What is the role of the Bahamas Financial Services Board (BFSB)?
ALLEN: The Bahamas Financial Services Board (BFSB) was started in 1998 with a dual mandate, sector promotion and sector development. We take both of those mandates very seriously. We are the truest form of public-private partnership there is. We have members that span different industries, from large private banks to independent asset managers, lawyers, and accountants. Our role is to really act as the natural link between the public sector and the private sector. We ensure the policies we have in place are business friendly, and that the government is aware of what some of the real concerns of the private sector are. This helps them to form their policies in a way that benefits the private sector and enables it to grow. That is the development side. On the promotion side, we are here to develop the branding for financial services in The Bahamas, and to take that branding to the world. Since 1998, we have been exceptionally successful at doing that. We hope that we are in the position now, with the increased support of the Ministry of Financial Services, to take that message even further and to truly raise the visibility of The Bahamas in the international arena. BFSB is involved in a number of different projects to facilitate both of its mandates. We are organizing missions like the Bahamas Landfall Event, which we are doing in Sao Paulo,Â and Mexico City next month. We do this continually throughout the year in addition to conference attendance and speaking around the world. We are also working very closely on the development side with the government on many issues, such as how to meet new regulatory initiatives, like the Financial Action Task Force (FATF) Revised Recommendations and related guidelines, the Alternative Investment Fund Managers Directive (AIFMD) out of Europe, and the U.S. Foreign Account Tax Compliance Act (FATCA). We have been at the forefront of this. This is all in addition to our legislative initiatives. New product development really starts with industry, and it is facilitated by BFSB. We ensure there is a forum for industry to get together, actually innovate, and create new products and services that will meet the increased regulatory needs of clients around the world, as well as their general planning needs.
How would you describe the growth and development of the financial services industry in The Bahamas?
ALLEN: When we started over 80 years ago as a destination for capital investment, we really followed the coming of the winter residents in The Bahamas. Since that time, we have grown in depth and expertise as an industry. We are no longer a destination for capital or money. We are a place for real and substantive businesses. We are a place where you can follow your money, and ground your business. We are a place where you can invest from The Bahamas and manage your businesses all around the world.
How do you see the contribution of the financial services sector as a proportion of GDP growing in the future?
ALLEN: I think with the continued investment by the government and the private sector, we will see some significant growth. We are positioning ourselves to benefit from the very natural advantages that we have. I agree with Mr. Keith Davies of the Bahamas International Securities Exchange (BISX), that the real impact of financial services is much greater than 20% of our GDP. It is probably closer to 30% of our GDP when you look at ancillary services. I do believe that there is room for growth within financial services. I think that we now have a very specific policy direction that supports that.
What niches do you want to see The Bahamas serving? What do you see as the biggest growth opportunities for the country?
ALLEN: Trust services are an important niche for us, and we consider ourselves a leader in wealth management. That is an area where I would like to see us grow and develop. We would like to grow outside of wealth management as well, specifically the specialist expertise that is required to add structures for families and for family governance. Families are looking for more than a trust and a foundation. They are looking for their structures to reflect their family values. I see The Bahamas growing in the facilitation of that process â€“ i.e. where you facilitate family governance, and corporate governance style rules, within an entire dynastic wealth structure. This is where we are developing our expertise. You can see this evidenced in the Bahamas Executive Entity, a new innovative product that really fills the role of governance and wealth structures. You can also see parts of this in the SMART Fund regime, which really straddles the space between pure wealth management, and asset management. In practice, that works by essentially building your family constitution into the structures that we have in The Bahamas. What you are looking for is a vehicle that allows you to do that in a very efficient way. The Bahamas Executive Entity is a structure that allows you to do that. It really is a matter of developing your family rules, having the expertise within the jurisdiction that helps you develop these family rules, and then putting them in place in a structure that allows them to be managed for generations in a way that reflects the values of the family.
What do you see as The Bahamas competitive advantages from a regional standpoint?
ALLEN: I think we have many advantages. They spring from our independence, our political and economic stability, our location, and also the depth of our expertise and knowledge in areas like wealth management and, increasingly, in funds.
Taking into account the global financial climate, which markets are most interesting for you today?
ALLEN: We were in Brazil last month for one of its biggest investment forums, and we are going again this month for a very targeted trade mission. We are also interested in Mexico. Mexico is a success story despite its challenges. That is an interesting economy for The Bahamas, as are several other economies in Latin America.
The real impact of financial services is much greater than 20% of our GDP. It is probably closer to 30% of our GDP when you look at ancillary services. I do believe that there is room for growth within financial services. I think that we now have a very specific policy direction that supports that.
How do you see the Foreign Account Tax Compliance Act (FATCA) impacting financial services on a more macro scale?
ALLEN: On a macro scale, we have seen clear concern over the Foreign Account Tax Compliance Act (FATCA) in that it deals with a huge amount of investment and resources, and it is an initiative that seems to benefit only one jurisdiction. On a macro scale, it means the cost of doing business is higher. This is not something that we are unfamiliar with though. We have been experiencing that for quite some time since the financial crisis. The increased regulatory burdens are something we all deal with on a day-to-day basis. FATCA is certainly a bigger challenge, but it is no different than some of the other challenges we have faced. FATCA has been embraced by nations around the world, or at least the FATCA style of automatic information exchange. That is likely to be a trend that you could see within the coming years.
On a cost basis, is FATCA similar to the Sarbanes-Oxley Act or is this on a much different scale?
ALLEN: I think it is perhaps similar. A lot of institutions were already QIs, so they were already dealing with the QI process. A lot of the institutions are actually familiar with some of the reporting that is required. What this requires is an upgrading of systems. It requires institutions to essentially dig deeper into who their clients are, and whether there are any US indicia that require them to report. I think it is similar, but certainly the amount of panic surrounding the initiatives heralds something very dramatic and very new. I do not think it is as dramatic and new as some commentators think.
Which indicators do you see showing the most positive trends for The Bahamas, and which do you feel represent challenges?
ALLEN: I think there are opportunities within the challenges. The amount of regulation that is affecting financial services now is a challenge, but it also represents an opportunity for jurisdictions like The Bahamas that are very nimble, and have a tradition of public-private sector partnership that enables you to be innovative in the face of regulation. The Bahamas has clearly demonstrated that it is a jurisdiction able to do that with its product innovations within recent years. We are really well positioned to take advantage of that challenge of over-regulation.