A government appointed committee of financial services professionals on Wednesday revealed its recommendations for streamlining financial services legislation and creating new ones to sharpen the sector’s international competitiveness.
Ten months after it was appointed, the Financial Services Consultative Forum, disclosed details of its proposals, which are ultimately designed to attract new business to the jurisdiction.
The report will be delivered to the government by the end of the week, according to Chairman Brian Moree.
“The Bahamas must continue to aggressively pursue the introduction of new products and legislation relating to the financial services industry in this country,” Mr. Moree said. “We must regain our competitive advantage in our core niche markets and we must provide a world-class environment for international business.”
The forum’s package of legislative changes includes proposals for a Segregated Accounts Companies Bill, a Purpose Trusts Bill and amendments to the Perpetuities Act and the Financial Transactions Reporting Act.
One of the essential proposals relates to the Know Your Customer [KYC] Rules. Mr. Moree noted the displeasure expressed by many clients at the inconvenience of having to present multiple forms of identification and other documents in order to comply with stringent measures.
He elaborated on recommendations the forum would make for amendments to the Financial Transactions Reporting Act, the legislation which made those measures necessary.
“What we are intending to do is to recommend to the government that we move away from the prescriptive approach that is presently set out in the statute where the financial institutions will be told literally by reference to a list what they specifically need in order to verify a customer,” Mr. Moree said. “In many cases that list really has not been practical.”
He explained that the Forum would recommend an alternative approach where financial institutions would be under an obligation to verify accounts based on general guidelines, which take into consideration a “risk-based approach” to each account.
“What we are going to recommend is that the approach to verification be conducted on a risk basis where patterns of behaviour, amounts of money, how long the institution has known the customer, the presence of any red flags or suspicious transactions and the source of the funds would all have to be considered by the financial institution in its verification process of its account owners,” he explained.
Many of the regulations for the sector, which some have labeled cumbersome, came about as a result of the package of financial services laws that was passed in December 2000 in response to the Financial Action Task Force [FATF] blacklisting the Bahamas.
But according to Mr. Moree, the forum’s proposals are fully compliant with the regulations and guidelines of relevant international agencies like the FATF, the Organisation for Economic Cooperation and Development [OECD] and the International Monetary Fund [IMF].
“There will have to be verification, but it is simply a question of making that verification more practical and a little more flexible,” he said.
The Segregated Accounts Companies Bill would allow a registered company to operate separate, self-dependent accounts within a single company.
“The result is that only the assets of a particular account may be applied to the liabilities of that account,” according to Mr. Moree. “Without this legislation it would be necessary to create separate subsidiaries or employ other more complicated structuring to achieve the same objectives.”
Acknowledging that the proposal for an amendment to the Perpetuities Act “is a somewhat technical point,” the Forum’s Chairman said the provision is nevertheless significant and is a direct response to market demands.
He added that the primary purpose of the amendment is to place some restriction on how far one generation can control the transference of property.
The proposed amendments to the Perpetuities Act will extend the perpetuity period from 80 years to 150 years.
“The rule against perpetuities restricts the extent to which future interests in property can be created by requiring that they take effect within a specified period of time called the perpetuity period,” Mr. Moree explained.
The Purpose Trusts Bill would provide the legislative framework for a specific type of trust that does not have to exclusively benefit charitable purposes and does not have any ascertainable beneficiaries, Mr. Moree said.
According to Mr. Moree, the package of legislation would provide immense benefits for the financial services sector.
The rationale is that if the new legislation is passed by Parliament, it will directly enhance the sector’s ability to service investment funds business, other rapidly growing segments of the capital markets sector and business associated with purpose trusts.
Deputy Chairperson of the Consultative Forum Maria Ferere said in addition to the proposed legislative changes the group also intends to recommend policy changes relating to immigration and regulatory issues affecting the financial services sector.
“What we want to explore is the need to relax the immigration laws to the extent that we need to in order to allow certain expertise to be imported into the country that’s needed in the financial services industry,” Mrs. Ferere said.
By Darrin Culmer, The Bahama Journal
