By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must reverse the “shrinkage” in its financial services industry to buttress its standing as a “grade A destination”, a prominent accountant has advised.

Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez managing partner, told Tribune Business that the ever-changing international financial services market poses a greater danger to the Bahamas than the so-called ‘Panama Papers’ leak.

Acknowledging that the international agencies and the G-20 will likely use the 11.5 million documents to justify a further crackdown on international financial centres (IFCs), Mr Gomez said the Bahamas was unlikely to suffer any “collateral damage” from the affair.

He emphasised that this nation’s regulatory regime was far stricter than its counterparts in many of the countries attacking IFCs, much to their dismay.

Mr Gomez also pointed to the hypocrisy of those states leading the onslaught, charging that many were guilty of the same practices they accused the Bahamas and other centres of.

“I’ve read the particulars of the Panama case, and the Bahamas continues to be one of the better managed international financial centres,” Mr Gomez told Tribune Business.

“We have made a tremendous effort to ensure we are a ‘grade A’ destination for financial services, and we continue to implement on a regular basis improvements to our regulatory structure and regime.’

Implying that the Bahamas both exceeded international regulatory best practices, and the standards that exist in many so-called ‘onshore’ centres, Mr Gomez said many were “dismayed” by this nation’s strict due diligence requirements.

The Baker Tilly Gomez partner added: “To the dismay of many in the international community, the Bahamas is viewed as a very, very demanding regulatory environment, and it’s not as easy as many would hope to establish corporate entities here.

“While the Panama issue is an interesting read for many who would seek to ‘black eye’ IFCs, I think the Bahamas will continue to improve on its regulatory environment and become the kind of jurisdiction we know it is.”

Mr Gomez’s message is that, in the Bahamas’ case, the international media hysteria surrounding the ‘Panama Papers’ case does not square with this nation’s on-ground regulatory reality.

While both the Argentine president and the father of David Cameron, the UK prime minister, have been linked to Bahamas-domiciled entities, the documents leaked from the Mossack Fonseca law firm provide no evidence of any wrongdoing by local practitioners.

The most ‘embarrassing’ revelations to-date are suggestions of inefficiency at the Companies Registry, and the resignation of Transparency International’s Chilean head because he was linked to five Bahamas-domiciled companies.

Mr Gomez argued that the greatest threat to the Bahamas lay not from the ‘Panama Papers’ themselves, but increased regulatory pressures that were likely to force more changes to IFC business models.

The Bahamas has been grappling with a rapidly-changing global supervisory environment ever since its 2000 ‘blacklisting’, which in turn has forced its business model to constantly shift and evolve.

The number of Bahamas-domiciled banks and trust companies has shrunk from around 410 at the century’s start to 254 in 2014 and, while stabilised, the IFC segment of the financial services industry continues to struggle for growth.

The just-released ‘State of the Nation’ report, the first component of the National Development Plan, supports such an assertion by revealing that the number of licensed bank and trust companies remained relatively static between 2008 and 2013. Some 267 institutions were licensed in 2013, compared to 271 five years’ earlier.

“The danger we are faced with is simply that the nature of the business is changing,” Mr Gomez told Tribune Business. “That’s our biggest challenge with respect to an issue like this; the nature of the business, and the industry has been shrinking for some time.

“The industry is shrinking. Not as many people are employed by the industry, and it continues to reduce. The general feeling is that institutions are closing faster than they are opening. This is not good.

“We need to find ways to grow our business in a compliant manner, and which will have minimal danger to us, given the way the world is moving.”

The ‘State of the Nation’ report again supports Mr Gomez, as it shows that total employment in the IFC sector fell by 9.2 per cent between 2009 and 2014 - from 1,208 to 1,097. Total Bahamian jobs dropped by 9 per cent over the same period, falling from 938 to 854.

The Baker Tilly Gomez managing partner, meanwhile, said many countries were guilty of the same accusations they were levying against the Bahamas and IFCs generally.

“Many of the people who talk about the Bahamas not being up to the mark are doing the same thing they complain about,” Mr Gomez told Tribune Business.

“Unfortunately, they’re the big boys and they play by different rules. The Bahamas is not one of the G-7 countries, so we have to be compliant, unlike them.”

Tribune Business understands that informal, ‘behind the scenes’ discussions have been held among financial industry executives over how the Bahamas should respond to the ‘Panama Papers’, and whether it should ‘get out in front’ of the claims.

The Bahamas was named as the third most-popular jurisdiction for Mossack Fonseca’s company incorporations, and the international public outcry provoked by the ‘Panama Papers’ media coverage leaves industrialised countries with little choice but to act.

Stung by the message that political and economic elites are legally able to avoid taxes, while the middle and lower classes cannot, tax investigators from 28 countries will meet in Paris today to launch an inquiry into the ‘Panama Papers’.

The European Union (EU) is already working on another ‘blacklist’ of so-called ‘tax havens’, and is already demanding that big multinational companies break down their profits and taxes on a ‘country by country’ basis.

Mr Gomez, though, said he did not believe there would be “any short-term fallout” as a result of the ‘Panama Papers’ among clients who were using the Bahamas for legitimate, compliant purposes.

He agreed, though, that the likes of the G-20, EU and Organisation for Economic Co-Operation and Development (OECD), either collectively or individually, will exploit the leak to increase the pressure on the Bahamas and other IFCs.

“The Bahamas is a good product and we will continue to improve on it,” Mr Gomez said.