The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The draft Bill for the Bahamas’ latest fund product will be sent to the Attorney General’s Office “in short order”, Tribune Business was told yesterday, amid anticipation it will give this nation “significant traction” in Latin America.

Ryan Pinder, minister of financial services, told Tribune Business that rather like foundations, the Condominium Fund would give Bahamian fund administrators and managers the platform to penetrate civil law jurisdictions in Latin America.

“We’ve substantially complete with the draft legislation, and look to go to the Attorney General’s Office for review and comment in short order,” Mr Pinder told Tribune Business.

“It’s a product to provide the framework for our fund industry, particularly in civil law countries.”

Explaining that ‘condominium’ was a term used to define fund development in civil law nations, Mr Pinder added: “It certainly differentiates us, similar to how foundations were designed.

“We believe the product will have significant traction coming out of Latin America, and be a significant development for the funds industry.”

Mr Pinder, meanwhile, joined Sean McWeeney QC in expressing scepticism that the G-20/OECD would be able to immediately implement automatic information exchange as the global standard, despite all the latter’s members signing up to it.

Pointing to the numerous delays the US had experienced with its like-initiative, the Foreign Account Tax Compliance Act (FATCA), which had extended for years, Mr Pinder said OECD representatives attending this week’s STEP Caribbean conference had suggested 2017 would be the earliest ‘first adopters’ could implement the automatic exchange of tax information.

Suggesting that even that estimate was “aggressive”, Mr Pinder said the Bahamas might not be required to adopt this until 2018 or 2019.

Nor would automatic exchange “open the floodgates”, the Minister said, as such arrangements would have to be worked out country-to-country rather than through an umbrella agreement covering all nations.

“There’s plenty of work to do, and it’s not that we respond to every jurisdiction from day one and have a drop dead regime,” Mr Pinder told Tribune Business.

Mr McWeeney, meanwhile, told the STEP Conference that the Bahamas needed to “take a page out of the playbook of Harold Christie”, the late realtor and investment promoter, when it came to attracting new financial services business to this nation.

With regulations making the US, Canada and Europe “increasingly off limits to the private banker”, and the situation unlikely to “get better any time soon”, Mr McWeeney said the Bahamas had to shift its focus to Latin America, particularly the likes of Brazil and Mexico.

Emphasising that tax neutrality should be a major focus, he added: “I hasten to add that the Far East - China, Japan and South Korea, where succession taxes have gone to 50 per cent - provide interesting possibilities for the Bahamas.”

Arguing that the Bahamas should not “cede” Asia to the likes of Hong Kong and Singapore, Mr McWeeney said “the same is true of the Middle East”.

“We need some Harold Christie’s to take ploughs into those fertile but unploughed fields that hold huge potential for tax neutral business,” the noted QC said.

He added that the Bahamas ”lost sight of the dynamics” of focusing on high-end, quality clients during the 1960s, 1970s, and 1980s, dropping Christie’s strategy in favour of a mass market approach that “commoditised” products such as International Business Companies (IBCs.

Mr McWeeney said these were almost sold ‘off the shelf’, like vacuum cleaners, to walk-in customers carrying briefcases of cash or tourists in flip-flops on vacation.

“Those days are gone,” he emphasised. “No one wants or takes that business any more. It’s fraught with dangers.”

Reiterating that the Bahamas could not sit by the phone, fax and e-mail waiting for the business to come to it, Mr McWeeney said it had to target specific markets where there was minimal regulatory and reputational risk.

“Nowadays, you can’t put on a parachute and jump into the enclaves of the rich and famous,” he added, explaining that the industry needed lo “know where the ‘no fly’ zones are”.

Noting that much of the Bahamas’ French trust business had moved to Panama as a result of regulatory reform in that nation, Mr McWeeney said: “We really have to focus on developing products and markets that take us outside the confrontational framework with the OECD, G-8 and others, and tax neutrality has to be the watchword going forward.”

Otherwise, significant personal and institutional reputational risks will be run, he added, with the US tactics of ‘John Doe’ summonses, whistleblowers and money laundering/tax fraud prosecutions set to be copied by Canada and the Europeans.