The Bahamas: A Complete and Compelling Choice 2024

2024 The Bahamas: A Complete And Compelling Choice A WealthBriefing Report On The Bahamas Financial Services Industry

INTRODUCTION

A Secure yet Dynamic Environment for Conducting Business We begin this end-of-year report with a fascinating overview of The Bahamas as a financial centre and a venue for business of all kinds, before exploring the benefits that the jurisdiction offers more closely.

One article looks at the difference between wealth management and wealth planning, the latter being essential to any high-net-worth (HNW) family that wants to beat the odds and preserve its wealth for generation to come. In doing so, it unpacks the “Bahamas Toolkit,” the comprehensive range of private wealth-management options to be found in the jurisdiction.

This includes: the Bahamas Executive Entity or BEE, which can provide a trust with resolute organisation and governance that stems from a central point and lasts for generations; private trusts; the commonly-used purpose trust – a structure which has no beneficiaries and can hold the shares of private-trust companies and other legal entities (a function that the BEE often fulfils also); and SMART Funds, which help investors to act in line with their objectives and risk limits.

Meanwhile, under the Digital Assets and Registered Exchanges (DARE) Act 2024, which has repealed and replaced the earlier – and ground-breaking – Act of 2020, The Bahamas is poised to become an important jurisdiction for the world’s digital-asset business. It remains a magnet for people who want to set up or redomicile family offices.

The political stability of The Bahamas is a recurring theme in all our dispatches, as it helps governments of different complexions to build upon each others’ achievements rather than change policy constantly. In 2018, for example, the Government established a new Policy Framework for the Public-Private Partnership Initiative, intending to create a formal and transparent method for improving, updating or creating public assets with private management and at the same time using public and/or private capital. The bold Nassau Cruise Port bond offering in 2020 was the first major result. After a general election in 2021, the new governing party wisely continued that policy.

Meanwhile, environmental initiatives provide some of the clearest evidence of The Bahamas’s resilience and flexibility.

The Carbon Credits Initiatives Act has put The Bahamas at the forefront of the global carbon-finance movement, as previous annual reports have shown.

Our comprehensive study looks at the lure of the Bahamian lifestyle for anyone who wants to set up a family office, a trust or a business in the islands – and, indeed, for anyone who wants to live or holiday there. Boating, fishing and diving are common pastimes, the cuisine is exotic, the people are friendly, temperatures are warm and sunshine is abundant all year round. The islands boast a healthcare regime of the most modern kind.

The unspoilt Family Islands or Out Islands, meanwhile, contain a multiplicity of small airports that allow visitors to travel between them, in addition to the larger international airports near the two main cities. HNW visitors therefore find it easy to occupy beachfront villas wherever they like in these islands, with no transport problems.

The Bahamas is a world leader in FinTech or financial technology (the aforementioned DARE Act being an obvious example) and in these pages we take a detailed look at the future of the sector.

We look at the way in which the rise of younger generations has helped FinTech companies to capture a larger share of the market; the disruption caused by mobile payment options; open banking, which allows outside developers to access bank data via application programming interfaces or APIs; artificial intelligence; and the restless and ever-growing need on the part of users for immediate service. Financial customers everywhere are becoming more fickle; it is therefore just as well that The Bahamas sits at the forefront of these trends.

We explore the environmental, social and governancerelated (ESG) standards that measure the sustainability and societal impact of an investment in a company or business.

Wealth managers in the Bahamas find these extremely useful when advising and helping the HNW individuals in their care. The local workforce of accountants, lawyers, bankers, asset managers, FinTech specialists, environmentalists and professional trustees is especially proficient in succession planning and business continuity.

This tapestry of talent provides ESG initiatives with all the support functions that they could possibly need.

Towards the end of this briefing we relate the story of AB Capital Partners, a globally-active investment house in New York, which more than satisfied its strategic objectives by using the diverse kaleidoscope of financial products and services available in The Bahamas. One of its chosen vehicles was an international business company or IBC. Wealth managers frequently use this type of structure in the Caribbean and the Bahamian version is better than all the others.

Underpinning the efforts of all Bahamian financiers is a rigorous but flexible regulatory regime which collaborates well with government ministers, practitioners and foreign regulators alike. Future investors in the jurisdiction ought to be reassured by the overview of the insurance regulator that is to be found in our final pages. Good regulatory organizations seldom spring into life fully-formed; instead, they take years to build up their expertise, contacts and staffing. This is what has happened in The Bahamas. Indeed, this is ultimately the achievement that makes this exotic but accessible jurisdiction a safe but exciting place in which to do business.

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The Bahamas: A Complete And Compelling Choice 2024

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The Bahamas: A Firmly Focused IFC *By Niekia Horton, the CEO and Executive Director of the Bahamas Financial Services Board

Recent discussions and narratives around International Financial Centres (IFCs) have focused on meeting the demands of international standardsetting bodies. Lost in the discourse is the value proposition of IFCs and their contributions to a globally diversified and financially inclusive community.

Undoubtedly, the deliberations between IFCs and international standardsetting bodies will continue as both groups seek transparency, accountability, fairness, and equal opportunity. The Bahamas, however, is firmly focused on being the region’s most complete and thriving financial centre, committed to upholding integrity in the financial system.

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he financial services industry has proven its prominence to the Bahamas economy as the second largest pillar of the Bahamian economy, contributing approximately 10% - 15% of the country’s Gross Domestic Product (GDP). Successive governments have consistently demonstrated the country’s commitment to good governance by fostering a robust regulatory framework. The country’s membership in the United Nations, CARICOM, and many other governing agencies supports its trustworthy democratic government system. Expertise in the local financial sector, coupled with the continued demonstration of the country’s commitment to international best practices and its strategic location, allows the Bahamas to remain innovative and progressive in its offering.

“Green finance is emerging as the next wave of innovation for The Bahamas.”

A number of attributes factor into The Bahamas’ position as a globally prominent IFC, specifically: Resilience: As a stable democracy for over half a century, The Bahamas, renowned for its robust regulatory regime, is an attractive IFC. However, what truly sets it apart is its resilience to economic fluctuations, which provides a steadfast and secure environment for financial activities. This resilience positions The Bahamas as a compelling jurisdiction for portfolio diversification and adept risk management strategies.

Covering 80 sq miles, New Providence, the capital island, serves as the nucleus for economic activity. The island’s compactness fosters an intricate interplay among the government, regulators, and financial services community, promoting agility and responsiveness in times of adversity. The Bahamas benefits from a tightly knit financial ecosystem, facilitating accessibility and promoting stakeholder collaboration for sustained success reinforcing its resilience.

Its geographic location shields it from the immediate economic impacts of world events, affording room for a well-calculated strategic

response to economic fluctuations. This insulation allows for the identification of solutions to safeguard the financial services industry effectively. The Bahamas’ resilience is further reflected in its agility in recognizing market demands and developing tailored financial products, which are integral to its financial ecosystem.

Regulatory excellence and trustworthiness: The Bahamas is dedicated to meeting international compliance standards in anti-money laundering (AML), know your customer (KYC), continued due diligence (CDD), and counter-terrorist financing (CTF) to maintain a robust and well-regulated financial system. Bahamian regulators are well-regarded and active partners with international peer groups and agencies supervising the sectors from a risk-based approach.

The Bahamas’ integrity as an IFC is cultivated through oversight by international governing bodies like the International Monetary Fund (IMF), the Financial Action Task Force (FATF), and the International Organization of Securities Commission (IOSCO). The privy council, as The Bahamas’ highest court, ensures regulatory stewardship.

Best in Class - Wealth Planning/Structuring: The Bahamas’ proven history as a prime wealth planning and structuring destination facilitates bespoke solutions catering to clients’ unique needs and preferences. These services and products include private banking, investment management, funds, fiduciary and corporate services, brokerage, structured products, and many more. The Bahamas’ sophisticated asset protection and structuring services allow clients to optimize their holdings, manage risk appetite, and enhance the efficiency of their financial structures. Structures established in the Bahamas are internationally recognized, reassuring individuals and businesses that their wealth management strategies will hold up across borders.

Additionally, clients in The Bahamas have access to a broad spectrum of global investment opportunities, ensuring diversified portfolios and exposure to different markets, asset classes, and non-traditional products (digital assets). Innovative products such as smart funds, ICON, and Bahamas Executive Entity (BEE), a growing captive insurance

The Bahamas: A Complete And Compelling Choice 2024

market, and the active embracement of financial technology (Fintech) have also enhanced clients’ wealth planning and structuring options.

Global connectivity, lifestyle, and accessibility: The Bahamas is more than just a bustling IFC; it is a sought-after destination offering its residents a high quality of life. Its cultural heritage, which blends various influences from African, European, and Caribbean traditions, contributes to a unique lifestyle. Modern infrastructure with cutting-edge communication technologies, world-class medical facilities, luxury properties, international schools, picturesque golf courses, and home to the world’s leading resorts make The Bahamas a well-rounded IFC.

“Major insurers in The Bahamas hold an AM Best rating of A- or better.”

Located just 50 miles off the coast of Florida, The Bahamas’ unique geography offers an undeniable advantage. Its proximity to the United States, Canada, and Central and South America perfectly positions The Bahamas to serve both traditional and emerging markets, creating opportunities to connect personal and financial interests seamlessly.

Strategically situated at the crossroads of the Americas, The Bahamas benefits from an extensive airlift schedule to and from the islands. As more individuals choose to ‘follow their money,’ The Bahamas, with its tropical environment and high quality of life, has become a preferred destination for those seeking to manage their global affairs while enjoying an affluent lifestyle.

Embracing a holistic approach that caters to non-financial needs, what truly differentiates The Bahamas is the warmth and friendliness that are inherently Bahamian. As a sought-after destination, further enhancing its appeal as an International Financial Centre, The Bahamas is an advantageous place to work, live, and play.

A Comprehensive Financial Ecosystem: With a thriving financial sector, The Bahamas is home to approximately 200 licensed banks and trust companies, including some of the world’s leading global and private banks, collectively holding assets totaling $127 billion. North American banks have operated in The Bahamas for over a century, while European and Swiss banks have maintained a strong presence for over 80 years.

The island nation also hosts over 177 broker-dealers and investment advisory firms, delivering investment management, custodial, and corporate services. Additionally, more than 50 fund administrators manage over 650 licensed funds, overseeing assets exceeding $200 billion. The Bahamas’ insurance industry is supported by responsive legislation, creating optimal conditions for international wealth management, including asset protection, tax efficiency, and investment flexibility. Major insurers in The Bahamas hold an AM Best rating of A- or better.

Over the past twenty years, a sound and modernized infrastructure has been established, enabling The Bahamas to offer highly competitive and market-responsive financial services. This solid foundation has positioned the nation to confidently navigate the evolving financial landscape and its diverse elements. An essential component of The Bahamas’ infrastructure is a healthy public-private partnership characterized by open and candid communication among the three main stakeholders: government, regulators, and the private sector. This collaboration plays a vital role in strengthening The Bahamas financial services ecosystem.

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Few jurisdictions can match The Bahamas’ rich heritage in financial services. Thousands of Bahamian professionals working alongside expatriate colleagues in numerous service providers that call The Bahamas home form the backbone of this thriving industry. This legacy is underpinned by a robust legal framework carefully cultivated over the decades, fostering a strong investment climate and a stable, predictable business environment.

Innovative and Progressive: With the launch of the Central Bank Digital Currency (CBDC), Sand Dollar, and a proactive stance on fintech regulation, The Bahamas sets itself apart as a pioneer, staying at the forefront of financial advancements. The introduction of the Sand Dollar CBDC promotes financial inclusion, efficiency, and security in transactions, showcasing the country’s commitment to leveraging technology for the benefit of its citizens and businesses.

Further demonstrating innovation and agility in the financial service sector, The Bahamas was also one of the first nations to comprehensively regulate digital assets and registered exchanges (DARE) with the DARE Act in 2020 and its subsequent iteration, the DARE Act 2024. The DARE Act 2024 aims to make it more appealing to managers, exchanges, and investors to participate in a well-regulated and comprehensive legislative program. The Bahamas’ proactive stance on fintech regulation fosters a conducive environment for companies to thrive and innovate.

“Warmth and friendliness are inherently Bahamian.”

With far-reaching implications for the economy and a direct influence on the lives of Bahamians and residents alike, green finance emerges as the next wave of innovation for The Bahamas. The innovative Carbon Change and Carbon Market Initiative Act 2022, the Carbon Trading Act 2022, along with other initiatives have recently been introduced to foster a robust blue economy that propels conservation and promotes sustainable investing.

THE BAHAMAS: A PROMINENT ONE-STOP JURISDICTION As the debate around IFCs continues, The Bahamas remains steadfast and unwavering in its dedication to excellence in financial services. A resilient jurisdiction reinforced by a solid regulatory framework, The Bahamas emerges as a comprehensive and successful IFC. Its wealth management and structuring distinction solidifies its position, while its global connectivity and accessibility are indispensable enablers for its continued success. With these qualities, The Bahamas continues to chart a course towards solidifying its status as the ultimate destination for financial services as a prominent one-stop jurisdiction.

Central Bank of The Bahamas Gross Economic Contribution of the Financial Sector in The Bahamas (2022)

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* Niekia Horton can be reached on +1 (242) 393-7001 or at info@bfsb-bahamas.com

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The Bahamas: A Complete And Compelling Choice 2024

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We Create Legacies for the Future *By Paul Winder, the Former Chairman at Bahamas Financial Services Board and Step Bahamas

It is common to hear financial practitioners all over the world praise The Bahamas for its financial prowess and for having hundreds of banks and trust companies. This praise comes from around the world, not least from the many friends of the jurisdiction in Hong Kong, from the corporate business service providers at Vistra, which has several offices all over the world, and from the UK Ship Register, one of the world’s best-performing flag registries, whose own people admire The Bahamas, amongst other places.

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he island chain is, moreover, home to a host of “heavy hitters” such as Deltec Bank & Trust Limited, Lombard Odier, Pictet, Fidelity, the Royal Bank of Canada and so on. But why should a high-net-worth individual (HNWI), or an intermediary, choose The Bahamas as a base of operations? What makes our jurisdiction the best choice in a world full of choices?

The Bahamas’ main virtue lies in the comprehensive range of private wealth-management options that are often known collectively as “The Bahamas Toolkit.” This is based on an admixture of pragmatically-crafted laws, quality wealth-management services and experts of all kinds working in the jurisdiction. These formidable resources are the product of a long and stable history of good finance, punctuated by the occasional blip and correction. Moreover, The Bahamas is one of the only Caribbean countries that obey every one of the Financial Action Task Force’s famous ‘40 Recommendations.’

The Bahamas – a former British colony and now an important independent Caribbean state – sits under the mantle of the most respected legal system in the world. The English Privy Council is the supreme legal authority in the jurisdiction, as established by the Declaratory Act 1799, and the entire jurisdiction sees this as a great advantage.

Being a common-law jurisdiction, trusts have existed in the country since the 1920s. Roywest, the first indigenous trust company, was set up in 1936. However, legislation was in place long before that in the form of the English Trusts Act 1898, which was inherited as a result of the country being under British rule at the time. More trust legislation has followed and trusts in The Bahamas are currently governed by the Trustee Act 1998 (as amended).

WEALTH MANAGEMENT V WEALTH PLANNING Terminology is important here. Wealth management is usually defined as an investment advisory service – drawing holistically from a range of financial services such as tax planning, accountancy and banking – that services the needs of affluent clients. Typically, fees are based on a client’s assets under management (AuM) and medium-term asset growth is the name of the game. Wealth planning, on the other hand,

is at least in part an attempt to arrive at the best possible legacy that a HNWI can leave for his heirs after his demise. Few family fortunes survive to the third generation. It is therefore a vital function of wealth planners to protect HNWIs and their families from sharp practice and the consequences of their own inexperience.

“The English Privy Council is the supreme legal authority in the jurisdiction.”

THE BAHAMAS TOOLKIT The Bahamas offers HNWIs trusts, foundations, private trust companies, purpose trusts, protectors, family offices and our own SMART Fund and ICON structures. If it is useful, the jurisdiction has it. Rarely, if ever, does a Bahamian financial institution offer pre-made or manufactured products that roll off the production line in some grotesque financial factory that pins Orwellian numbers on HNWIs. Instead, the Bahamian wealth manager pays attention to the client and his story.

The Government also had this aim in mind when it enacted the laws of the last 40 years. The main ones are as follows.

1991: 1998: 2003: 2004: 2007:

The Fraudulent Dispositions Act. The Trustee Act. The Investment Funds Act. The Foundations Act and the Purpose Trust Act. The Banks and Trust Companies (Private Trust Companies) Regulations.

2011: The Trustee Amendment Act, the Bahamas Executive Entities Act and the Rule Against Perpetuities (Abolition) Act. 2014: The Investment Condominium Act. 2020: The Digital Assets and Registered Exchanges Act and the Financial and Corporate Service Providers Act. 2023: The Arbitration (Amendment) Act and the International Commercial Arbitration Act.

The Bahamas: A Complete And Compelling Choice 2024

This impressive collection of statutes ensures that settlors can exercise reserved powers, can avoid the imposition of foreign forced-heirship laws on their arrangements in The Bahamas (there being no indigenous Bahamian laws of that kind) and can remain free to create common-law trusts, civil-law foundations, dedicated private trust companies and family offices. The latter two are especially useful to members of HNW families who want to set up legacies, either individually or collectively. If arbitration at any time becomes necessary, then The Bahamas has recently provided clear rules on the matter.

“The Bahamian wealth manager pays attention to the client and his story.”

Central to trusts, foundations and dedicated offices are three uniquely Bahamian assets: SMART Funds, ICON Foundations and Bahamas Executive Entities.

SMART FUNDS Stemming from the Investment Funds Act 2003, SMART Funds capitalise on our jurisdiction’s renowned expertise with purpose trusts (trusts created for specific purposes which have no beneficiaries) and help investors to act in line with their objectives and risk limits.

The ‘Model Two’ Fund, otherwise known as the ‘Incubator Hedge Fund,’ enables up to ten professional investors to establish a hedge fund at trifling cost that is opaque to the general public and issues redeemable shares which carry voting rights, allowing their holders to elect to change any fund’s operator.

The ‘Model Four’ Fund, known as the ‘Private-Client Fund,’ conveniently provides a family with a centralised asset-holding vehicle by which to open accounts and initiate investments while losing nothing in terms of control.

INVESTMENT CONDOMINIUMS The Bahamas was one of the first nations that recognised the immense potential of Brazil and Brazilian entrepreneurs, yet the civil legal system of that emerging nation presented a problem for common-law, Commonwealth powerhouses such as The Bahamas.

After working with Brazilian experts and gauging the legal requirements of Brazilian HNWIs most thoroughly, we established the Condominium as a convenient way in which they could pool assets for collective-investment purposes – often for properties with high potential.

The Condominium exploits our expertise with purpose-driven investment funds and civil-law foundations. It follows the common-sense principle of limiting investment liability to whatever an investment touches, while leaving growth potential uncapped. No investor should expose his global property portfolio to creditors.

THE BAHAMAS EXECUTIVE ENTITY In 2011, The Bahamas abolished the Rule Against Perpetuities, allowing Bahamian trusts to survive ad infinitum. This opened a portal to a new realm, unlocking the market potential of our jurisdiction in its dealings with all things to do with legacies. The life of a trust can now be unlimited, lasting three, four, five, or six generations.

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Every trust needs firm organisation and governance that stems from a central point. A ‘protector’ – a person whom the settlor has chosen to exercise powers over the trust, who is not himself a trustee – is a traditional way of providing this. Such a person can act as a voice of wisdom and guide the trust through times of danger, but one individual cannot do this for generations.

The Bahamas established the Bahamas Executive Entity or BEE as an answer to this problem. It institutionalises this role and is a good way of guiding structures that multi-generational dynasties use, such as long-standing foundations or private trust companies. However, a BEE’s use extends beyond just acting as a protector, as a BEE can perform the role of any office of a trust or of a legal person. The persons that comprise a BEE receive limited liability for multiple jurisdictions, counter-intuitively enabling them to fulfil their fiduciary obligations – for example, when defined in a foundation charter.

PRIVATE TRUST COMPANIES AND PURPOSE TRUSTS Private trust companies, at their core, contain multiple voices of reason that belong to trusted advisors who maintain complete discretion on principle. These are rare virtues, but essential for effective wealth planning. Furthermore, they de-limit the constraints inherent in institutional ‘packaged’ trusts while consolidating affairs under a single roof.

Private or visionary-type investors are naturally encouraged to consider a private trust company as soon as practical.

“The Bahamas has recently provided clear rules for arbitration.”

The Bahamian professional trustee envelops the purpose trust, which enforces the private trust or holding company, which consists of multiple family trusts. This provides the necessary structure for an effective, unlimited estate plan that aims to tie certain assets or parental goals to certain family members or friends. In other words, it is a holistic blank canvas for wealth planning that puts the senior HNWI at the helm.

Finally, the purpose trust itself, absolutely protected by The Bahamas’ Fraudulent Dispositions Act 1991, allows for unlimited freedom in the pursuit of investing happiness. It establishes a two-year statutory limitation from the date of disposition (e.g. transfer) within which a creditor can claim assets, but he must prove fraudulent intent. Thereafter, the assets settled in the purpose trust may not be attacked or challenged as belonging to the trust.

One must be mindful, however, that any trust set up with an intent to defraud is invalid. What we Bahamians do, and what we do well, is to think innovatively when tailoring structures to create responsible legacies. This is the right way to plan for the future.

OUR FUTURE The Digital Assets and Registered Exchanges Act 2020 and its descendant, the DARE Act 2023, are testaments to the growing prominence of digital assets. They relate to major cryptocurrencies such as stablecoins, but also to the technical freedoms presented by smart-contract technology. They allow for transparent, objective, code-driven instructions to govern every structure that we have discussed so far.

In the meantime, protected investment funds lend themselves well to the volatility inherent in a new asset class that is still making its mark.

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The Bahamas: A Complete And Compelling Choice 2024

You may win, you may lose, but frankly, with structured planning, you are more likely to succeed.

also holds allocations to privately-incorporated equity (SMART) and real-estate (ICON) funds. I shall leave that calculation to you.

“The purpose trust allows for unlimited freedom in the pursuit of investing happiness.”

As a parting gift, I shall add that the assets under management in the Bahamian jurisdiction stand at more than $50 billion, contained in more than 680 licensed funds. Deltec itself, with employees and partners located globally, manages and guides nearly $3 billion of that amount. This article has shown how that is done.

Consider the potential of a 10% allocation to cryptocurrency within an investment fund, itself within a governing purpose trust, which

So, if you are a HNWI and you have not yet explored The Bahamas and what it has to offer, is your legacy really set up to reach its full potential?

The Bahamas: A Complete And Compelling Choice 2024

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Recent Developments in a Dynamic Financial Centre * By Antoine Bastian, the CEO of Genesis Fund Services Limited

Over the past decade or more, The Bahamas has experienced several turbulent economic events that have created fiscal challenges for the country. The economic impact of such events – including natural disasters, blacklistings and COVID-19 – have been challenging and have redirected the government, regulators and the private sector to work harmoniously to reimagine The Bahamas’ workplace to ensure that the jurisdiction continues to have a stable, growing and robust economic future.

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trong legislative reforms, public-private partnerships, new tax perspectives and new financial and environmental projects are all a part of The Bahamas’ response and have made its financial services industry more resilient and flexible than ever.

recent wave of global standard-setting that has resulted in far more onerous AML and tax regulations in all nations, and they have emerged at the other end with flying colours. Few Caribbean jurisdictions can comply with the highest standards while still being able to help HNWs and family offices find creative solutions to their problems nimbly and quickly.

KEEPING ON TOP OF WORLD EVENTS CREATIVITY IN THE CRYPTO-WORLD The global dysphoria on the subject of taxes has certainly not been avoided in The Bahamas. The tax-related demands of the Global North over the past 20 years have driven Bahamian politicians to walk a tightrope, balancing the role of adopting new global tax ideologies – ideologies that are focused on keeping The Bahamas as a relevant financial centre – and, at the same time, striving to convince industry stakeholders that a change in tax ideologies is prudent from a long-term perspective. The Bahamas’ ambition has been to rethink the ideas of tax ideologies and tax reform in a modern, global and transparent way.

“Bahamian financiers have ridden the recent global wave of standard-setting with flying colours.”

While this article is not intent on providing a chronology of The Bahamas’ time on and off the FATF and EU grey-list and black-lists respectively, the intent is to celebrate The Bahamas’ vigilance and determination to progress a financial services sector that is a part of the global plan for the eradication of tax evasion, money laundering, terrorist financing and counter-proliferation (AML/CFT/CFP). The completion of the National Risk Assessment and subsequently the National Identified Risk Framework Strategy was the cause of legislative amendments and new enactments to help the sector by creating a more robust and compliant financial services industry. The Beneficial Ownership Register Act 2018 is a case in point – although the Register of Beneficial Ownership is not accessible to the general public and only a designated officer of a regulatory authority may request a search. Bahamian financiers have ridden the

The Bahamas, though, has done more than simply acquiesce to global demands of AML and tax transparency. Successive governments have been creative in their approach to continue to develop and grow the financial services sector. Like the ground-breaking SMART Fund models in 2003, The Bahamas demonstrated more innovation, agility and resilience in the financial-service sector by the introduction of the Digital Assets and Registered Exchanges (DARE) Act 2020. The Securities Commission of The Bahamas (SCB), in consultation with other regulators and industry professionals, embraced the idea that cryptocurrencies and digital assets were going to be a part of the economic global landscape and that The Bahamas was going to be part of it also. The desire to regulate a burgeoning financial-services space properly was an important aspect of jumping into the digital-assets space and becoming one of the first jurisdictions with a strong legislative and regulatory programme in the digital-asset space. Despite the negative press of the FTX fall-out, The Bahamas has seen significant growth in the sector and is amending the DARE Act with the aim of making a greater appeal to those managers, exchanges and investors to be a part of a well-regulated and comprehensive legislative programme.

The new amendments are timely and should include some of the crypto-policy recommendations issued by IOSCO that are “designed to improve global standards of regulation of crypto-assets...set out how clients should be protected and how crypto-trading should meet the standards that apply in public markets.”

Furthermore, the Executive Director of the SCB has indicated that the amendments that are expected later in 2024 will also provide a

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The Bahamas: A Complete And Compelling Choice 2024

better legislative framework for stablecoins, making The Bahamas one of the few countries with such legislation. The amended DARE Act should redefine conflicts of interest, the custody of digital assets and digital assets being held off-balance-sheet. Notwithstanding the confidence of the DARE regime, the anticipation is that The Bahamas will be an important digital-asset jurisdiction for “the rest of the world,” meaning that smaller and more flexible firms not targeting larger regulated jurisdictions like the US, Europe and Canada to do digital asset business will have an opportunity to participate in a global marketplace and, at the same time, participate in a well-regulated jurisdiction.

“The Bahamas will be an important digital-asset jurisdiction for the rest of the world.”

WHY POLITICAL STABILITY IS VITAL The growth in financial services is testament to the stability of The Bahamas’ democracy. From one governing party to another, and in many cases, policies are not changed or scrapped but rather enhanced and developed for the better of the country at large. In 2018, the Government of The Bahamas established a new Policy Framework for the Public Private Partnership Initiative (PPPs). The intention was to create a formal and transparent methodology of enhancing, updating or creating public assets with private management and at the same time using public and/or private capital. After a general election in 2021, the new governing party continued the PPP policy. The bold Nassau Cruise Bond offering in 2020 was the first major transformative initiative. The overall total debt and equity raised by the Nassau Cruise Port PPP initiative was approximately $300 million. This phenomenal capital raise has directly and significantly contributed to an economic boom and the inflow of money from tourism to The Bahamas. The offering for the port demonstrated the government’s ability to modernize the downtown core of Nassau and successfully upgrade the nation’s number-one industry, without the need to borrow or tax its citizens.

CARBON CREDITS Environmental initiatives provide some of the clearest evidence of The Bahamas’s resilience and flexibility. The Carbon Credits Initiatives Act has put The Bahamas at the forefront of the global carbon finance movement. Under the terms of Article 6.4 of the United Nations’ Paris Agreement, and in particular the United Nation’s Carbon Offset Platform (see https://offset.climateneutralnow.org/), which promotes the avoidance and removal of greenhouse emissions from the atmosphere via projects in the developing world, The Bahamas Government’s enactment of these dynamic pieces of legislation now provides a regulatory framework for the accreditation and transactions of blue-carbon credits. The Bahamas has also enacted the Carbon Credit Trading Act 2022. This legislation now enables the Securities Commission of The Bahamas to regulate the trading of carbon-credit securities related to

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this new asset class and also allows broader rights participation in the fast-growing voluntary carbon markets.

While the current legislation allows entities or individuals to manage the monetization of blue-carbon sales or trading, the Government remains the owner of the sovereign assets and, under the current arrangement, will receive 92.5% of all proceeds of carbon-credit sales after operational costs. The proceeds will be used to fund The Bahamas’ Sustainable Development Goals as defined by the United Nations CCC. By monetizing its blue-and-green carbon assets through credit issuance, The Bahamas will unlock new financial flows to support, among other things, marine and coastal conservation, ecosystem restoration, clean energy and resilient infrastructure, all of which in turn increase its carbon sequestration capacity and reduce greenhouse gases. At the same time, the effects of a carbon-credit economy can create new sustainable businesses and job opportunities in the fields of environmental science and marine biology oceanic carbon measurement, mangrove and seagrass stewardship, and beyond.

GROWTH AND CHANGE IN A FICKLE MARKET The Bahamas is actively cultivating a financial service that includes carbon trading and carbon finance, conservation management and sustainable economic development with the support of global partners and stakeholders. This new initiative has the potential to reconfigure the economic landscape of The Bahamas because these activities are all aligned closely with UN Sustainable Development Goals such as poverty eradication, quality education and life below water.

“Legislation now provides a framework for the accreditation of blue-carbon credits.”

Overall, in this fast-paced and fickle financial-service environment, the Bahamas’ government, regulators and service providers are adapting continuously to the tides of global change and are continuing to demonstrate an out-of-the-box approach to maintaining a resilient financial service centre. At the same time, The Bahamas is ensuring that growth and change are predicated on a robust, compliant and modern legislative infrastructure that keeps the financial-services industry stable, progressive and proactive. * Antoine Bastian can be reached on +1 242 502 7020 or at abastian@genesisfundservices.com

The Bahamas: A Complete And Compelling Choice 2024

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To Live The Bahamian Dream *by Chris Illing, the Chief Commercial Officer at ActivTrades Corp

The Bahamas, a picturesque archipelago of more than 700 islands and cays nestled in the turquoise embrace of the Caribbean Sea, has long been celebrated for its idyllic beaches and warm climate. It is also an exceptional destination for investment, employment and residency.

This article delves into the reasons why The Bahamas combines financial services, cultural richness, modern infrastructure, world-class amenities and a high quality of life to create an unparalleled living experience.

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esides Nassau and Freeport, the two major cities, everyone can visit the unspoilt ‘Out Islands’ or ‘Family Islands’ (i.e. everywhere in the Bahamas beyond the islands of New Providence and Grand Bahama) which offer peace and quiet away from the hustle and bustle of the cities.

A MODERN INFRASTRUCTURE Although the Bahamas is renowned for its stunning beaches and crystal blue waters, it also boasts a modern infrastructure that supports a high quality of life. Nassau and Freeport are well-equipped with modern facilities which include shopping malls, gourmet restaurants and entertainment venues. These cities offer the convenience of urban living without losing the island’s relaxed atmosphere.

“There are several world-class medical facilities available across the islands.”

The Bahamas’ modern infrastructure extends to its transport network.

There are several international airports on several islands which provide seamless connections to major cities across the globe, making travel both convenient and efficient for residents and visitors alike.

All islands have airports, which make inter-island travel easy and affordable.

Meanwhile, the Bahamas’ real-estate market boasts a range of luxury properties that caters to diverse tastes. From beachfront villas with panoramic ocean views to elegant condominiums in bustling city centres, there are high-end living options that are as varied as they are luxurious. Investment in Bahamian real estate provides a high-net-worth individual with a prestigious residence that is also a strategic asset in a thriving market. Gated communities such as Albany, Lyford Cay and Ocean Club attract the rich and famous. Harbour Island, the Exumas and selected private islands welcome the international jet set year after year.

A FINANCIAL POWERHOUSE ON AMERICA’S DOORSTEP The Bahamas is also considered to be an international financial hub and has a tax regime which makes it attractive for investors and businesses. Notably, there is no personal income tax, no capital gains tax and no inheritance tax there. It has a competitive corporate tax rate, which enhances the country’s appeal as a destination for financial activities and investments.

“Nassau is only seven hours from London.”

Additionally, the Bahamas offers various incentives (including tax holidays and exemptions) to attract foreign investment and business operations and to foster economic growth. Its blend of modern amenities, regulatory advantages and strategic benefits makes it an exceptional choice for anyone who wants to thrive in the international financial landscape.

HEALTH, WEALTH AND WISDOM One of the critical considerations that a person can have when relocating or investing in a new country is the quality of its healthcare. The Bahamas excels in this regard, with several world-class medical facilities available across the islands. Its healthcare system is supported by a mixture of private and public hospitals, all equipped with state-ofthe-art technology and staffed by highly-trained medical professionals. Additionally, many hospitals and clinics offer specialized services, which range from advanced diagnostic imaging to complex surgical procedures. Residents therefore have access to excellent medical care, contributing to overall well-being and peace of mind.

The availability of high-quality education is a significant consideration for families that are thinking of moving to a new country. The Bahamas is home to several international schools that offer

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The Bahamas: A Complete And Compelling Choice 2024

curricula that conform to global standards. Schools such as King’s College, Lyford Cay International School and St Andrews provide rigorous academic programmes in a nurturing environment. These institutions not only cater to the educational needs of expatriate children but also embrace the rich cultural diversity of the Bahamas. They offer extracurricular activities that range from sports to arts and community service, thereby ensuring that every student receives a well-rounded education.

The Bahamian climate is a major draw, with warm temperatures and abundant sunshine all-year-round. This pleasant weather supports an outdoor lifestyle, allowing residents to enjoy a range of recreational activities such as boating, fishing and diving. The crystal-clear waters and vibrant marine life make the Bahamas a haven for water enthusiasts and anyone who wants to relax by the sea. Nassau, the capital, is only 30 minutes from Miami, 2.5 hours from New York, 3 hours from Toronto and 7 hours from London.

A CULTURAL MELTING-POT, OPEN TO ALL

“This is an environment that nurtures both professional and personal growth.”

To invest, to work, and to live in the Bahamas is to immerse oneself in a vibrant and diverse cultural tapestry. Bahamian culture is a fusion of African, European and indigenous influences. It finds its expression in colourful festivals, rhythmic music and a rich culinary tradition.

The Junkanoo Festival, held every Boxing Day and New Year’s Day, is a spectacular display of Bahamian heritage, featuring elaborate costumes, energetic dance performances and pulsating drums. This festival, along with numerous other cultural events, offers a unique opportunity to meet the local community and experience the Bahamian spirit at first hand.

“The Junkanoo Festival is a spectacular display of Bahamian heritage.”

The Bahamas is also home to a thriving arts scene. Galleries and art centres showcase the works of Bahamian artists, from contemporary paintings to traditional crafts. The island nation’s artistic landscape reflects its history and vibrant culture, creating an environment where creativity and expression are celebrated and supported.

Ultimately, what sets the Bahamas apart as a premier destination for investment, work and living is its unparalleled quality of life. The combination of natural beauty, modern amenities, easy accessibility and a supportive community creates a lifestyle that is both luxurious and fulfilling.

The Bahamian people are known for their warmth and hospitality.

Their sense of community and friendliness creates a welcoming environment for newcomers, making it easy for them to integrate and feel at home. This positive social atmosphere and the vibrant expatriate scene, combined with a stable political environment, contributes to a sense of security and comfort.

From its lively festivals and artistic expressions to its state-of-the-art medical facilities and international schools, the Bahamas offers a lifestyle that is both luxurious and deeply connected to its cultural heritage. For people who are thinking of opening a new chapter in their lives, the Bahamas stands as a testament to the promise of a life welllived in an environment that nurtures both professional and personal growth. Embrace the Bahamian dream and discover a lifestyle that is as rewarding as it is beautiful. It’s truly better in the Bahamas. * Chris Illing can be reached at cilling@activtrades.com

The Bahamas: A Complete And Compelling Choice 2024

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The Future of FinTech * By Dr Iyandra Smith Bryan, the Chief Operating Officer of Quantfury Trading Limited

‘Disruption’ is the perfect word to describe the phenomenon with which the financial services sector is struggling today. It is the one constant in a fluctuating world. The question that we should be asking ourselves is: in the midst of this disruption, where do we go and how do we thrive?

A SECTOR-WIDE PHENOMENON

THE NEXT GENERATION

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The rise of younger generations has also helped FinTech companies to capture a larger share of the market. 2.6 million Baby Boomers are dying each year, while Millenials and members of ‘Generation X’ are expected to inherit $83.5 trillion dollars in the next two decades. Numerous studies have shown that younger generations have a strong affinity for technology when they use financial services. They demand short, quick account onboarding processes and want their questions answered immediately through various technological means. Younger generations are also using mobile payment options for everything – from splitting vacation costs to making lease payments.

t the heart of this disruption of financial services lies a loyalty crisis which every participating firm in the sector is facing right now. It does not matter whether that firm operates in wealth management, in banking, in securities or in insurance – its customers are becoming more fickle.

“Technology helps financial institutions to think differently about how they work with clients.”

This loyalty crisis is disrupting the markets. Data shows us that, fifty per cent of the time, when a child or adult inherits money, he takes his funds to another institution. Statistics further demonstrate that more than 70% of bank clients would prefer to work with a technology provider such as Apple Pay or Google Pay rather than a traditional financial institution.

THE DISRUPTING EFFECTS OF FINTECH Financial technology is the central disruptive force. It has redefined the financial services sector and has uprooted established and archaic banking structures and processes. Numerous FinTech advancements have transformed clients’ relationships with financial services. These include blockchain technology, mobile banking applications, artificial intelligence, robo-advisors, digital payments and more. FinTech has a critical competitive advantage over traditional financial institutions because it makes it easier and more enjoyable to do business. Its advance is driven by society’s increasing access to smartphones and mobile connectivity, as well as people’s desire for – and need for – immediacy.

One can now perform banking transactions in the palm of one’s hand, as opposed to visiting a branch or calling a contact centre.

TRUST IN TECHNOLOGY Whether we are young or not, all of us can safely say that we desire low friction and immediacy more than ever. In other words, a client’s trust in a financial institution rests on that institution’s ability to deliver its products and services easily, immediately and with the least amount of irritation. Gone are the days when your bank charter or your bricksand-mortar building was enough to inspire clients to trust you – now, and in the future, a financial institution’s utility and trustworthiness will rest on its ability to use technology. One of the most successful deposit products in the world, Alipay, does not even involve humans.

It is completely automated, yet it has a higher trust rating than traditional financial institutions in China. Trust has to do with utility and the deployment of technology to make services easy and immediate.

AI AND APIS Other factors continue to fuel the rise of FinTech providers. The growth of open banking, which allows outside developers to access bank data via application programming interfaces or APIs, and which encourages competition and furthers innovation in the financial services sector, is another notable trend that will shape the future of financial services.

Delivering Unmatched Trading And Investing Conditions Globally NOW HIRING

The Bahamas: A Complete And Compelling Choice 2024

With the use of open-banking APIs, financial institutions are able to access their clients’ financial data securely and adequately. This allows them to offer customized solutions and additional efficiencies, perhaps by streamlining loan application processes.

“Trust has to do with utility and the deployment of technology.”

We also continue to hear of the increasing use of artificial intelligence and machine learning, both of which technologies help to make financial services more efficient, more custom-designed and better tailored for the client’s use. Artificial intelligence and machine-learning algorithms can analyse financial data in order to determine a number of helpful factors, including creditworthiness, and can help to specify and identify trends and optimize loan terms for clients.

We also see a greater use of client relationship technology, which ascertains a client’s values and priorities and helps the financial institution to speak to him in the frequency and manner that pleases him.

Technology helps financial institutions to think differently about how they work with clients. Importantly, it allows people who work in teams at financial institutions to focus on rendering the highest standards of excellence to clients and on maximizing their productivity with the client’s interests at heart.

Technology helps us to answer the following questions: • How are we engaging clients?

• Are we connecting with our clients on a level that is real to them?

• Are we tapping into the full potential of our clients?

• Are we responding to our clients in a timely, efficient manner?

• Are we prioritizing the matters that are of significance to our clients?

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• Are we showing the clients the passion we have for our products and services and the passion we have to be our clients’ partners and help them fulfil their objectives?

• Are we producing a high-quality work product?

• Are we empathizing with our clients?

• Are we truly enriching the lives of our clients?

A WORLD IN FLUX FinTech capitalizes on the pain points of traditional financial institutions. It capitalizes on the failure of traditional financial institutions to answer these questions. If they go on failing to innovate, to anticipate the needs of their clientele and to provide the value they expect in the future, more of their business will go to “tech companies offering financial services.”

“Financial institutions must be at the forefront of change.”

The future is FinTech. To thrive in such an environment, financial institutions must be at the forefront of change, must be proactive and not reactive and must be attentive to their clients’ needs. The world is evolving and it is up to all financiers to ensure that they are not left behind. * Dr. Iyandra Smith Bryan can be reached on +1 242 362 6170 or at iyandra.smith@quantfury.com

The Bahamas: A Complete And Compelling Choice 2024

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The Bahamas Embraces the Future with ESG *by Delphino Gilbert Cassar, the head of business development and FinTech at Equity Bank Bahamas Limited, and Michael Clare, the head of digital assets and FinTech operations at Liongate Bahamas Limited.

The Bahamas has blazed a trail for other jurisdictions to follow in the field of sustainable finance, that set of practices and standards that strives to fulfil environmentally-sound objectives while also generating profits. In the business world, ‘sustainability’ often refers to policies that try to prevent the depletion of natural resources. Investors often take sustainable finance to be synonymous with Environmental, Social and Governance-related (ESG) investing.

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he island nation began to evolve robust ESG rules and principles earlier than most jurisdictions. These are designed to benefit impact-driven businesses that want to do societal and environmental good as well as earn revenue.

and sustainable. ESG is crucial because it aligns business success with ethical responsibility, creating wealth and tackling global problems at the same time.

PROBLEMS TO BE SOLVED

“Investors often take sustainable finance to be synonymous with ESG.” Such rules and principles are also likely to protect the environment in The Bahamas, make local communities more resilient and foster economic growth that raises the standard of living for broad swathes of the islands’ population.

THE E, THE S AND THE G But what exactly is ‘ESG’ and why is it so important?

Environmental, social and governance-related standards or criteria measure the sustainability and societal impact of an investment in a company or business.

• Environmental criteria consider how a company performs as a steward of nature, focusing on such issues as climate change, the conservation of natural resources and pollution.

• Social criteria examine its relationships with employees, suppliers, customers and communities. Labour practices and diversity (the inclusion of people with more than one creed, colour, sexual orientation etc) are factors here.

• Governance concerns a company’s leadership, executive pay, audits, internal controls and shareholders’ rights.

By pursuing ESG-related policies, businesses and investors can spot and offset risks, boost revenues and make the world more equitable

In recent years, however, many people have grown sceptical about ESG. They have pointed to examples of greenwashing – the act of claiming that a product or business is more environmentally safe than it actually is. They have declared that ESG rules are not well standardised and that rigorous governance and accountability are absent.

They have also argued that it is often hard to quantify and verify the real-world impact of ESG strategies and that businesses often claim to be ESG-friendly while simply carrying on business as usual.

THE BAHAMIAN SOLUTION The Bahamas has met these concerns head on. It has built a regulatory system that is grounded in transparency, integrity and high standards of environmental and social performance.

The Carbon Credit Trading Act 2022 and the Climate Change and Carbon Market Initiatives Act 2022 contain clear and robust provisions for the validation and verification of carbon credits. They establish a rigorous process of registering and authenticating carbon credits that ensures that they represent genuine and permanent reductions or removals of emissions.

The legislation also sets out strict criteria for the accreditation of independent third-party validators who, when the time comes, will be responsible for assessing the quality and credibility of Bahamian carbon projects and assets. This guards against the risk of greenwashing and inspires trust and confidence in buyers and investors.

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The Bahamas: A Complete And Compelling Choice 2024

“In recent years, many people have grown sceptical about ESG.” These Acts legitimise a new asset class (carbon credits) and impose a set of assessment rules on it in pursuit of the United Nations’ Paris Agreement’s goal of reducing emissions. This proves to trusts and other corporate structures domiciled in The Bahamas that the recognition and valuation of carbon credits is well regulated.

SUPPORTING LEGISLATION A further medley of Bahamian Acts underpins this.

The Investment Funds Act 2019 provides a regulatory framework for the creation of versatile investment fund vehicles. Investors can use these regulated funds for carbon-credit projects and for all manner of ESG investing strategies. Such funds, which range from private-placement SMART (Specific Mandate Alternative Regulatory Test) funds to professional funds, allow them to see – and oversee – the whole process very clearly.

The Segregated Accounts Companies Act 2004 makes it possible to make sub-funds available, in an economically and efficient way, with segregated NAVs (net asset value calculations) underpinning their ESGrelated strategies.

DIGITAL ASSETS IN THE SERVICE OF ESG As green finance interacts with technology, FinTech projects related to the tokenisation of carbon credits or utility tokens based around ESG communities can take advantage of the regulatory clarity that the Digital Assets and Registered Exchanges (DARE) Act 2024 (an update of a previous and much more ground-breaking Act) provides.

Moreover, traditional corporate structures in The Bahamas such as companies or unit trusts may provide tokens with legal personalities by tokenising the shares or units, which have enforceable contractual rights.

A SMORGASBORD OF SERVICES The Bahamas is a robust international financial centre that offers a complete wealth management solution. Its adroit workforce of accountants, lawyers, bankers, asset managers, FinTech specialists, environmentalists and professional trustees is especially proficient in succession planning and business continuity. This tapestry of talent provides ESG initiatives with all the support functions that they could possibly need.

New types of trust asset are always appearing and carbon credits may soon be among them. Bahamian trust practitioners are always nimble and responsive to these trends, as the law requires them to be.

Moreover, trustees who want to preserve and increase the wealth that their trusts hold should consider the efficacy of ESG funds and investment options – not only for moral satisfaction, but also for the sake of monetary prudence, judging each fund or option by merit.

In 2023, sustainable funds performed far better than traditional funds in various asset classes and regions, as revealed by the Morgan Stanley Institute for Sustainable Investing’s sustainability report. Data from Morningstar, which the institute analysed, indicated that sustainable funds achieved a median return of 12.6 per cent, surpassing the 8.6 per cent return of traditional funds.

BAHAMIAN SEA GRASS AND THE CARBON MARKETS The responsible management of natural resources and ecosystems, research into their preservation and the advent of active voluntary and involuntary carbon markets are all combining to offer investors financial gain.

For instance, it has been discovered that The Bahamas is endowed with the largest natural habitat of sea grass in the world, accounting for 40.7% of all known sea grass. The sea grass works organically as a blue-carbon sink, sequestering 2–3 billion kilograms of carbon into its root systems annually. Studies are being conducted to quantify the amount of carbon credits that this discovery is going to generate.

In 2023, sustainable funds performed far better than traditional funds.”

The government of The Bahamas counts every carbon credit generated in The Bahamas as its own sovereign property. However, it is welcoming private/public partnerships that might generate said carbon credits. It wants this to happen through projects that are ‘additional,’ i.e. that cannot take place without the expected revenue from selling carbon credits. It is willing to negotiate income-sharing arrangements.

THE GIVING PLEDGE Many current and prospective grantors of trusts want to leave a positive mark on the world while also ensuring that their loved ones are cared for. This is the impetus behind the Giving Pledge that Bill and Melinda Gates and Warren Buffet founded in 2010. It is a collective effort by high-net-worth philanthropists to dedicate the majority of their wealth to charitable endeavours, either during their lifetimes or through their wills. To date, more than 240 individuals from 30 countries have taken this pledge.

SUSTAINABLE FINANCE ON THE RISE AMONG HNWS Meanwhile, interest in sustainability among global investors is on the rise, with a Morgan Stanley report revealing that 77 per cent of investors are keen on companies that prioritise ESG factors. Furthermore, a poll by FTAdviser indicates that more than half of investors are planning to increase their ESG investments in 2024. PwC, the accounting firm, has also done research that shows that ESG has become a critical factor for leading investors worldwide.

The Bahamas provides an ideal destination for such investments, having legislated in favour of sustainable finance at an early stage in the ESG story. Its rules on the subject are anchored in quantifiable, verifiable metrics that measure the environmental and social impact of plans and projects – an ideal basis of support for a burgeoning ESG marketplace. * Delphino Gilbert Cassar and Michael Clare can be reached on +1 (242) 676 8188.

The Bahamas: A Complete And Compelling Choice 2024

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Three Steps to Heaven - The Case of AB Capital Partners in The Bahamas *by Dwayne Whylly and Lakera Russell, a partner and senior associate at Glinton Sweeting O’Brien

The Bahamas has long been recognized as a leading international financial centre, boasting a well-established and comprehensive financial ecosystem which provides bespoke solutions that are tailored to the unique needs and preferences of a broad range of clients. This article looks at this ecosystem by exploring the journey of AB Capital Partners as it achieved its strategic goals by using the diverse kaleidoscope of financial products and services available in The Bahamas.

THE SEARCH FOR A FUND DOMICILE

Step 2: Licensing and Registration

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With the incorporation of ABC Bahamas completed, AB Capital proceeded to secure the necessary licences to manage the fund’s assets.

B Capital is a leading global investment firm headquartered in New York. It specialises in asset management and wealth advisory services. With a diverse portfolio of alternative investments and a presence in major financial hubs all over North America, Europe and Asia, it manages more than US$100 billion in assets for institutional and high-net-worth clients.

“AB Capital identified The Bahamas as the ideal jurisdiction.”

AB Capital was approached by one of its largest clients, which was interested in launching a mixed-asset investment fund consisting of both securities and digital assets. AB Capital identified The Bahamas as the ideal jurisdiction in which to facilitate the launch, administration and management of that fund, not only because of its flexible SMART (Specific Mandate Alternative Regulatory Test) Funds regime and reputation as a leader in the regulation of digital assets, but also because of its strategic location, its robust legal and regulatory framework and the overall sophistication of its financial-services sector.

Step 1: The Incorporation of a Bahamian Subsidiary AB Capital incorporated a subsidiary as an international business company or IBC to serve as its primary vehicle for operations in The Bahamas. The structure of the IBC (ABC Bahamas) was chosen due to its ease of incorporation, cost-effectiveness and flexibility – in particular its ability to operate across borders, which made it ideal for AB Capital.

CAPITAL-MARKET BUSINESS LICENCES The management of securities in, or from within, The Bahamas requires licensing by the Securities Commission of The Bahamas (the SCB) in accordance with the Securities Industry Act 2024, as it constitutes the conduct of capital-market business. The SIA, which has come into force recently, has not only modernised the regulatory framework; it also upholds international standards and helps the market develop.

All of this underscores The Bahamas’ status as a leading jurisdiction for securities and capital markets.

The SIA provides for the licensing of various activities, which include dealing in capital-market instruments, arranging deals in capitalmarket instruments, managing capital-market instruments and advising on capital-market instruments. A firm may receive a licence in one or all of those categories, allowing it to expand its service offering or to adjust its operations to cope with changes in market conditions. ABC Bahamas opted to be licensed in the categories of managing capitalmarket instruments and advising on capital-market instruments.

DIGITAL-ASSET BUSINESS LICENCES Similarly, the management of digital assets in, or from within, The Bahamas constitutes digital-asset business and requires licensing by the SCB in accordance with the Digital Assets and Registered Exchanges

The Bahamas: A Complete And Compelling Choice 2024

(DARE) Act 2024, which also came into force recently. DARE introduces enhanced ongoing regulatory requirements for digital-asset business and registered exchanges. It solidifies the position of The Bahamas as a leader in digital-asset regulation.

Since ABC Bahamas had already applied for licences under the SIA, the SCB was able to streamline ABC Bahamas’ application for a licence under DARE, as afforded by the legislation. ABC Bahamas received its licences to advise on and manage digital assets.

FUND ADMINISTRATORS An investment-fund established in accordance with the Investment Funds Act 2019, unless it is self-administered, is required to appoint an investment-fund administrator that is licensed under the IFA or is established and operating in accordance with the laws of a prescribed jurisdiction. As the United States, where AB Capital is regulated, is a prescribed jurisdiction under the IFA, AB Capital is able to act as administrator of the fund without further registration.

“DARE solidifies the position of The Bahamas as a leader in digital-asset regulation.”

REGULATORY OBLIGATIONS As an entity regulated in accordance with the SIA and DARE, ABC Bahamas is required to have at least two directors, a chief executive officer, a compliance officer and a money laundering reporting officer.

Such officers must be based in The Bahamas, using a physical office maintained by ABC Bahamas. To comply with its obligation to maintain a physical presence in the islands, ABC Bahamas tapped into The Bahamas’ highly skilled workforce and recruited a team of professionals to fill the key positions. The availability of skilled professionals with a deep knowledge of The Bahamas’ regulatory regime enabled ABC Bahamas to not only comply with local requirements, but also to maintain its global standards of operation.

Step 3: Launching the Fund With both licences secured, ABC Bahamas proceeded to launch the fund under The Bahamas’ innovative investment funds regime. The IFA governs the licensing and regulation of investment funds and related parties.

ABC Bahamas was required, in the first instance, to establish the fund by forming the underlying legal vehicle. The IFA permits the establishment of an investment fund as a company (i.e. an IBC), a partnership, a unit trust or an investment condominium. ABC Bahamas opted for the IBC, which is the most commonly-used vehicle.

After incorporation, ABC Bahamas explored the different classes of investment funds recognised under the IFA. It could have had a standard fund, which can be marketed publicly, or a professional fund, which

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caters specifically to sophisticated investors (such as high-net-worth individuals and institutional investors) who meet certain criteria under the IFA. AB Capital decided to go with a SMART fund, which offers flexibility and customisation and narrowed its options to the SMART Fund, models 002 and 007. The SFM 2 and SFM 7, as they are known, share many of the same characteristics, such as a requirement for an offering memorandum or term sheet, a minimum of two directors on the board (neither of whom need to be resident in The Bahamas) and the need for an independent custodian (unless the investments are of such a type that they do not have to be held in custody).

Neither model of fund is required to appoint an independent investment-fund administrator. Both may be licensed by a Bahamianlicensed unrestricted investment-fund administrator or by the SCB within three days of the submission of the application.

“Bahamian SMART Funds offer flexibility and customisation.”

ABC Bahamas decided to license and launch the fund as an SFM 7. This decision was driven by the diverse investment strategy which would accommodate the mixed asset classes and the ability to appoint AB Capital as a foreign administrator of the fund, with ABC Bahamas as the fund’s investment manager, capable of managing both the securities and the digital assets of the fund. As an SFM 7, the fund is limited to fifty investors and the initial minimum investment per investor is US$500,000 (or equivalent).

A GOOD STRATEGIC MOVE AB Capital’s expansion into The Bahamas was a good strategic move that had a significant impact on its global operations. By using The Bahamas’ robust regulatory regime, its highly-skilled workforce and its innovative financial services and products, AB Capital was able to launch the fund successfully and strengthen ties with one its largest clients. ABC Bahamas was, thereafter, able to create similar fund structures for additional clients. This has enhanced its overall product and service offering and has made it more competitive.

The case of AB Capital is proof that The Bahamas is a dynamic and vibrant financial hub. As the global financial landscape continues to evolve, the jurisdiction is well placed to attract international businesses and investors while adding something of its own to the evolutionary process along the way. * Dwayne Whylly can be reached on (242) 397-9050 or at dwhylly@gsolegal.com; Lakera Russell can be reached on (242) 328-3500 or at lrussell@gsolegal.com

WARNER & SPENCER

MAINTAINING INTEGRITY

As a globally trusted regulatory authority, the Insurance Commission of The Bahamas upholds a world-class insurance regulation standard, reinforcing The Bahamas as a premier jurisdiction for insurance solutions. Our commitment to transparency, compliance, and innovation empowers insurers, insurance professionals, and other financial service experts to confidently navigate a constantly evolving global market.

DOMESTIC INSURANCE COMPANIES CAPTIVE INSURANCE COMPANIES INSURANCE INNOVATION

AGILE | RESILIENT | SOUND

FOLLOW US Poinciana House, 31A East Bay Street - P.O. Box N-4844 Nassau, New Providence - The Bahamas Tel: (242) 603-4183 - Email: info@icb.gov.bs - Website: www.icb.gov.bs @INSURANCECOMMISSIONBAH

The Bahamas: A Complete And Compelling Choice 2024

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A Tower of Strength in the Insurance Sector: The Role of the Insurance Commission of The Bahamas *By Dana Munnings-Gray Superintendent of Insurance, Insurance Commission of the Bahamas

As the regulator of the insurance sector in The Bahamas, the Insurance Commission of The Bahamas (ICB) is proud to affirm our commitment to upholding world-class insurance regulation standards. The ICB is recognised globally as a trusted regulatory authority, reinforcing our jurisdiction as a premier destination for insurance solutions. Our dedication to transparency, compliance and innovation empowers insurers, insurance professionals and other financial-service experts to navigate an increasingly complex global market confidently.

LEGISLATIVE REFORMS TO STRENGTHEN THE INSURANCE INDUSTRY In our continuous pursuit of excellence, the ICB is undertaking significant legislative reforms to strengthen the insurance industry. These reforms are designed to enhance consumer protection, improve transparency and promote competitive practices in the market. By aligning our regulatory framework with international best practices, we are safeguarding our stakeholders’ interests and ensuring that our insurance sector will remain resilient in the face of evolving challenges.

“Effective risk management is not merely about prediction.”

One of the critical aspects of these reforms involves the integration of robust Anti-Money Laundering (AML) measures. The ICB is committed to fostering an environment that supports practical risk assessment and compliance with AML regulations. In 2018, the Financial Transactions Reporting Act introduced general insurers to the AML regulatory framework, signalling to the insurance sector the importance of complying with international standards. This marked a pivotal step for the industry, underscoring the need for a proactive approach to anti-money laundering practices. This change necessitates a comprehensive understanding of the sector’s risks and compels the ICB and insurance companies alike to identify, assess and manage the industry’s inherent and residual risks.

In this context, it is essential to recognise that effective risk management is not merely about prediction but also involves proactive measures that ward off dangers. The words of Richard S. Fuld, Jr. resonate profoundly: “The key to risk management is never putting yourself in a position where you cannot live to fight another day.”

This philosophy fuels our commitment to building a resilient insurance market – one that not only endures the challenges and pressures inherent in regulatory oversight but also adapts and thrives in the face of change. It is this guiding principle that empowers us to create a stable, reliable framework for the industry and the communities we serve.

THE ROLE OF THE ICB IN ENFORCING AML REGULATIONS The ICB is dedicated to enforcing AML regulations and building frameworks that promote practical, effective risk assessment. Compliance is not merely a “tick-box” activity; it is a vital culture that begins with the regulator and extends throughout the industry. We understand that compliance demands continuous attention and oversight.

The ICB has taken significant steps to address compliance challenges by fortifying its first line of defence: insurance salespersons. In December 2023, we launched our first-ever Salespersons’ Refresher Training Seminar, a ground-breaking effort designed to reinforce salespersons’ responsibilities to policyholders while deepening their understanding of AML requirements. This inaugural training session, held in partnership with the Financial Intelligence Unit (FIU), attracted around 500 industry stakeholders.

“Compliance is not merely a tick-box activity; it is a vital culture.”

In addition, key AML/CFT obligations have been integrated into our updated Salesperson Examination Handbook to ensure that these essential topics are covered in examination questions. Through this focus on education and training, we are building a knowledgeable workforce equipped to prevent and combat financial crime effectively.

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The Bahamas: A Complete And Compelling Choice 2024

COLLABORATION WITH INDUSTRY STAKEHOLDERS Recognising the importance of collaboration, the ICB has engaged with the insurance industry to assess Money Laundering and Terrorist Financing (ML/TF) risks and vulnerabilities. In partnership with AML Analytics, we implemented an online risk-based system for conducting AML/CFT risk assessments on our licensees. This initiative aims to gather insights and enhance our understanding of sectoral risks, thereby strengthening our regulatory framework.

Between May and August 2024, we achieved a remarkable 100% response rate from insurance companies and intermediaries who submitted risk assessments. This unprecedented engagement demonstrates the ICB’s – and the insurance industry’s – commitment to complying with high standards. We shared the results of these assessments during our bi-annual CEO Forums and the inaugural Compliance Blue Table Talk held in September 2024, where industry participants expressed a strong willingness to collaborate on compliance efforts.

Moving forward, our work will continue beyond assessing risks. We are dedicated to providing our licensees with the support they need to address vulnerabilities and implement effective mitigation measures.

During our engagement sessions, we emphasized the importance of compliance professionals, including compliance officers and money-laundering-reporting officers (MLROs), in maintaining the integrity of our regulatory framework. Their role as gatekeepers is crucial in safeguarding the industry and ensuring compliance with regulations.

A ROBUST REGULATORY FRAMEWORK THAT HELPS INNOVATION THRIVE The ICB’s robust regulatory framework is designed to enforce compliance and support innovation and technological advancements within the insurance sector. As we look to the future, we recognise the transformative potential of InsurTech and other emerging technologies. We aim to empower insurers to develop products and services that meet consumers’ evolving needs by fostering an environment conducive to innovation.

The growth of the insurance sector in The Bahamas has been notable, with gross premiums in the property and casualty sector reaching $535.4 million in 2023, a $56.3 million increase from the previous year.

Similarly, the long-term insurance sector experienced a 10% growth, driven by the introduction of affordable health insurance options.

This growth reflects the resilience of our industry and highlights the importance of continuous innovation in response to market demands.

In an era where climate change poses significant challenges, the insurance sector must evolve to address the unique risks we face. The Bahamas is no stranger to natural disasters and insurance has proven to be a vital lifeline for recovery and rebuilding efforts. By developing insurance products that are responsive to the risks posed by climate change, we can better protect our citizens and ensure the sustainability of our industry for generations to come.

THE FUTURE OF INSURANCE IN THE BAHAMAS AND THE REGION As we look towards the future, it is clear that the insurance industry is on the brink of transformation, both here in The Bahamas and all over the Caribbean. Today’s challenges will shape tomorrow’s innovations and our collective responsibility is to ensure that we are prepared for what lies ahead.

Digital transformation is no longer a futuristic goal; it is happening now. It is imperative for the insurance sector to embrace new technologies to stay competitive and meet the demands of modern consumers. By using artificial intelligence, blockchain and data analytics, it will streamline its operations and enhance its customers’ experiences.

Companies are increasingly using digital platforms to provide more accessible, user-friendly insurance products. We are committed to supporting the digital infrastructure and regulatory framework necessary for this shift, thereby ensuring that our industry remains agile and responsive to an evolving marketplace.

Climate resilience is also at the forefront of our planning for the future.

As a nation that is highly vulnerable to natural disasters, we must develop insurance products that respond to the risks that climate change poses. The Caribbean region is at a pivotal moment where the future of insurance depends on our ability to adapt to emerging trends and seize new opportunities. The Bahamas has always been a leader in financial services, and we are determined to maintain this position as we face the challenges ahead.

Our vision is to keep pace with global trends and become trendsetters, demonstrating what is possible through education, innovation and collaboration. The Caribbean is a unique market that faces distinct challenges but also has immense potential. By aligning our practices with clients’ needs and embracing new technologies and innovations, we will ensure a bright, resilient, and sustainable future for insurance in the region.

THE ROAD AHEAD The Insurance Commission of The Bahamas remains steadfast in its commitment to enhancing the insurance sector through legislative reforms, robust AML regulations and a supportive regulatory framework. As we traverse an increasingly complex global landscape, we shall continue to prioritise transparency, compliance and innovation.

The future of insurance in The Bahamas and the Caribbean depends on our collective ability to adapt to emerging challenges and seize new opportunities. By working collaboratively with industry stakeholders, we can ensure that our insurance practices take stock of the realities of our region and contribute to a resilient and sustainable future.

“100% of insurance companies and intermediaries submitted risk assessments.”

Together, we can build a stronger insurance sector that protects our citizens and supports the Bahamas’ broader economic stability. * For more information on the Insurance Commission of the Bahamas, please visit our website, www.icb.gov.bs, email us at info@icb.gov.bs, or connect with us on social media.

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In association with: BAHAMAS FINANCIAL SERVICES BOARD Montague Sterling Centre East Bay Street P.O. Box N-1764 Nassau, The Bahamas Telephone: (242) 393-7001 www.bfsb-bahamas.com

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