The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is moving too far, too fast to satisfy international demands, a former finance minister warned yesterday, adding: "We're kind of being led to the slaughter."

James Smith, pictured, also an ex-Central Bank governor, told Tribune Business that creating a central Beneficial Ownership Registry amounted to the Bahamas implementing expensive infrastructure without reaping any benefits from it.

Speaking after legislation to create such a Registry was tabled in the House of Assembly on Wednesday, Mr Smith expressed fears that the Bahamas was taking a "piecemeal approach" towards meeting global regulatory demands that threatened to undermine the financial services industry's long-term viability.

"We seem to be moving so fast in implementing the suggestions of the Organisation for Economic Co-Operation and Development (OECD) and other bodies without, in my view, a thorough, comprehensive review of where we are and where we want to go," Mr Smith told Tribune Business.

"It seems to me to be going too far, and we're taking whatever they give us. If you're doing a beneficial ownership registry, you're taking away the last refuge of confidentiality. You're putting in place a structure that demands encryption, and can't be easily penetrated."

Mr Smith expressed concerns that a central Beneficial Ownership Registry could expose the Bahamas to 'Panama Papers' style leaks, given that details on the ownership of all Bahamian-domiciled corporate and legal entities will reside in one place.

K P Turnquest, deputy prime minister, had earlier this week told Tribune Business that the Registry will have "the most stringent" data protection safeguards, and may not be linked to the 'cloud' or the Internet.

The Registry will also not be an 'Open Sesame' where the general public can do searches on all entities. Instead, it will only be accessible to 'designated persons' - those authorised by the Attorney General's Office and financial regulators to conduct searches, and staff from 'registered agents' updating corporate records.

Mr Smith's 'too far, too fast' concerns likely stem from the breadth and speed at which the Bahamas is being pushed to enact reforms. Apart from the Registry, Parliament will soon debate legislation to facilitate country-by-country reporting for entities that are part of multinational financial structures, thereby bringing it into compliance with the OECD's Base Erosion and Profit Shifting (BEPS) initiative.

Once that is out of the way, the Bahamas will then have to address the European Union's (EU) demands for the elimination of 'ring fencing' and that entities doing business in the Bahamas must have a physical presence/do real business here.

Mr Turnquest told this newspaper on Wednesday that the Beneficial Ownership Registry is needed to address the Financial Action Task Force's (FATF) anti-money laundering and counter terror financing requirements, as well as the OECD/EU desire for automatic tax information exchange.

Taking the alternative view to Mr Smith, he yesterday told a financial services industry seminar that resistance to such change was futile, and small jurisdictions such as the Bahamas had no alternative but to adapt to global regulatory changes.

"Such jurisdictions are left with one option: To adapt. Adaptation is necessary to take advantage of the new realities, to compete globally and to have a chance at prosperity," Mr Turnquest said.

"This jurisdiction is adapting. There is a burgeoning renaissance in our financial services industry, and much of it is being led by financial services regulators."

Mr Smith, though, said the Bahamas was paying for infrastructure such as the Beneficial Ownership Registry "and deriving no benefit from it", as this would all go to foreign countries and their regulators.

The former finance minister railed against what he termed "a piecemeal approach", rather than taking a position on how far we want to deconstruct the financial services industry, having regard to its importance in our economic development".

"We've been in this position before, when we responded too swiftly and lost so much, and have learnt nothing from that," Mr Smith said, referring to the 2000 'blacklisting' response.

"I don't know why we need to bend over to accommodate these guys. We need to retain some features that differentiate us form others. They're not even looking at the end result of this. Our business is going right back to the developed countries, while our revenue is going down and costs are going up.

"I still think there's really a need for a more in-depth analysis of where we are and where we wish to go, and not merely responding piecemeal. We'll have a very robust oversight system but nothing to look after."

Mr Smith warned the Government to be careful in following the likes of the British Virgin Islands and the Cayman Islands in enacting and developing regulatory reforms, as these were both UK Crown dependencies and could expect some protection from London whereas the Bahamas cannot.

Arguing that the Bahamas should also avoid "taking someone else's template", he told Tribune Business: "We're kind of sitting back and being led to the slaughter. I don't think they've [the Government] taken into account the cost of this thing.

"We're in a hurricane zone, have a deficit, and we have to invest in building this facility not to satisfy our own needs but the needs of a third country to what end? We won't be using it."