The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must be careful “not to spook” its high net worth clients over last week’s HSBC revelations, with politicians, businessmen and ex-ministers united in their call: “Don’t assume the worst.”

All spoken to by Tribune Business described as relatively meaningless the revelation that 55 Bahamian passport holders were among the 202 HSBC private banking account holders with a connection to this nation.

K P Turnquest, the Opposition’s finance spokesman, and ex-Central Bank governor, James Smith, said it was impossible to pass judgment on the data obtained by The International Consortium of Investigative Journalists without more information.

Details such as the true beneficial owners of the 659 Bahamas-linked bank accounts; the sources of the funds and the purpose for opening these accounts; and whether any necessary exchange control approvals were obtained all had to be divulged before a proper assessment could be made.

“My initial reaction is not to overreact,” Mr Turnquest told Tribune Business,” because a number of them are obviously clients of the financial services industry.

“I don’t want to overreact and think the worst because it could very well be an extension of the business we provide, and I certainly don’t want to spook our clients to think it’s wrong and inappropriate for individuals in this jurisdiction to be acting in this way.

“It’s a valuable service that we provide as a jurisdiction. Until we find out, and are able to determine, the beneficial owners of these accounts, it is premature to assume the worst.”

Although the data obtained by the Journalism Consortium said the 55 Bahamian passport holders accounted for 27 per cent of the 202 clients linked to this nation, it is possible these persons are financial services professionals - lawyers, accountants and bankers - acting as nominees for their clients.

Very few of the Bahamas-linked accounts were numbered, being split almost 50/50 between individuals and corporate entities being named as the signatories. Some 418 Bahamas-linked client accounts were also opened at HSBC’s Swiss private bank between 1988 and 2006.

The Bahamas was also ranked eighth in the world when it came to the total sum on deposit at HSBC, a figure that totalled around $7 billion. The largest account was said to be worth $1.6 billion, but over 100 clients - more than 50 per cent - had balances ranging between $0-$60 million.

The Bahamas’ high world ranking, and $7 billion sum, will come as little surprise to financial services industry professionals. It is likely a reflection of this nation’s standing as an international financial centre (IFC), and the fact it deals with high net worth and corporate clients who dabble in such sums.

“I’m not totally surprised,” Mr Turnquest told Tribune Business. “We have been a very successful jurisdiction in terms of assets under management. The surprise is to the extent there are Bahamian beneficial owners and account holders.”

He suggested that the Financial Intelligence Unit (FIU) might consider doing its own “due diligence” on the HSBC data, while another issue was whether Bahamian passport holders obtained Central Bank exchange control permission to send their funds to Switzerland if they were resident here at the time.

Mr Turnquest’s position was echoed by James Smith, the former minister of state for finance, who reiterated that “more information” was needed to make an accurate assessment of the data.

“For instance, if an offshore bank had a correspondent relationship with a bank in Switzerland, and the account holder is an International Business Company (IBC) from the Bahamas, this would show a Bahamian corporate personality against the bank account,” Mr Smith said.

“It’s very difficult from that type of information to determine whether it’s a Bahamian resident. None of them may be living in the Bahamas at all. Even a hedge fund operating out of Cayman could have a corporate account in the Bahamas with HSBC.”

He emphasised that with corporate entities, nationality was determined by where these were incorporated, not the nationality of the beneficial owners. And economic permanent residents did not have to obtain exchange control permission from the Central Bank to transfer monies overseas.

Another who agreed there should be no rush to judgment was Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chairman Gowon Bowe.

He said that given the Bahamas’ position as a major financial centre, there was every likelihood the 55 Bahamian passport holders were not the beneficial owners of the funds but merely acting in their professional capacity as financial service providers.

Mr Bowe, a PricewaterhouseCoopers (PwC) Bahamas accountant and partner, said that reports that 55 of the 202 clients from The Bahamas held Bahamian passports appeared to be “misleading on the face of it”.

“We have to be very careful to understand what they are referring to because bear in mind in the Bahamas there are a lot of trust companies, and the trust will have Bahamian directors and they may very well be signatories on the trust that will have monies in various institutions around the world. There is a distinct difference between actual Bahamians who won money versus Bahamians who are representing organisations and are trustees, custodians or other service providers. I would be really careful until we have the details behind this,” said Mr Bowe.

“The Bahamas is a major offshore financial centre doing significant legitimate business. The distinction has to be made between Bahamian passport holders that are beneficial owners of the funds versus Bahamian passport holders that are mere nominees in their professional capacity as service providers.

“While someone who is trying to make mischief in Switzerland or Europe will say: ‘Look what the Bahamian dodgers are doing down there’, I think that would be very misleading if they are in reality in legitimate business

“Also, you have to think about how difficult it would be to sort of expatriate that type of money given our foreign currency regime. If it’s truly Bahamian then it would have to have been money they made outside of the country,” Mr Bowe added.

“Because if it was made in the Bahamas, to get it out would have been a tremendous challenge. If it was outside the country it may have been an issue of saying well they should have been paying premium for investment dollars, but from that perspective it would have been money made from transactions that really don’t contribute to the economy in any event.”