The Bahamasﾴ financial services sector is in a stronger position to generate future employment, according to Central Bank projections. The position is linked to new figures that show the current number of offshore entities with a physical presence here is the largest it has ever been.
In 2001, the Central Bank imposed a requirement for all managed or shell companies to establish a physical presence in the Bahamas by June 30, 2004.
The Minister of State in the Ministry of Finance James Smith, told The Bahama Journal on Monday that the move strengthens the supervisory framework of the country and its reputation as a well-regulated jurisdiction.
ﾓMany of the large banks, when first established in The Bahamas, came here through a managed presence to see first of all ﾑbefore I commit this kind of capital letﾴs see if I could get a foot hold here, whether I could do business here, whatﾴs the regulatory environment like, whatﾴs the government like etcﾴ,ﾒ said Minister Smith.
ﾓThey would have another bank manage them for a while, then they would decide to convert. ﾠThey wonﾴt have that opportunity anymore,ﾒ he stated.
In the past, a larger bank or law firm could manage smaller banks. ﾠThey would act as ﾓshell licenseesﾒ for the smaller financial institutions. ﾠBut a tighter regulatory regime put an end to that phenomenon.
The Central Bankﾴs Economic Overview reports that offshore financial institutions that established offices in The Bahamas increased to 216 by December 2003 from 203 the previous year.
According to bank officials, another 29 operations are in transition to full physical presence.
Mr. Smith, a former Central Bank Governor, said officials took that position based on discussions with international regulators. ﾠ
They reportedly found in some instances, particularly in small island nations, that there was some money laundering activities due to banks not having a physical presence. ﾠ
ﾓI think Central Bank took the view that since it happened in one case, it would just ban all of them,ﾒ he said. ﾠﾓThere are still managed banks in countries like The Cayman Islands and The Virgin Islands. Like that, the bank doesnﾴt have a physical presence, but it has a name.ﾒ
Locally, new regulations required that with the physical presence in The Bahamas, offshore companies would have to maintain a minimum level of staffing and onshore record keeping. ﾠSince the transition began in 2001, Central Bank officials said a significant number of institutions decided not to satisfy the requirement and have instead had their licenses revoked.
ﾓIt must be understood that some of those financial institutions went into voluntary liquidation. Maybe it was getting too competitive for them (and) they decided to go to another jurisdiction,ﾒ Minister Smith said.
Hadassah Hall, The Bahama Journal
