By NEIL HARTNELL
Tribune Business Editor
A prominent QC yesterday said he “would not advise anybody to do business in The Bahamas right now” because of the “strangulation” caused by excessive red tape and client due diligence.
Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that the cost and “ease of doing business” in this nation had “only gotten worse, not better” despite repeated pledges by the Minnis administration that improvements are being made.
In particular, Mr Smith railed against the six-month wait to open a business account at a commercial bank - a duration that two new company owners, both well-known and established businessmen, speaking on condition of anonymity, told this newspaper they also had to endure.
The outspoken QC accused Bahamas-based commercial banks of imposing “every kind of restriction under the sun” when it came to Know Your Customer (KYC) due diligence, and ensuring the beneficial owners of accounts and wire transfer originators were really who they said they were.
Disclosing that he was finding it increasingly difficult to wire money to persons he had done business with for four to five years, Mr Smith warned that “we’re going to strangle ourselves to death” with bureaucracy and onerous compliance requirements.
Calling for “the entire Cabinet to go to Singapore for a six-month crash course” on how to run a country efficiently, he added that “the constant barrage” of new laws and regulations had also driven numerous institutions from The Bahamas to the extent that the financial services industry’s future was becoming extremely precarious.
“It’s impossible to do business in The Bahamas because of Know Your Customer (KYC),” Mr Smith blasted, “with the banks imposing every kind of restriction under the sun. What doesn’t apply in the US applies in The Bahamas.
“The Government promised to break down this red tape strangulation of business in The Bahamas, but it’s only gotten worse, not better. I wouldn’t advise anybody to do business in The Bahamas right now; it’s too difficult with KYC and the difficulties in the banking sector, and having to disclose all your private information to the Government.
“In The Bahamas, everyone is found guilty rather than innocent. The presumption of innocence has been turned upside down in The Bahamas.” Mr Smith also pointed to the identification requirements that he said were contained in the proposed Immigration Bill as another example of this
“The Bahamas is going to be bureaucratically impossible to function in even for Bahamians,” Mr Smith continued. “It takes six months to open a bank account for a business. Banks I have done business with for 40 years are creating huge problems to wire money out for legitimate businesses we are involved with.”
He added that he had encountered just such a problem this week, when there were “difficulties wiring out to people we’ve done business with for four to five years”. Mr Smith said the bank blamed its compliance department when he inquired about the problems he was experiencing.
“It’s impossible, and very challenging, to do business in The Bahamas,” the Callenders & Co attorney and partner added. “I call on the FNM government to cut through the red tape or we’re going to strangle ourselves to death.
“Why can’t The Bahamas succeed like Singapore? Singapore is one-third the size of Grand Bahama, and Grand Bahama - on the doorstep of the most powerful nation in the world - is limping to its death. What’s Singapore’s secret? We need to send the entire Cabinet to Singapore for a six-month crash course on how to run a government successfully.”
Mr Smith expressed specific concern for the Bahamian financial services industry, which he argued was suffocating under the weight of legislation and regulatory initiatives imposed in response to the escalating demands of the European Union (EU) and Organisation for Economic Co-Operation and Development (OECD).
“I understand that a number of private banks have closed down in The Bahamas because they have found that the constant barrage of new, arbitrary and intrusive legislation is crippling them from functioning correctly,” he added. “We will lose our financial services industry if the Government does not turn this around sensibly.”
The outspoken QC’s complaint about six months being required to open a business bank account was backed by two entrepreneurs who spoke to Tribune Business on condition of anonymity. One said their business was effectively shut down for six months after the bank inexplicably closed its account, with the opening of a new one at a different institution taking half a year.
The other revealed that their frustration was finally eased when they contacted the bank’s Caribbean call centre, having endured never-ending delays in dealing with Bahamas-based bank staff due to the imposition of new requirements and documentation requests just when they thought the whole process was complete.
“I was on the phone yesterday with a bank call centre, presumably in Trinidad, after six months of trying to open a Bahamian dollar bank account dealing with local representatives. It was painful. Terrible communication skills, and I was forever prodding them for the next fragmented step,” the source told Tribune Business.
“After 15 minutes on the phone with a well-spoken, obviously competent person at the call centre judging by the speed and ease of getting things set up/finished up, it was done. No suck teeth, no attitude, just straightforward, effective, pleasant service in well-spoken English. After hours, too.
“The six-month wait for local ‘service’ is apparently common to Royal Bank of Canada, CIBC First Caribbean and Scotiabank. It makes no difference. Ignoring our pathetic reality won’t make it go away or fix it.”
Similar drawbacks were also identified in the US government’s just-released 2019 investment climate report on The Bahamas, which said: “Companies have identified a lack of transparency in government procurement, shortages of skilled and unskilled labour, bureaucratic and inefficient investment approvals process, time consuming resolution of legal disputes, high energy costs, and the high cost of labour as negative aspects of The Bahamas’ investment climate....
“Some businesses have also reported the absence of transparent investment procedures and legislation to be problematic. US and Bahamian companies alike report that the resolution of business disputes often takes years, and collection of amounts due can be difficult even after court judgments.
“Companies also describe the approval process for foreign direct investment and work permits as cumbersome and time-consuming. According to reports, the Bahamian government does not have modern procurement legislation, and companies have complained that the tender process for public contracts is not consistent, and it is difficult to obtain information on the status of bids.”
While acknowledging the Minnis administration’s efforts to correct these deficiencies through the implementation of a transparent e-procurement system, the US report added: “The Embassy is aware of cases where the Bahamian government failed to respond to investment applications, and several cases where there have been significant delays in the approvals process.
“Despite the challenges that investors have reported, investment continues to grow in tourism, finance and quick-serve restaurant franchises.”