With the Bahamian financial sector undergoing a period of intense disruption, in both the common and the business sense of the word, The Bahamas must continue to build its industry up to a place where the innovation that comes out of this sector is an equally formidable force as the disruption being experienced within the global financial system said The Hon. Peter Turnquest, the Bahamas Deputy Prime Minister and Minister of Finance.
In addressing members of the Bahamas Financial Service Board's at their annual meeting in September, the Deputy Prime Minister said, " If in the past, our value proposition was the provision of traditional banking services and confidentiality, I contend that we must now show consumers, both domestic and international alike, that what we can offer them is innovative digital products, real-time transactions underpinned by impenetrable cyber-security that they can literally control from their fingertips, through smart devices and other online platforms.
"This will enhance the service that we provide to our consumers and improve the perception of The Bahamas in the eyes of the international standard setters."
He noted that disruption has become commonplace in the industry. "The industry faced the disruption that was the OECD AML/CFT Blacklist in 2000. The industry faced the disruption that was the Global Financial Crisis in 2008/2009. The industry faced the disruption that was the de-risking phenomenon in 2015 and we once again face a disruption in the form of the ongoing threat of EU blacklisting," he said.
Compliance with the OECD and EU criteria on tax governance has required The Bahamas to institute sweeping changes to the legal and regulatory regimes that govern its financial sector. In response the Deputy Prime Minister said The Bahamas has been engaged in meaningful discussions with these international bodies and has drafted new legislation to ensure the achievement of the right balance of business, economic sustainability, and compliance with the international standards.
- The passing into law the Multinational Entities Financial Reporting Act, which sets out a comprehensive framework for Country by Country reporting in line with the BEPS Action 13.
- The initiation of Automatic Exchange of Information "AEOI" with 35 jurisdictions (19 of which are EU jurisdictions), in accordance with the Common Reporting Standard.
- Drafting the Commercial Entities (Substance Requirements) Bill, which addresses EU concerns with respect to entities having economic substance.
- The enactment of the Beneficial Ownership Register Bill before the end of the year.
"These laws will make The Bahamas the bellwether for other jurisdictions to craft their response to the EU's threat, "said the Deputy Prime Minister.
He also noted the increasing focus on Financial Inclusion and FinTech --two trends in the global financial landscape -- are vital to the sustainability of the Bahamian financial sector. "The benefits of financial inclusion are not only significant for individuals but for economies as well. Inclusion helps drive economic growth and supports poverty alleviation and crime reduction, "he said.
FinTech, on the other hand, could be the disruptive innovation that The Bahamas uses to shepherd the financial services industry to a new level. "The so-called sharing economy may have started with cars, taxis, and hotel rooms, but financial services will follow soon enough, "said the Deputy Prime Minister. "Financial intermediation as we know it will change. FinTech will drive this new business model, with blockchain as its building block. FinTech will enable access to market for the type of disruptor that we want: that is, the progressive, fast moving company delivering innovative technological solutions on a peer to peer basis to consumers in the financial services sector."
The Bahamas Government has made digital technology a critical element of the national development plan. Companies in The Bahamas are now developing applications that allow for peer to peer payments, similar to Venmo and PayPal. "From a regulatory point of view, we are working with the prudential regulators to develop sound policy to promote and expand digital banking and other FinTech applications and to effectively supervise entrants in this space," he said.
The Deputy Prime Minister noted it is now becoming increasingly obvious that financial services and FinTech are becoming inseparable, putting IT security into a critical position. "As technology evolves and fuels innovation in the financial sector, we must be mindful of the need to manage our IT architecture securely. Cybersecurity will be one of the top disruption risks that our financial sector will have to urgently address. Within the next months, I will begin to outline a series of strategic measures focused on improving our cyber infrastructure in the financial sector," he said.
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