'Full-throated' effort urged on regulatory compliance


ATTORNEY General Ryan Pinder.


Tribune Business Editor


The Bahamas must display a "full-throated commitment" fighting all forms of financial crime, the attorney general reiterated yesterday, while pointing to the imminent challenge posed by global corporate tax reforms.

Ryan Pinder KC, addressing a financial services regulator "roundtable" convened by the Ministry of Economic Affairs, said it was critical for The Bahamas to continue to "differentiate" itself on regulatory matters because it was "not an equal playing field" when it came to anti-money laundering and counter-terror financing standards and their application.

Pointing to the "tremendous efforts" undertaken since 2015 to address alleged deficiencies in the country's regulatory regime, he added that this work had paid off with The Bahamas' "significant achievement" of a perfect '40 out of 40 compliance with recommendations by the Financial Action Task Force (FATF), the global standard-setter for anti-financial crime regulation.

"The Bahamas became the second jurisdiction in the Caribbean and the Americas to attain such a position, and only the sixth in the FATF’s global network of 206 jurisdictions. We continue to strive for regulatory excellence," Mr Pinder said.

"It is important that regulatory compliance and a progressive approach not be left to government or to private industries. Regulators must also be involved in leading the way. We see this in our regulators and they should be commended for their leadership."

Mr Pinder pointed to the Securities Commission's involvement with IOSCO, the global body for securities regulators, as one example, plus the Central Bank showcasing its research capabilities at its fourth anti-money laundering conference attended by both the FATF's president and vice-president.

"These are the types of activities and leadership that is required in order to differentiate The Bahamas in the regulatory space. We will differentiate ourselves, but it's not always easy and, for a small country like The Bahamas, as we all recognise, we are generally judged at a different standard; it is not an equal playing field," Mr Pinder reiterated.

"Therefore, when it comes to regulation, and specifically regarding money laundering, it is vital that we demonstrate The Bahamas’ full-throated commitment to the global fight against money laundering, terrorist financing and proliferation financing."

Noting that the Securities Commission was already moving on reforms to The Bahamas' digital assets regulatory regime prior to FTX's collapse, Mr Pinder said the push for a minimum global corporate tax rate of 15 percent was another initiative this nation must address.

At present, the G-7 and OECD-led initiative, to which 138 countries including The Bahamas have committed, seeks to impose a corporate income tax on multinational enterprises with an annual turnover of 750m euros or greater. "A corporate income tax is clearly a novel approach in The Bahamas and will have significant regulatory reform for the country in tax administration, affecting almost every area of the cross-border economy," Mr Pinder said.

"The OECD/G20 inclusive framework on BEPS (Base Erosion and Profit Shifting) released just this week technical guidance to assist governments with implementation of the landmark reform to the international tax system, which will ensure multinational enterprises will be subject to a 15% effective minimum tax rate.

"As continued guidance is released by the OECD we will have to advance our regulatory reform on taxation to ensure that we are compliant and have a new corporate tax regime." The Ministry of Finance, in a paper on the issue released last year, said: "The imposition of a corporate income tax would necessitate a significant reform of Business Licence fees, very likely including the elimination of the turnover-based annual fee for the vast majority of Bahamian businesses.

"As such, the net annual revenue gain from a new corporate income tax would most certainly be significantly reduced.” Simon Wilson, the Ministry of Finance's financial secretary, last week said a consultative "green paper" on the move will likely be issued before the 2023 first quarter ends.

Meanwhile, Mr Pinder said The Bahamas needs to keep a careful eye on potential FATF-related reforms concerning trust beneficiaries given this product's importance to the country's financial services sector. "Given the importance of the trust industry to The Bahamas, it is important to note that additional regulation on the beneficial ownership of legal arrangements and trusts may be forthcoming," he added.

"Following the June 2022 plenary meeting of the global FATF, the anti-money laundering standards body has published a consultation paper on revisions to its recommendation 25, regarding transparency and beneficial ownership of legal arrangements such as trusts. Recommendation 25 currently requires trustees to obtain and hold information on beneficiaries or classes of beneficiaries. FATF is considering setting the nexus of such obligations to countries where the trustees reside or where the trusts are administered.

"FATF has asked consultation respondents whether it should create a separate, standalone definition of 'beneficial owner' in the context of legal arrangements, distinct from that for legal persons, and also seeks suggestions on strengthening the requirement for countries to have access to beneficial ownership information in respect of legal arrangements. These clearly will have material implications for our trust business in The Bahamas."


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