Higgs & Johnson sponsored its 2013 annual client seminar under the theme of "Riding the Waves of Change: Compliance, Confidentiality and More". Opening remarks at the seminar were provided by the Minister of Financial Services Mr. L. Ryan Pinder. In the context of what was noted by the Minister as an ever-changing environment of financial services and international financial matters it was observed that new policies, legislation and agreements were under development and affecting in some form or fashion, the financial services industry, including compliance. Mr Pinder anticipated the ongoing evolution of international tax transparency and compliance and identified a clear global expansion in compliance. He further noted that the developments in what is regarded as international best practices in international financial services have caused for increased compliance requirements on institutions and clients.
The Minister pointed to the fact that the issues relative to compliance have extended beyond the know your client and due diligence evolution in local legislation. Relevant developments potentially and in actuality affecting The Bahamas are also found in laws of other countries and are reflected in discussions regarding multilateral requirements of information exchange. It was understood that compliance is now extending beyond money laundering matters that have had the focus of the last decade, and now impacts international tax concerns. The United States Foreign Account Tax Compliance Act (FATCA) represented the first step where the requirements of additional compliance with respect to tax matters could be seen.
Mr. Pinder's useful analysis of developments in compliance which reflected the distinction between compliance within the arena of tax related matters and compliance as a means to negating money laundering formed the basis for much of his presentation. He noted that the certainty facing the global community was that there are impositions on local and foreign private financial Institutions creating the obligation for tax compliance and reporting. Insofar as The Bahamas is concerned he advised that the Government of The Bahamas was assisting in minimizing the effect of such impositions by a course of action considered to be the best way forward; effectively through a Model 1 Intergovernmental Agreement. By way of explanation he advised that this will cause the Government, and specifically the Ministry of Finance to be the Competent Authority in transmitting information to the United States Internal Revenue Service. It is anticipated that the private sector will continue to be responsible for the gathering of information adequate to meet compliance and due diligence requirements, but will not have the added responsibility of sending information directly to the IRS.
Minister Pinder was aware that of primary concern to the local and international community is the place of confidentiality within the evolving arena of compliance which increasingly trended towards greater transparency. He pointed to the reality that confidentiality is important for a number of reasons including those connected with personal safety concerns and issues connected with lack of confidence in certain foreign governmental authorities. The Government had engaged its United States counterparts on this matter when dealing with discussions regarding provisions of FATCA, particularly as regards the initial requirement that all trusts managed by professional trustees (even those without US interests) be required to register and enter into an FFI agreement with the IRS. He further advised that having advanced the argument expressing legitimate concerns for maintaining confidentially, the result was that the US Treasury updated its FATCA exemption Annexes (Annex II) of both Model IGA agreements to include an exemption for "trustee sponsored trusts" such that a trust with a professional trustee, would be exempt from the registration and from FFI agreement requirements where the due diligence and reporting (relative to the existence of US interests) are carried out by the professional trustee which is a FFI under FATCA. The Minister underscored the significance of this amendment for The Bahamas.
Mr. Pinder expressed confidence that with arguments grounded in legitimacy and credibility, confidentiality can be protected. It was however his view that The Bahamas must continue to demonstrate that it is a jurisdiction with a highly skilled workforce, a long history of integrity and a well regulated industry where wealth is managed and in turn positioned for international business and investment globally. Accordingly he emphasized that the Government remained committed to the philosophy and argument of confidentiality with legitimacy, and looked to work hand in hand with the regulators to ensure that The Bahamas is a jurisdiction sensitive to the operation of the private sector and an inviting jurisdiction to the international financial services participants. As part of his concluding remarks he maintained that The Bahamas is a jurisdiction of substance and credibility, always operating consistent with international best practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.