The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-Cabinet minister has warned that creating a central Beneficial Ownership Registry could "destabilise" the Bahamian financial services industry and should be shelved "for now".

Ryan Pinder, a former financial services minister, told a Bahamas Financial Services Board (BFSB)-sponsored seminar that the proposal represented "a major shock" for an industry and client base already reeling from the imposition of numerous international regulatory initiatives within just a few years.

He warned that the Register of Beneficial Ownership Bill 2018, tabled recently in the House of Assembly, would likely prove especially alarming for the high net worth Latin American clients that The Bahamas is increasingly targeting.

Mr Pinder said such clients had legitimate reasons for confidentiality, given the often-high level of crime and political instability in their home countries, and disclosure of their wealth - via hacking or data leak from a Bahamian ownership registry - could place their lives and their families in jeopardy.

The former minister urged the Government to delay the Beneficial Ownership Registry until global standards on the issue further evolved, and instead focus on complying with the European Union's (EU) demands for 'economic substance' and the elimination of 'ring fencing'.

He added that the Bahamian financial services industry could ill-afford further "shocks and challenges" until the revamping of its business model, and a clearly defined "value proposition" and growth strategy, were developed and implemented.

"Leave the Register of Beneficial Ownership Bill 2018 alone for now and focus on 'economic substance' and 'ring fencing' matters," Mr Pinder recommended to the Government. "Address [the] Beneficial Ownership Register at a later date after we re-define our value proposition and make some substantial advances."

K P Turnquest, the Deputy Prime Minister, previously told Tribune Business that the proposed Beneficial Ownership registry will have "the most stringent controls" when it comes to data protection and information security.

It will not be accessible to members of the general public, and he said it was "not an unreasonable guess" to suggest that the Bahamas would follow the Cayman Islands' lead by establishing a registry that is neither 'in the cloud' or linked to the Internet, in a bid to eliminate the threat of hacking and/or data leaks.

Mr Pinder, though, said such pledges were unlikely to allay the legitimate confidentiality/privacy concerns of many Bahamian high net worth clients and their advisers. "Despite maintaining that a Beneficial Ownership register will be private, this will not satisfy the legitimate data protection concerns," he argued.

The now-Graham Thompson & Company attorney and partner pointed to previous "high profile" and Bahamian database hacks and breaches as one factor, along with the absence of global standards for such Beneficial Ownership Registries.

"Many G-20 countries themselves do not have such legislation. We still need to continue to insist on a level playing field," Mr Pinder said, suggesting that the Bahamas needed to wait and assess the fall-out from the UK parliament's decision to pass legislation forcing the likes of the Cayman Islands, British Virgin Islands (BVI) and Bermuda to implement public registries by 2020.

Mr Pinder said the Bahamas' current regulatory regime, where supervisory authorities and the courts could obtain beneficial ownership information on all Bahamas-incorporated entities from the relevant 'registered agent', was sufficient to meet this nation's obligations.

"The Bahamas has focused on, and successfully attracted clients from Latin America, a new region," he warned. "Latin American clients have a specific concern about privacy as they live in an environment where kidnapping, victimisation and even murder can be commonplace. A Beneficial Ownership Registry could drive this business away.

"The significant amount of international regulatory changes in just a small timeframe (FATCA/CRS/BEPS) has placed a significant strain on an already volatile and sensitive industry. The additional shock of a beneficial ownership registry - which is a major shock - could very well destabilise the financial services industry of the Bahamas.

"The imposition of additional shocks and challenges to the industry without having a clear value proposition or growth strategy will be detrimental to an already-contracting industry."

The Register of Beneficial Ownership Bill was tabled with an 'Appointed Day Notice', which many in the financial services industry have interpreted as a signal that it will not take effect immediately once the legislation is passed by Parliament.

The belief is that the Register will take time to set-up, as the Government addresses information technology (IT) concerns and the best model for maintaining confidentiality/privacy, while also working on the data gathering process for thousands of legal and incorporated Bahamian entities with industry.

Several observers suggested that the Government wanted to demonstrate progress by tabling the Bill, especially with the Financial Action Task Force (FATF) due in the Bahamas next month to assess whether this nation has adequately addressed the anti-money laundering and counter-terror financing deficiencies identified by its Caribbean affiliate last year.

"One of the FATF's concerns, as well as the other alphabet group's, is that there's no central repository for information, so there's potential for gaps that might not be detected because there's no central registry," Mr Turnquest told Tribune Business previously. However, government sources said the Bill would not permit 'fishing expeditions' by foreign regulators.

Mr Pinder, though, expressed concerns over whether the Register of Beneficial Ownership Bill is "going too far", and if it might create "a trust registry through the backdoor". In particular, he questioned whether the beneficial owners of companies owned by trusts will be included.

Suggesting that the regulations gave the responsible Minister latitude to determine who is defined as a 'beneficial owner', Mr Pinder said it was "unclear" whether registered agents could "perform any search" or just those for companies they act for.

He also queried whether the Government intended for the financial services industry to pay for the register through regulations, and noted the absence of a fee schedule for the Registrar.