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Courtesy of BFSB
Wendy Warren, CEO and Executive Director of BFSB |
The Bahamas typically evokes images of sun-splashed islands and quality vacations. But it’s also a center of sophisticated financial services for what are called “high-net-worth individuals,” those with at least $1 million in assets to invest.
Today, such “offshore” financial centers are a respected part of the international financial system. As The Economist magazine put it in a recent article, “Places in the Sun,” they’re “good for the global financial system.”
And they’re good, as well, for small countries with service-oriented economies. In The Bahamas, the financial services sector is second only to tourism as a contributor to the national GDP. It fuels nearly 30 percent of direct and indirect investment and supports around 22,000 jobs, which amounts to 13 percent of the country’s total employment.
None of this comes as a surprise to Wendy Warren, CEO and executive director of the nine-year-old Bahamas Financial Services Board, a venerable trade organization in Nassau, the capital, with some 140 corporate members.
Warren sees an increasingly bright future for the financial services sector. The new government of Prime Minister Hubert Ingraham, for one thing, has declared that it wants to spur the already healthy sector to even higher levels of growth. That will undoubtedly mean more work for Warren, who likens the services board “to a chamber of commerce but for financial services.”
Nine years ago, the board was formed to promote and drive the development of the financial sector.
Since then, it also has served as an important catalyst for changes and reforms that are needed to keep the financial sector competitive and beyond reproach. It monitors local and international financial trends, critiques the sector’s performance, and “raises issues as we see them with the government, regulators, and with our own members,” said Warren. She added, “So whether it is on legislation, administrative efficiency in government, or any number of issues, we are a vital part of bringing about, I think, improvements in the jurisdiction.”
The board has been operating on an annual budget of $750,000, funded by the government and corporate members. However, the new government of the fiscally conservative Free National Movement party has voiced its intention to boost the budget with an increased annual grant in the amount of $500,000. With this amount the government would match the contribution by the private sector.
Warren said the additional funding will help The Bahamas present a “much stronger” message about the quality of its financial services sector and its compelling environment from which to conduct global business; it’s something many in the sector had felt was needed “for quite a while,” she said. In the future, she added, officials knowledgeable of the financial services industry might even be staffed in foreign missions in cities such as New York and London.
The government also has endorsed the idea of creating a school for financial services, offering undergraduate and graduate-level courses. This school would carry forward the tradition of quality graduates from The College of The Bahamas—soon to secure university status—and the Bahamas Institute of Financial Services.
Besides promoting the industry, the services board provides financial professionals with a popular website, (www.bfsb-bahamas.com) which offers a wealth of in-depth information on issues and trends in banking, investment, and finance. Under a section called “latest news,” one article recently described a report on worldwide money laundering, and another made note of an upcoming “wealth-management” seminar.
While it may be the best of times for the financial services sector, it hasn’t always been that way. At the start of the decade, The Bahamas adopted a slew of tough banking laws and regulations in response to international concerns about the possibility of money laundering and unfair tax competition. Among other things, The Bahamas required banks to have a physical presence. Some firms were shut down. Later, the Sept. 11, 2001, terror attacks subjected financial institutions worldwide to even greater vigilance. Soon after the attacks, The Bahamas wrote its own anti-terrorism laws, Warren noted, so it was ready for the extra scrutiny.
Critics of the tougher financial-sector legislation said it went overboard, forcing some law-abiding clients to go elsewhere. But not Warren. ““I think, overall, The Bahamas responded well,” she said. “But certainly there were some areas where I think we were quite proactive in ensuring that our environment is safe and sound.
“Probably the best example of that was that The Bahamas eliminated “bearer shares.” (These financial instruments may enable the holder to retain anonymity, making them problematic in respect to maintaining a transparent investment environment.)
Other countries and financial centers eventually adopted similar regulations, Warren noted. This underscored that The Bahamas and its financial sector had been “ahead of the curve,” she added. And thanks to the knowledge gained from these proactive steps, The Bahamas even assisted U.S. firms endeavoring to comply with the Patriot Act, she said. Regulations governing Bahamian financial institutions already were consistent with the parts of the Patriot Act that improved the accountability of U.S. banks and financial firms.
“These improvements are a testament to the effectiveness of international cooperation in combating money-laundering,” former U.S. Treasury Secretary Paul O’Neill was quoted as saying in 2002, referring to reforms made by The Bahamas and other nations in the region. Along similar lines, Warren said: “We are part of the financial system, and we influence how that system works, and we have to play our role in that respect.”
Ultimately, Warren said, The Bahamas’ hard-earned reputation as a safe, stable, and well-regulated jurisdiction is priceless. |
