Dpm Pledges ‘Most Stringent Controls’ On Ownership Registry

THE Deputy Prime Minister yesterday promised that the proposed Beneficial Ownership registry will have “the most stringent controls”, amid industry concerns over the lack of prior consultation.

K P Turnquest told Tribune Business that it was “not an unreasonable guess” to suggest that the Bahamas would follow the Cayman Islands’ lead by establishing a registry that is neither ‘in the cloud’ or linked to the Internet.

He spoke to this newspaper after the proposed registry, which will contain beneficial ownership information on “all corporate and legal entities” incorporated in the Bahamas, raised immediate data protection concerns among the financial services industry’s high net worth clients.

Asked how the Government planned to safeguard sensitive financial information related to hundreds of thousands of companies, both domestic and non-resident, Mr Turnquest replied: “I don’t want to really talk about that at this point, but suffice it to say it will be protected with the most stringent controls.”

The bid to create the registry, via the Register of Beneficial Ownership Bill 2018 that was tabled in the House of Assembly yesterday, is designed to bring the Bahamas in line with both international standards and rival international financial centres (IFCs)). The likes of the US and other major nations have long pushed for the Bahamas to create such a registry, which would act as a one-stop shop for collecting, holding and updating beneficial ownership information on all entities incorporated in this nation. Mr Turnquest told Tribune Business that the registry is necessary to meet the anti-financial crime strictures of the Financial Action Task Force (FATF) and its affiliates, as well as the Organisation for Economic Co-Operation and Development’s (OECD) and European Union’s (EU) fight against tax avoidance/evasion.

“It’s also going to be required to facilitate our commitments to the OECD and EU with respect to the automatic exchange of tax information,” he added. “It’s not a public registry, that is correct.

“One of the FATF’s concerns as well as the other alphabet group’s is that there’s no central repository for information, so there’s potential for gaps that might not be detected because there’s no central registry.”

Beneficial ownership information is currently required to be held and maintained by the local ‘registered agent’ for all Bahamas-domiciled entities, and this will now have to be ‘inputed’ into the registry once its creation is given legal authority by the Bill’s passage.

The registry, though, is not an ‘Open Sesame’ and will not be open to members of the public to conduct ownership information searches on all and sundry. The Bill provides that it can only be accessed by so-called ‘designated persons’, who must either be assigned by the Attorney General’s Office – which has direct responsibility for the registry – or selected by a ‘registered agent’.

The latter can only designate a maximum of two persons, and searches of the registry’s database can only be authorised by the Attorney General’s Office or one of the financial services regulators in response to domestic and overseas supervisory authority requests.

Changes to any entity’s beneficial ownership must be submitted to a registered agent within 15 days, with the latter having an equivalent period of time to update the registry. All ‘designated persons’ must take an ‘oath of confidentiality’, while Bahamian investment funds and companies listed on the Bahamas International Securities Exchange (BISX) are exempted from its provisions.

The Bill’s ‘objects and reasons’ describe it as legislation to enable the Attorney General’s Office “to establish and maintain an electronic database of beneficial ownership details for all corporate and legal entities registered in the Bahamas, and to permit search of the database… by a designated person upon the request of specified authorities designated in the Bill”.

Tribune Business understands that the Bill is based on, and benchmarked against, similar laws already enacted by rival Caribbean IFCs – chiefly the British Virgin Islands and Cayman Islands.

A source close to the Attorney General’s Office, speaking on condition of anonymity, reiterated that the registry “is not open and accessible to the general public”, but only by ‘designated persons’ acting on a request from law enforcement and overseas regulatory authorities.

They added that the registry would not be abused for “fishing expeditions”, with all searches based on specific requests and facts. “There will be, to the extent humanly possible, no possibility of anyone accessing the server to do fishing expedition searches,” the source said.

However, Tribune Business was told that the Bahamian financial services industry and its clients were caught off-guard by the Bill’s tabling in Parliament yesterday, as there had been no prior disclosure of – or consultation on – its contents.

Ryan Pinder, the former financial services minister, told Tribune Business that he had “never seen a copy of the legislation prior to its tabling, which is a bit unorthodox”.

He and other attorneys at the Graham, Thompson & Company law firm were taking “a long, hard look at it to see what it presents”, with ‘news already having travelled fast’ and being picked up by clients.

Disclosing that data protection concerns were high on client agendas, Mr Pinder said the absence of prior disclosure and consultation had left attorneys and the wider financial services industry unable to properly advise them.

“These are the type of questions clients are already asking, and without consultation and detailed review prior to the Bill’s release we are unable to give the intelligent answers they’re looking for,” he told Tribune Business.

“This is very delicate and sensitive information, and certainly extremely sensitive in this era of data protection and leaks. That’s a very important element of this, and clients are most concerned about data leaks.”

Financial services is based on confidentiality, a concept that the Bahamas previously exploited to the max. However, the registry and legislation to create it are further evidence of the transparent world the Bahamas now competes in.

Mr Pinder said different jurisdictions had taken different approaches, with the BVI placing its central ownership registry “in the cloud”, but Cayman not connecting it to either the cloud or Internet to make hacking even more difficult.

Mr Turnquest yesterday said it was “not accurate” to suggest there was little to no consultation on the Register of Beneficial Ownership Bill, adding that this had been under the purview of the Attorney General’s Office.

But Mr Pinder said: “There was no indication to industry as far as I’m concerned, and I work closely in these matters, that this Bill was even drafted. There was no notice, no consultation.”

He added that the Register of Beneficial Ownership Bill should not have been “bundled” with the Multinational Entities Financial Reporting Bill, which was also tabled in Parliament yesterday.

Mr Pinder said they dealt with “important but separate” issues for the financial services industry, with the first focused on transparency and the latter on dealing with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.