The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must join “the more innovative and creative” international financial centres (IFCs) to survive, a leading QC yesterday warning a global shift to the automatic exchange of tax information was inevitable.

Brian Moree QC, senior partner at McKinney, Bancroft & Hughes, said the key for this nation’s financial services industry was not the immediate response to FATCA-type initiatives, but rather the development of a “sustainable business model” for the long-term.

And he warned the Bahamas not to “get too far ahead” of its competition in complying with global regulatory initiatives if it was to preserve its competitive advantage.

Speaking after Dr Nicola Virgill-Rolle, the director of financial services, revealed that the Bahamas is looking to remove language from its draft Foreign Account Tax Compliance Act (FATCA) agreement with the US, which would commit it to working with Europe and the OECD on the automatic exchange of tax information, Mr Moree said it was inevitable this would become the global standard.

“I think it is obvious to anyone who has been following the recent developments that the Europeans, and indeed the Canadians and other countries, will want to have the same treatment with regard to the exchange of information as was given the US under FATCA,” the leading QC told Tribune Business.

“This is an inexorable process, and it’s only a matter of time. I think there have already been statements and comments coming out of the European Union (EU) that they will expect to replicate a FATCA type of arrangement with the IFCs.

“Anyone who thinks that the automatic exchange of information under FATCA will be limited or restricted to the US is mistaken.”

Reiterating that the Bahamas must ensure a regulatory ‘level playing field’ when complying with the likes of FATCA, Mr Moree added: “Provided these apply to all IFCS, and we don’t get too far ahead of our competitors, it is obviously going to affect all of us in the same way and we will not be at a competitive disadvantage if it is managed properly.

“The real issue is how does it affect the offshore banking industry generally, and how are we going to develop a business model which is going to be sustainable in this new environment.”

The Bahamian financial services industry has had to deal with numerous global regulatory initiatives, each coming one after the other and “moving the goalposts”, since the mid-1990s.

“Their ultimate intention is to completely close down IFCs to stop the leakage of tax revenues from their own country,” Mr Moree said of the G-20.

“That’s the reality we have to face, and as these initiatives are addressed, you continue to revamp your business model.”

He added, though, that there were “compelling reasons” for the Bahamas and other IFCs to survive, given that they acted as ‘collection stations’ for large quantities of capital that was subsequently invested in the top developed countries.

“IFCs play an important role, and I think for that reason the more innovative and creative IFCs will survive,” Mr Moree told Tribune Business. “The challenges for the Bahamas is to ensure we are in that group.

“It does require a review of the business model to take into account these developments. The automatic exchange of information is going to be the norm going forward.

“We are well positioned to survive, provided we continue to stay ahead of the curve. We have to continue to innovate, and the Government of the day has to continue to focus very seriously on these issues.”

Mr Moree urged the Government to ensure that the Ministry of Financial Services was equipped with the necessary resources, technology and expertise, and that its focus was not split between too many areas.

In her Wednesday address to a Society of Trust and Estate Practitioners (STEP) luncheon, Dr Virgill-Rolle said the Bahamian financial services industry had already adapted its business model to one that was based on ‘added value’ rather than tax advantages.

“Sovereignty has made the Bahamas more attractive,” she added. “We determine what we do, and how we comply. Cayman had to do a wholesale [FATCA agreement]; ours is more balanced.

“We seek to negotiate things in the best interest of our nation, and we were successful.”

While the Bahamas’ financial services sector had developed as a private wealth management specialist, Dr Virgill-Rolle said it was now positioned as a full service business centre offering a wide variety of products.

“We offer strong compliance, and that’s probably one of our strongest selling points,” she said, adding that the Bahamas was an active member of the OECD’s Global Forum on Tax Transparency and regularly made its views known.