Being nimble is crucial in the current changing environment
In a consistent effort to improve its value proposition to investment managers and service providers, the Bahamas has continued to fine-tune its legislative framework, pandemic notwithstanding. The changes expected will support the growing trends witnessed within the financial services industry, both in the Bahamas and on a more global scale.
Throughout what has been an unimaginable 2020, the Bahamas’ legal and regulatory framework supported the shift to remote working which was driven by the global pandemic. Kevin Moree, partner at McKinney, Bancroft & Hughes notes: “The Bahamas financial industry has demonstrated its resilience and adaptability throughout the pandemic. It supported the continuation of services and facilitated businesses and corporations as they transition further into the digital sphere.
“This unprecedented event has seen firms employing e-business methods, electronic communications and electronic signatures and contracts under the provisions of the Electronic Communications and Transactions Act. This law was enacted in 2003 but is now more than ever crucially relevant due to the restrictions on travel.”
The growing use of technology, motivated by the pandemic is expected to persist across the financial services industry globally, including the Bahamas. Christel Sands-Feaste, partner at Higgs & Johnson comments: “As a result of the Covid-19 pandemic and international initiatives there will be an increased use of technology, consolidation of participants in the industry and more stringent regulation.”
In further testament to its support of the industry, the government also allowed for additional flexibility in recent months, given the continued restrictions due to Covid-19. Moree highlights: “The Regulatory & International Affairs Unit of the Ministry of Finance announced in August that a temporary framework had been put in place to accommodate businesses which have had to adjust their operating procedures as a result of the pandemic. This temporary framework allows for virtual meetings where it has not been possible or feasible for meetings of boards of directors to physically take place in The Bahamas.”
Other efforts demonstrate how the Bahamian government is being responsive in these challenging times. This includes the launch of a Work/Study Visa program which allows visitors to stay in the Bahamas for a twelve-month period. Individuals will be able to work or study remotely from hotels, condominiums, rental villas and other accommodation.
Linda Beidler-D’Aguilar, partner at Glinton Sweeting O’Brien, expands on the rules governing this program: “The only restrictions, in terms of work, are that any work carried out must relate to business outside the Bahamas. Further, the worker must be employed and paid by an entity outside the Bahamas. A visa holder under this program cannot participate in the domestic economy without first obtaining a work permit, and thereby forfeiting the Work/Study Visa.
“Ultimately, it is hoped that through the Work/Study Visa program, people may decide to redomicile on a permanent basis rather than simply providing a post-Covid boost to the economy.”
Another government initiative is related to the tax residency certificate (TRC). According to Elsworth Johnson, minister of financial services, trade and industry and immigration, the launch of the certificate is a high priority. The holder of such a certificate would have their own taxpayer identification number which confirms their tax residence in the Bahamas, having met specific criteria with respect to local tax obligations. In addition to officially setting the Bahamas as individuals’ place of residence, these certificates help confirm the holder's compliance with their own home country tax laws.
Sands-Feaste says: “The Bahamas continues to amend existing legislation and to pass new legislation to ensure that we remain compliant with international best practices and regulatory requirements.” Some of these amendments includes clarification on trust and fiduciary services as well as the regime for financial and corporate service providers. These changes serve to further strengthen the regulatory regime of the Bahamas.
Even in these uncertain and challenging times, financial jurisdictions, like the Bahamas need to focus on progress and development. In Beidler-D’Aguilar’s words: “The Bahamas is highly innovative. Its focus is on developing client-driven solutions. The industry listens to what existing clients want to further their own businesses and opportunities. Also talking to our own advisors gives us the information we need to develop new products and update our legislative regime to respond to their needs.”
Sands-Feaste agrees: “Industry participants are developing technology and systems to ensure that they are able to deliver their services in full compliance with these initiatives.”
After all, the future of the financial services sector depends on innovation, which provides a path to increasing competitiveness.
The Bahamas can also support growing interest from investors and traders in other parts of the world. Brendan Davis, Business Development Manager, ActivTrades, outlines: “Financial trading is no longer just for people who are close to traditional financial hubs like London or New York.
“There are people in South America and the Caribbean who follow the markets closely and are serious about trading. They want access to products of their own. To this end, we see the future of the Bahamas financial services industry being one where the country is well-placed to become a hub for these types of clients.”
One of the jurisdiction’s focus areas going forward will be to attract more family offices. To support this appeal, the Bahamas Financial Services Board, a collaborative body between government and private business, is working on several initiatives targeting the establishment of family offices in the Bahamas.
This involves reviewing the legislative and regulatory regimes, as well as working on educational initiatives to ensure qualified persons are available domestically to meet staffing needs.
Beidler-D’Aguilar comments on this development: “There remains a keen interest in bespoke, highly personalized services for families with business interests across the Americas, especially because the Bahamas is in a convenient time zone and is a highly accessible location.
“Moreover, many such families no longer want to have all of their interests with a single service provider. Consequently, there is an opportunity for smaller scale entrepreneurial service providers who are focused on superior service and swift adjustments to external forces. We’re already seeing such providers step up in the Bahamas.”
Sands-Feaste delineates her view on future client requirements: “Demand for fiduciary products, for which the Bahamas is well known such as trusts and foundations as well as investment funds, will remain strong. This is being driven by an increased focus on estate planning as a result of the pandemic.”
As mentioned earlier, regulatory change is crucial to the country’s value proposition. Sands-Feaste gives additional information on the initiatives she believes are vital: “Recent initiatives which are critical to the future of the financial services industry include the overhaul of the regulatory regime applicable to regulated investment funds in the Bahamas. This will modernize the legislative framework and ensure compliance with international best practices regarding the regulation of investment fund managers.”
She also identifies the growing potential of the digital space: “Legislation is currently being drafted to regulate digital asset businesses and initial token offerings. Critical regulatory initiatives to the continued success of the industry demonstrate an increased focus on ease of doing business and the transition to a wholly virtual platform in key Government agencies.”
Beidler-D’Aguilar emphasizes the strengths of the Bahamas as a jurisdiction: “The Bahamas has always sought to provide superior financial products and services and a world class client experience. It has proven itself to be nimble and responsive to global changes – always mindful of the need to adhere to international standards with respect to compliance, cooperation and transparency. This is complemented by the fact that the Bahamas is not only somewhere that offers bespoke private wealth management, it is also a beautiful place to live and work.
“Three vital features are at the heart of what distinguishes the Bahamas as an international financial centre of significance - Expertise, Innovation and Location. Everything the Bahamas offers is defined by these words. Everything that comprises the Bahamas value proposition and continued success as a leading international financial services centre is guided by these distinguishing factors.”