The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Financial Services Board’s (BFSB) chief executive yesterday echoed a former Cabinet minister in warning that “the very survival of the sector is under threat”, and demanded urgent reforms.

Tanya McCartney, addressing a Bahamas Institute of Financial Services (BIFS) seminar, called on for this nation to demonstrate its commitment to the new automatic tax information exchange/Common Reporting Standard (CRS) by passing legislation to bring this into effect by fall 2016.

Even though the Bahamas does not have to implement the new global standard until 2018, Ms McCartney called on this nation to “expedite” implementation so that it could detect - and manage - the risks to its financial services industry.

And, in an address that almost mirrored the 2016-2017 Budget debate contribution by former financial services minister, Ryan Pinder, she called on the Government to overhaul the permanent residency regime approvals regime and ‘ease of doing business’ to enable the industry to flourish.

“It should not take two years to process a permanent residency application,” Ms McCartney said. “We believe that if properly managed, Immigration policy and process reform will yield results that give maximum return for the Bahamas and for Bahamians. Failure to take action in this regard could very well be fatal to the financial services sector.

“The reality is that the very survival of the sector is under threat. This has implications for the overall economy but, closer to home, it has implications for each of us on a very personal and direct level who work within the sector. It certainly has grave implications for our middle class. Hence, decisive action must be taken.”

The fact that senior private, and formerly public, sector officials are speaking in unison on both the gravity of the situation facing the Bahamian financial services industry, and the necessary reform strategy, highlights the importance of rapid reform and action.

Ms McCartney acknowledged that many were “pondering the viability of the sector for the long-term”, given the multiple challenges and regulatory pressures it is facing, such as tax transparency/information exchange and correspondent banking ‘de-risking’.

Both she and Mr Pinder have this week reiterated that long gone are the days when the Bahamas could sit back, and rely on its ‘bank secrecy’ and ‘no tax’ platforms to bring business to it.

The new international regulatory platform has eliminated these former competitive advantages, forcing the Bahamas and other international financial centres (IFCs) to compete directly with onshore centres such as London and New York.

Emphasising that the Bahamas needed to “differentiate” itself from rivals, and give high net worth clients a compelling reason to use it, Ms McCartney said this nation needed to prove it was fulfilling its international commitments.

“As we manage regulatory risks, therefore, we must be proactive and take decisive and demonstrative steps so as not to be seen as laggards only paying lip service to the international community,” the BFSB chief executive said.

“Our efficiency must be the differentiator in this context. We have committed to implementing Automatic Exchange of Information by 2018 using a bilateral approach, and there are some concrete steps that must be taken to ensure that we manage the risks associated with this new regulatory regime.”

Ms McCartney said the Bahamas “needs” the legislation and regulation to facilitate the implementation of automatic tax information exchange “in place” by year-end 2016, and ideally passed by the fall.

She added that the Bahamas also needed to assess jurisdictions it would automatically exchange tax information with, and ensure there were “strict safeguards on the disclosure and use of data”, plus put in place the necessary IT systems.

Emphasising that the financial services industry was willing to assist the Government in drafting the necessary legislation, Ms McCartney said: “We must expedite the implementation of the action plan to meet our deadline of 2018.

“We know what needs to be done, and the private sector is committed and stands ready to work with government, and to invest time and resources to ensure that as a jurisdiction we mitigate against the risks associated with automatic exchange of information and the common reporting standard, and a failure to implement in a timely manner.”

Ms McCartney then indicated that she, too, sees the Bahamas’ financial services future lies in getting high ne worth clients to follow their assets to the Bahamas, and using this nation as their primary domicile to legitimately escape high tax rates in their home countries.

Backing Mr Pinder’s call for the Bahamas to start issuing Tax Residency Certificates to prove its clients’ compliance, Ms McCartney said this country needed to expand the permanent residency requirements beyond real estate investments, and also grant such status with the right to work in the applicant’s own business.

“BFSB and its members strongly believe that enhancing our Immigration policy and processes will inure for the benefit of the sector. We must examine our permanent residency (PR) regime,” she said.

“Importantly, there is an opportunity to improve the process for handling of Immigration matters. This is tied to the overall need for improvement in the area of ‘ease of doing business’ to improve our overall ratings. Hence, BFSB is formulating recommendations as to how processes may be refined for improved efficiency.”

Ms McCartney added that the Bahamas needed to become a ‘Centre of Excellence’ for developing human capital, and said: “We need a business-friendly environment where applications, license requests and other processes that require government interface are processed in a timely manner, and requirements are streamlined.

“This may be addressed quite simply by having government agencies speaking to/interfacing with each other. The slip in the World Bank ratings evidences the urgency of this.

“We must ardently take the requisite steps to manage the risks that threaten the very survival of the financial services sector, as the Bahamian economy and the lives of countless professionals depends on it.”