounts unless they are satisfied as to the relationship in accordance with the requirements of Bahamian law.

Members shall take all reasonable measures to ensure that accounts are not used for the purpose of holding assets obtained as the result of, or for facilitating, the commission of criminal activity or for any objects that infringe Bahamian law, and shall take appropriate steps to report any suspicious transactions relating to any accounts so used at the earliest possible opportunity.

Members shall not knowingly commit any acts in any foreign country that would be an offence under the fiscal or exchange control laws of that country, and in particular shall not accept cash deposits in any foreign country that might constitute such an act. Members shall not provide customers with false attestations or documentation for the purpose of evading the fiscal or exchange control of any country.

Members will be guided by the highest standards of client confidentiality, as well as by applicable provisions of Bahamian banking legislation.

Members shall be committed to provide both classroom and on-the-job training for their staff and ensure that they are adequately trained and properly supervised.

Members shall organise and control their internal affairs in a responsible manner, keeping proper records and implementing well-defined compliance procedures as required by Bahamian law.

The advertisements issued by members, whether in The Bahamas or abroad, shall not be misleading and shall be of such a nature in form and content as to reflect the good nature of The Bahamas as a reputable international financial centre.

Members shall fully observe the requirements of the Central Bank now or hereafter in effect with regard to disclosure of the identity of members’ beneficial shareholders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.