BFSB Chairman Addresses
Bahamas Institute of Chartered Accountants
INTERNATIONAL BEST STANDARDS & PRACTICES
Good afternoon ladies and gentleman … and thank you for this opportunity to address you in my capacity as Chairman of the Bahamas Financial Services Board.
It would be an understatement to say that we, in the financial services industry, are living in interesting and challenging times.
There is no need, however, for me to review in detail the events that are causing us to examine and change some of the ways in which we must conduct business in the future.
OECD, FATF AND FSF initiatives and actions have predominated our thinking and discussions over the past six months.
We read about it daily in newspapers both locally and abroad.
Our clients want to talk to us about it.
Our lunch and dinner discussions inevitably turn to healthy debate about the changing world of international financial services and where the Bahamas now fits in.
Recently these discussions have turned to the issue of the need for international best standards and practices throughout our entire financial services industry.
I know I’m preaching to the converted here, since you already work in a professional service area that embraces this notion.
Rather I want to take this opportunity to enlist your support for broader acceptance of the need for an industry-wide and industry-driven, international best standards and practices program.
What I am talking about is self-oversight of the financial services industry.
This would complement the government’s legislative response, which in essence will codify international best standards and practices already being followed by international accountants and member banks of AIBT and the Clearing Banks Association. This is a natural addition to the AIBT code of conduct established and accepted now for many years.
Frankly it is my view that we must wholeheartedly embrace an international best standards and practices program. There is no other option if our industry is to compete, grow and flourish in a new, highly scrutinized international financial services industry, let alone survive.
Make no mistake about it … we and other offshore centres have been placed under a high-powered microscope.
Every action that we take or don’t take is being noted.
Any sign that we intend to cling to some of the ways of the past will inhibit our ability to go forward in the future.
We have reached a new set of crossroads in our industry.
Government is doing its part through the announced legislative initiatives that will strengthen the Bahamas financial sector.
BFSB, AIBT and the Clearing Banks’ Association are on record as stating that they support and encourage the efforts and plans of government, so long as these are consistent with those being implemented and adopted by all of our major competitors, and all of the so-called onshore jurisdictions.
As an industry, however, we must also demonstrate an equally determined, thoughtful and all encompassing program of initiatives and actions that will ensure that we emerge as a stronger, forward-thinking and even more professionally-sound jurisdiction.
In this regard, BFSB is making a deliberate effort to ensure international best standards and practices are applied throughout the entire financial services sector.
Let me explain.
In July, BFSB established a Strategic Development Committee to formulate a private sector plan for the continued development of The Bahamas’ financial services industry. One of its aims is to act as an efficient and effective conduit on behalf of the industry.
The Committee has had several meetings with government and is providing ongoing industry recommendations on proposed legislation.
What has also become very evident in the course of the Committee’s deliberations is the clear need for effective, far-reaching, self-oversight of the industry.
In a report delivered at the annual general meeting of BFSB in early October the Committee said “…in a more formal way than before, the financial services industry and each constituent part must provide a system of attentiveness to the maintenance of best practices.
“It is good for our reputation, good for the country, good for business and the right direction to go. With the representative associations of constituent parts of the industry, the Committee will explore ways of achieving this.”
Yesterday afternoon BFSB’s Board of Directors met to consider, and thereafter adopted, a recommendation from the Strategic Development Committee for the establishment of the Best Standards and Practices Committee and thereby for the self-oversight of the financial services industry.
Its mission will be to promote and encourage adherence by members of BFSB to best international standards and practices generally, and, in particular, in relation to KYC and counter money laundering systems, procedures and practices, being adopted world-wide. The Committee embraces all sectors of the industry and comprises a representative from each of the principal professional bodies, together with some respected individuals.
The Committee will also seek to identify a policy of consequences where a member fails to remedy deficiencies in standards and practices.
The standards ultimately adopted will be the output of all key sectors of the financial services industry. They will speak volumes about who we are and intend to be as an international centre.
Given the size and scope of our financial services industry, there may be some that view the actions being proposed by government and the private sector as a sign that ” we are selling out”.
Nothing could be further from the truth.
The purpose of the standards is not to drive people out of business, but to keep them in business.
The many individuals and organizations who have been involved in developing industry positions and recommendations such as the Standards and Practices Committee are firmly committed to the ongoing success, independence and prosperity of our entire industry.
These and other initiatives that will likely come forward will make us better equipped as individual organizations and as an industry and nation as a whole to deal with the new international realities of financial service planning, administration and management.
Over the past few weeks a number of people have asked whether we in the Bahamas can have a viable industry going forward, in view of the fact that we will have to retain, develop and attract business in a changed environment.
This is a natural reaction as most people fear change, let alone the unknown. But out of threats come opportunities provided you have the right mind set.
I read an interesting quote the other day: “..there is little difference in people; the little difference is attitude. The big difference is whether it is positive or negative.”
Well, looking at these challenges which face us, with a positive attitude, here are some thoughts on how we can develop a set of strategic advantages and thereby continue the success of our industry:
We can still stress our tax neutrality.
We must have excellent standards and individuals and institutions who project them.
We must have good world-class levels of service in all areas of our business. Do not forget that ultimately we are only as good as our weakest link. We must not let any element, which contributes to our industry, let us down.
We must have world-class communications.
We must project our country as an attractive and ideal location for a second home and for residency. In this way we encourage people to legitimately “follow their money”. It must be a safe and pleasant place to live.
We must attract, hire, develop and retain world class professionals with the skill sets required to develop the business we need to attract.
For instance one seasoned international practicing professional from London put it to us just the other day that we must go after the big, clean new money being handled by such organisations as Goldman Sachs and Merrill Lynch, to name just two.
This will require our having experts in tax law and accounting to develop new effective structures and arbitrage vehicles.
On the basis that we succeed in establishing the above as our set of strategic advantages we can attract business.
Two segments very worthy of consideration are firstly the so-called techno nomads who move around the world many with mobile residences, but with substantial pools of wealth.
Secondly, in the next twenty five years the baby boomers, a huge segment of the world’s population born between 1946 and 1960, will start to die (not an attractive thought I am a part of that group!) The world will then experience the largest transition of wealth from one generation to the next which it has ever seen.
There has to be lots of opportunities here for the innovative thinkers in our industry.
I read recently an interesting and, i think, extremely relevant statement by Charles Darwin in his famous treatise “the origin of the species” and i quote “it is not the strongest nor the most intelligent of the species which will survive. It is the ones who are most adaptable to change”.
Yes there are and will be dissenters. In a democratic society such as ours there should be open and constructive dialogue on matters of this importance.
But let us not be sidetracked by debate whose sole purpose is narrow self interest.
Let us not be fooled by their intent.
We have a vibrant industry, well poised to meet the business and competitive challenges of the future. If we are serious in our desire to be a long term player in the financial services market our reputation is paramount. However, never forget that reputation and confidence take years to gain, but can be lost in an instant.
Meaningful industry self-oversight will force all of us to perform to a level that will help ensure our collective success.
Some will not be prepared to meet these standards.
So be it.
Our future rests with those who do.
November 9, 2000