'How much more can financial services take?'


Tanya McCartney


Tribune Business Editor


The Bahamian financial services industry was yesterday said to be “astounded” by France’s decision to “blacklist” this nation, with some asking: “How much more can the sector take?”

Tanya McCartney, the Bahamas Financial Services Board’s (BFSB) chief executive, told Tribune Business that the organisation and its industry members were “equally as surprised as the government” by the French action as there had been no advance warning it was imminent.

While any impact will be much less severe than if The Bahamas had been targeted by a multinational body, such as the European Union (EU) or Organisation for Economic Co-Operation and Development (OECD), Ms McCartney added that “no adverse listing is welcome news” for a sector struggling for growth following a two decade-long assault by international regulatory initiatives.

And several Bahamian financial services professionals argued that the French move was merely the latest example of how little control the industry has over its destiny, leading some to openly wonder how long the industry can maintain its status as a “significant player” in the face of such “continuous bombardment”.

Craig A “Tony” Gomez, the Baker Tilly Gomez accountant and partner, told Tribune Business: “This again serves as another indication that the financial services industry is moving further away from our control and into the full control of those G-7 and OECD countries.

“From a practical perspective, as a practitioner in the financial services industry we are challenged on a daily basis to serve clients and potential clients because of the vast amount of regulations we are bombarded with.”

Pointing to a new set of regulations just issued by the Securities Commission and Compliance Commission, Mr Gomez added: “Again, the bar moves on us. We are challenged constantly as professionals, and I wonder how much more the industry can take.

“We know from practical experience just how complex it is to open a bank account in The Bahamas. To add another layer for a foreign person or corporate entity, there is tremendous regulation, frustration and paperwork to comply with international standards. Now we are blacklisted again, and the bar on frustration rises further up the ladder.

“One has to wonder how much further can the industry take the continuous bombardment before we are challenged by not being a significant player in financial services any more.”

Mr Gomez said that, while “the only consolation” is that other international financial centres (IFCs) are grappling with the same challenges and issues as The Bahamas, “it doesn’t make it any better for us but less painful”.

He added: “The penalties under which we now operate in the financial services industry, which are promoted by international organisations, will actively deter Bahamians from operating in this business - the heavy fines and imprisonment for not complying with the standard.

“Who is going to operate in that environment? The Bahamian professionals no longer find the industry attractive. It’s no longer a comfortable and fulfilling environment; the environment they’ve forged with fines and penalties.”

The Baker Tilly Gomez chief said that while The Bahamas controlled the tourism product it offers, this is now “not so” with its second largest industry - financial services - which provides the majority of The Bahamas’ higher-paying, played a key role in building-up a middle class that is increasingly under strain, and generated much indirect economic activity and employment spin-offs.

He said the sector’s international segment, in particular, is now at “the mercy and dictate of international countries and organisations”, thereby leaving The Bahamas with little choice but to diversify its economy by developing or attracting new industries to pick up some of financial services’ previous gross domestic product (GDP) contribution.

“This further propels us to develop industries that are specific to us and which we can control to a large extent,” Mr Gomez said. “Why is this important? Because the bar continues to move and shift on us in the financial services industry.

“If the EU gives us a stamp of approval, but France turns around and blacklists us while part of that group that gave us approval.... How could you give us your approval and then, as a separate country, turn around and blacklist us?”

France is a member of both the EU and OECD which, in recent years, each led efforts to crack down on tax evasion - particularly by multinational companies. The Bahamas and rival IFCs were impacted by both, yet this nation was subsequently rated compliant by each body when it came to addressing their ‘concerns’.

The EU, in particular, last year kept The Bahamas off its own “blacklist” after finding it had complied with demands to eliminate so-called “ring fencing” preferential treatment for foreign investors and introduce a “substance” regime requiring all corporate entities to be doing real business in/from this jurisdiction.

“We have to get on with the business of finding alternative industries, alternative sources of work, and alternative sources of attractiveness for and doing business in The Bahamas,” Mr Gomez added. “We’ve got a construction industry, we’ve got a tourism industry which for years people have said we have to find an alternative to, but the numbers are holding.

“We see the slippage in financial services, and it’s not an indication of control any more.”

The BFSB’s Ms McCartney said the organisation, and wider financial services industry, had been unaware of “any outstanding issues with respect to France” prior to media in that nation revealing Paris’s intention to “blacklist” The Bahamas over the weekend.

“We were astounded they would take such strong unilateral action. We were equally as surprised as the Government,” she told Tribune Business. “We’re in constant dialogue with the Government relative to tax transparency and to ensure we stay on top of any concerns relative to these issues.

“I know the Government is communicating through diplomatic channels to get to the bottom of it, and to the extent the industry can assist we stand ready, but you never want to be on any such list. No adverse listing is welcome news. You never want to be listed in such a manner.

“Having communicated with the deputy prime minister I know they are engaging their diplomatic channels to get to the bottom of it and to see what exactly drove the French government to take this position.”