The Tribune

BY NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

NON-COMPLIANCE by corporate entities with The Bahamas’ beneficial ownership regime has shrunk from 28 percent during COVID-19 to just 2 percent last year, it has been revealed, helping to minimise financial crime risks.

The Bahamas’ latest assessment of the risks posed by money launderers, terror financiers and other financial criminals found that compliance with the Register of Beneficial Ownership Act 2018, which requires all corporate entities domiciled in this nation to maintain accurate and current information on their owners and control purposes, has improved significantly over the past five years.

Blaming COVID, and the fact the Bahamian financial services industry was still getting to grips with the Act’s demands, for more than one-quarter of all Bahamas-registered entities being non-compliant in 2021, the report said steady improvement has taken the sector to a position where there is near-total conformity.

“Beneficial ownership compliance across legal persons and arrangements in The Bahamas remained high and improved steadily during the 2021–2025 period,” The Bahamas’ risk assessment 2025 asserted.

“The compliance rate in 2021 was around 72 percent, reflecting the relatively recent implementation of BOSS (Beneficial Ownership Secure Search System) in 2019 and the temporary extensions granted in 2020 due to the COVID-19 pandemic.

“From 2022 onwards, compliance increased steadily, reaching approximately 98 percent by 2025. This trend reflects the effectiveness of ongoing supervisory measures, timely regulatory engagement and the embedding of reporting obligations across all entity types,” the study added.

“Domestic companies and International Business Companies (IBCs) consistently demonstrated strong adherence, while smaller or specialised entities, including exempted limited partnerships, foundations and foreign companies, gradually improved compliance, consistent with the complexities of cross-border operations.”

The Bahamas’ risk assessment noted that compliance with the beneficial ownership regime had increased to 84 percent of all corporate entities and their registered agents in 2022, with further improvements to 90 percent by 2023; 94 percent by 2024; and last year’s 98 percent, which was attributed to the implementation of reporting obligations and increasing “adoption and awareness” of these demands.

“By 2025, the pattern indicates a well-established culture of compliance, with regulatory authorities continuing to emphasise timely submissions and periodic updates, supporting a robust and reliable beneficial ownership framework,” the report said. “Supervisory activities provide additional assurance by validating the completeness, accuracy and timeliness of beneficial ownership information held at the institutional level, including through cross-referencing with available registry data.”

The assessment added that just four criminal matters, featuring a combined $4.085m and involving Bahamas-based companies, International Business Companies (IBCs), foreign companies, exempted limited partnerships, foundations and investment-related vehicles, were identified by law enforcement authorities between 2021 and 2015. Three resulted in prosecutions.

“Mutual Legal Assistance Treaty (MLAT) requests were submitted in five matters, reflecting cross-border co-operation with the US, Canada, Venezuela and Spain,” it added. “The matters primarily involved domestic companies and IBCs, often characterised by single ownership or shell structures, with assets concentrated in bank accounts.

“Civil enforcement activity during the period was limited to one reported matter, and no convictions were recorded. The total value of suspected proceeds under investigation was approximately $4.085m.” However, The Bahamas’ assessment said the three cases being prosecuted show how “sophisticated corporate structures, including IBCs, domestic companies and professional service providers, can be exploited to facilitate money laundering”.’

However, it quickly added that they also showed “the effectiveness of regulatory oversight, BOSS, and inter-agency coordination in tracing complex financial flows”. The report said: “Case one involves a domestic company and an IBC used to launder proceeds of cheque fraud, with charges pending trial.

“Case two involves a law firm providing professional services in the real estate sector, and concerns the laundering of proceeds from stealing by reason of service. The case remains under investigation. Case three involves IBCs and foreign companies transferring funds through cross-border channels, currently under investigation via international co-operation requests.”

The Bahamas’ assessment acknowledged that this nation’s corporate entities pose a “medium” level threat of exploitation from money launderers and other financial criminals, adding: “While some documented misuse exists, beneficial ownership data, professional oversight and internal controls make exploitation less likely….

“No cases explicitly related to terror financing were identified, consistent with the sector’s low exposure to terror financing risk. Overall, the evidence indicates that the Bahamian regulatory framework effectively mitigates systemic money laundering risks while supporting legitimate business activity.”

Trusts, foundations and other estate-planning and investment vehicles were also found to pose a “medium” risk. “The sector’s risk profile is influenced by the international nature of clients and structures,” the risk assessment said of these vehicles. “Most clients are non-residents, with Latin America and Brazil, in particular, representing the largest source of business.

“High-risk clients account for 19.1 percent of accounts in the banks and trust sub-sector, and 7.3 percent in the trust sub-sector, with PEPs (politically exposed persons) comprising 4.8 percent and 7.2 percent, respectively. Despite this, transparency is maintained through rigorous identification, verification and ongoing monitoring of all relevant parties, supported by statutory and supervisory frameworks.

“No instances of misuse were reported during the review period (2021-2015). Supervisory processes assess whether all relevant parties to legal arrangements are identified and verified, and whether this information is maintained in a manner that supports an accurate and current understanding of control and ownership.”

A survey of Bahamian financial services workers and providers found many are all too aware of the potential threats. “Respondents identified several risk factors, including links to high-risk jurisdictions (60.7 percent); gaps in beneficial ownership transparency during customer due diligence (53.3 percent); weaknesses in customer due diligence (52.5 percent); and the involvement of politically exposed persons (45.9 percent),” The Bahamas’ risk assessment said.

However, the report argued that, for the most part, such risks are “actively managed”. It said: “Financial and corporate services providers report routinely delaying or refusing client onboarding where ultimate beneficial ownership cannot be verified,” the Bahamas’ risk assessment said. “Internal risk-rating systems and enhanced due diligence are applied for clients associated with PEPs, high-risk jurisdictions or unusually complex ownership arrangements.”

Similar scrutiny is applied by Bahamian realtors. “Feedback from surveys and working-group discussions indicates that real estate professionals exercise structured due diligence, including verification of beneficial ownership, scrutiny of funding sources and enhanced checks for transactions involving higher-risk jurisdictions or complex corporate structures,” the report added.

“Transactions are often delayed or declined when ownership information is incomplete or clients fail to provide satisfactory documentation. The regulatory framework further supports transparency through statutory registration requirements, oversight of licensed professionals and information sharing with financial institutions involved in transaction settlement.

“While legal persons in the real estate sector may present theoretical exposure due to their transactional nature and the use of corporate vehicles, these structural vulnerabilities are well understood and actively managed.”

As a result, the report concluded: “The assessment confirms that The Bahamas maintains a robust, well-governed and transparent environment for legal persons and arrangements. High levels of compliance, strong professional oversight and active co-ordination between domestic authorities and international partners provide assurance that risks are appropriately monitored and mitigated.

“Recommendations focus on reinforcing existing best practices, sustaining high levels of beneficial ownership compliance, maintaining sectoral co-ordination and continuing vigilance with regard to complex or cross-border structures.”