Bahamas: Financial services keeping up with international best practices claims Strachan
Minister of Financial Services the Hon. Hope Strachan said international best practices are evolving at a rapid pace, particularly as it relates to automatic tax exchange initiatives, tax transparency, anti-money laundering and financial crime, and e-commerce, reports the Bahamas Weekly.
Making her contribution to the 2015 Budget Debate in the House of Assembly, Wednesday, 3 June 2015, Minister Strachan stated, “we have seen the convergence of the strategies of the Global Forum, The Organisation for Economic Co-operation and Development (OECD), G-20, G8, the EU and the United Nations on matters related to international financial centres.”
She explained that it is clear that these organizations have embarked on the voyage toward a global standard for automatic tax exchange, and The Bahamas has begun its journey to comply.
“In doing so, we will maintain our position as ‘David’ in this ‘Goliath’ regime as we continue our evolution to adapt and drive change through the development of a systematic and principled approach. Our message to the world is that The Bahamas as a sovereign nation is ‘Open for Business’.”
The Financial Services Minister said the Foreign Account Tax Compliance Act (FATCA) was enacted into US law in 2010.
She noted that it effectively designates financial institutions all over the world that receive U.S. payments or deal with U.S. clients as Foreign Financial Institutions (FFIs) for reporting purposes: “FATCA requires FFIs to register with the US Internal Revenue Service (IRS) to report US citizens to the IRS for tax purposes. FFIs in The Bahamas will do this through the Ministry of Finance as The Bahamas has entered into an Inter-governmental Agreement (IGA) with the IRS to exchange information.”
The Minister explained that The Bahamas Government, through negotiations with the IRS, was able to secure advantages and exemptions in key product areas to the benefit of our industry.
“The first and only FATCA workshop facilitated by Treasury and IRS officials for the region where 10 countries were able to hold bilateral consultations with the Treasury Department and the Bahamian financial industry was held here in The Bahamas. This was a major accomplishment, for The Bahamas.”
She said the Ministry continues with the development and implementation of FATCA in partnership with Ernst and Young (EY) and Convey (a leading tax software provider).
Minister Strachan said this team has been engaged to design and deploy The Bahamas’ FATCA solution. This solution, which will follow the published IRS schema, is intended to safely manage and facilitate the ease of reporting requirements to the US government through the transmittal of information from FFIs to the Bahamas Competent Authority who will then transmit that information to the IRS under the IGA.
“We are on schedule to release the FATCA solution to the financial services industry by the end of June. I wish to advise that a pilot group is scheduled to test the system in mid-June.
“The Relevant Legislation has been approved by cabinet and will be introduced in the House at the earliest opportunity after this budget debate. The work on FATCA will continue and will continue to inform and update industry on a regular basis.”
The Minister also said the OECD released its Common Reporting Standards (CRS) in February of this year. CRS is similar to FATCA and sets out the criteria under which financial institutions must gather and report information to be exchanged, types of accounts, and other due diligence procedures.
She noted financial institutions will provide information to be automatically exchanged with other jurisdictions on an annual basis. For The Bahamas, this will begin in 2018.
The OECD has obtained commitments from countries to the Automatic Exchange of Information through the Multilateral Convention on Mutual Administrative Assistance in Tax Matters with many countries signing on as early adopters.
“FATCA and CRS are but a few of the international initiatives that my Ministry is following. My Ministry together with the Ministry of Finance and the Attorney General’s continue to monitor new developments out of Europe calling for the creation of a public registry of beneficial ownership for shareholders of companies and trusts,” Minister Strachan said.
“The effect of such a registry on business here in the Bahamas, if at all, is to be determined so that any action to be taken will be done proactively.”
She said, “it is important to have rules and guidelines that thwart against money laundering corruption, fraud, terrorism and other financial crimes, but it is also important that we recognize the right to financial privacy and find the right balance to ensure the integrity of the industry and maintain client confidence.”