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CBA Analytical Report: Bahamas Financial Services Industry Begs Reform
By Council For Concerned Bahamians Abroad (CBA)
Jun 1, 2012 - 1:35:19 AM

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False Creek area showing Science World (right) in Downtown Vancouver, British Columbia, Canada

Once again the Bahamas faces a growing debacle in the area of Financial Services, and this time the Country’s regulators and administration seem to be on solid footing.

The Bahamas finds itself in some debate over the actions of its securities commission assisting the Canadian province of British Columbia in preventing the violation of its securities provisions, and perhaps other laws. The situation is instructive and should clarify an age old problem which many Bahamians seem not to understand. The securities Commission of the Bahamas should be commended on doing the kind of job it should do more often, if the Bahamas wants to build its economy, international reputation, and develop a Capital Market Driven Economy (CMDE), as advanced by the Council for Concerned Bahamians Abroad (CBA) in several of its previous reports at www.ourbahamas.org .

The Bahamas must base its future on productive legitimate enterprise, and be a cooperative and collaborative player in world financial affairs, rather than a small “Black Hole” outlier whose primary claim to fame in Financial Services is viewed from the outside by powerful international forces as assisting in the violation of the laws of other countries. The Country must avoid acts seen as encouraging and promoting the international movement and disappearance of monies down a virtual “Black Hole” never to be further traced by anti-terrorist, anti-money laundering, and taxing authorities and agencies.

In brief, it has been reported that Gibraltar Global Securities a Bahamian based and apparently owned financial service company has been declared “Unsuitable” to do business in the Province of British Columbia by the Securities Commission of British Columbia (BCSC). The company and its Canadian affiliate “Global Securities” also faces other sanctions and fines in a hearing scheduled for June 12, 2012. The principals of the Bahamian company have publicly complained that it is a sovereignty issue and that the Securities Commission of the Bahamas (SCB) was wrong in providing the BCSC with information it involuntarily retrieved from Gibraltar in a 2010 “surprise” visit to Gibraltar’s offices. The SCB seized documents containing information which the British Columbia government claimed existed, and which Gibraltar had reportedly refused prior requests for discovery, claiming protection from “Fishing Expeditions” not allowed by Bahamian “Financial Secrecy Law”. Also, Gibraltar now claims that the SCB should be investigated in the matter, as its actions will hurt the Bahamian industry, and reverberate internationally among clientele seeking offshore services and protections.

The SCB has admitted to sending the seized documents to the Provincial government thus giving them evidence needed for their subsequent ruling and actions. Generally, this is how a competent securities Commission is expected to operate, and based on current law and regulations, the SCB seems to have been justified considering the prior discovery requests and resultant refusals by Gibraltar. The BCSC in its ruling also offered evidence that Gibraltar and Global had previously proffered formal statements specifically denying their engagement in the activities the retrieved documents later evidenced they were involved in. More on the specifics of the case can be viewed at www.ourbahamas.org .

While the CBA can only opine as to the actual facts as reported in the BCSC ruling and elsewhere, an evaluation based on what has been reported, reveals a situation which is highly instructive. Notably, this is not the first incident the Bahamas Securities Commission has had with Canadian based and affiliated financial service operations. There have been several prominent examples. Due to the lack of a federal securities commission, oversight regulations, and enforcement capabilities, the Canadian securities system which is Provincially based, has come under much scrutiny and criticism. Some observers have gone as far as to state that parties hurt by Canadian related financial services must often depend on transactional connections to the long and powerful arm of the U.S. Securities operations and laws for enforcement solutions. Ironically, this is also one reason the more prudent Financial Services operations in the Bahamas have traditionally and facially steered away from U.S. based transactions whenever they can. The situation in Canada has led to disparate enforcement of securities matters, and internal and international forum shopping by questionable Investment practices and promoters. The Bahamas has unfortunately become a forum shopped by some of these entities due its history as an offshore center with laws touting financial secrecy, and with local actors amenable to lucrative, less enforceable Canadian, as compared to highly scrutinized U.S., based transactions.

The view from outside is extremely important in this area. The Bahamas cannot build and maintain a financial services industry or any industry for that matter, which is viewed from the outside as assisting in the violation of the laws of other countries. This is particularly so when the laws being violated are those of world leading countries, and where our actions may be seen as contravening international norms of financial practice. Simply because we are a sovereign nation with our own laws, does not mean we can do any and everything to make money.

A simple rule that actors within the Bahamian Financial Services industry must remember is that within International Law and Relations, “Might Is Almost Always Right”. This may be a sobering realization for the less well heeled nations, but it is one to take important notice of. While International law and treaties may be interpreted by international bodies with some token representation from smaller nations, such laws are generally established by the larger more powerful forces, and always unilaterally self interpreted and enforced by them in protecting their interests. Unresolved international disputes only exist when two behemoths disagree, but generally when a behemoth confronts a small actor in an international dispute, most knowledgeable observers realize who will ultimately win. Numerous examples of this can be cited but is unnecessary in the context of this report, and may be covered in a follow up report on www.ourbahamas.org .

Large powerful countries and international organizations in attempting to protect their interests will strive to do so, particularly when the moral and ethical situation, and international law is arguably on their side.

The new Minster of Financial Services Ryan Pinder, a highly trained and U.S. experienced Tax and Business Transactional lawyer has his work cut out in reigning in unrealistic actors and expectations in the Bahamas Financial Service community. His appointment breeds hope that financial services can now be focused on bringing foreign income and jobs from legitimate foreign business setup and financial services, rather than from the assistance of “Black Hole” financial services couched in terms like “sovereign protected”, “wealth management”, “high net worth offshore asset protection” et al.

The writing has been on the wall for some time now for any objective observer to see. Large important production based world economies will not allow small non-production related economies like the Bahamas to assist foreign violations and abuse of their laws. The recent BCSC ruling, FATCA, OECD, The Patriot Act, and several others now in the pipeline are clear examples that the problem for countries like The Bahamas is not going away.

Both Prime Ministers Ingraham and Christie recognized the problem, and Ingraham though criticized for giving in to the OECD during his first terms in office should be applauded for doing what was morally and ethically right, even if he may have been forced to do so. It is important to note that Christie in his first term did not try to repeal Ingraham’s decision, apparently recognizing the futility of attempting to do so in face of the clear writings upon the international wall of financial compliance. In addition, he appears to have an obvious inclination and predisposition to make the Bahamas a more important and respected player on the world stage. Members of the Bahamas Financial Services Community who do not follow the views espoused in this CBA report, should not be surprised, or expect Prime Minister Christie to take any steps which will put the international reputation of the Bahamas at risk.

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