The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

CARIBBEAN international financial centres (IFCs) are “all in very serious trouble”, a former financial services minister warned yesterday, expressing fears that many may not survive.

Ryan Pinder, pictured, who held the post under the last Christie administration, outlined the grim reality facing nations such as The Bahamas amid the changing regulatory landscape. He said that in the absence of in visionary policy direction and reform, “I fear many of us will not exist as IFCs any longer”.

Mr Pinder, who was addressing the Society of Trust and Estate Practitioners (STEP) Caribbean 2019 conference, told attendees he did not share the optimism that regional IFCs are strong and “will all be ok”.

“I think we are all in very serious trouble, and I don’t say this because I believe we cannot survive with compliant business. Region wide we struggle with a lack of identity and an opaque value proposition as international financial centres given today’s regulatory reforms and scope of business that we must adapt to,” said Mr Pinder.

“My view of the world, and us IFCs in the world today, is not very bullish. I think we have significant challenges to be viable as financial centres. I have difficulty identifying our competitive advantage and value proposition that clients will desire. Why do clients need regional IFCs when their information is no longer private and they have to invest significantly in physical presence - in certain cases from an operational point of view, and in most cases from a governance point of view.

“In an era of transparency, economic substance and over-compliance, what sets us as IFCs apart from onshore financial centres? Unless we adapt and can identify and convince the market of our value proposition in the new world order, we will struggle to continue. In the short-term we will all try to survive, in the medium-term we will struggle with innovation and differentiation, in the long-term I fear many of us will not exist as IFCs any longer without fundamental and visionary policy direction and reform.”

Mr Pinder questioned whether efforts to adapt and adjust to the past decade’s regulatory onslaught have placed Caribbean IFCs in a position to remain competitive. “I struggle to see how we are better off from a business point of view,” he said.

“We have gone from holding ourselves out as true differentiating financial centre to proclaiming that we are compliant with all the rules imposed on us. That alone does not attract clients and develop an industry. That message, as a sole message, is an admission that we are regulating ourselves out of business.

“Global regulatory standards have expanded now beyond tax, beyond anti-money laundering and have now put the focus on economic substance.... The imposition of economic substance requirements will be difficult for many of our IFCs, difficult in understanding exactly what the clients are doing, difficulty in having the capacity to provide the economic substance domestically in our countries, and difficulty for our private sector - especially those that are in international groups - to comply with the archaic outsourcing requirement that prohibits the outsourcing of core income generating activities outside of the country.”

Mr Pinder said that while The Bahamas has undertaken several legislative reforms, many are “lacking in regulations and guidance that will assist the private sector in understanding their obligations and how to conduct their business, adding to the uncertainty in our marketplace”.

“We still have work to do on the legislative front,” he warned. “Some of the legislation likely will require amendments, and most of the legislation we have seen requires more precise guidance. The downfall of this process, however, is that we have not passed enough legislation for new products, new innovation and new opportunities for a value proposition.”

He continued: “If we can define ourselves, be attractive to business, then we have a fighting chance. If we can reshape our market, invest in our own knowledge and understanding, work collectively as private sector, government and regulators, then the chance of survival, and hopefully success, remains.

“It is a hard journey; we all have a lot to invest, but it’s our industry not theirs. It’s our future, not theirs. It’s our viability as small island nations that is most important. We live here, they don’t.”