As we review the bright spots in the financial landscape we remain mindful of the tremendous challenges confronting international financial services providers and centres.

My Government has sought since coming to Office some eight years ago, to build on the foundation of an international financial services industry established in The Bahamas more than 50 years ago. Businesses locating in The Bahamas are attracted to our long tradition of political stability (over 270 years of uninterrupted Parliamentary democracy), an independent judiciary, social harmony and an open economy. Since 1992, we have placed special emphasis on developing and implementing responsible fiscal policies – reducing the rate in the increase of Government debt and balancing the national recurrent budget – policies conducive to business expansion. And, we have not tampered with our age-old taxation system which excludes personal income, corporate or estate taxes.

Our success has not gone unnoticed, neither by our competitors in the delivery of financial services nor by jurisdictions concerned that our centre could accommodate business capable of abuse by criminals and/or which could be attractive to individuals and entities whose accommodation by ourselves, has the effect of eroding their revenue base. Hence, we have the coordinated action by the FSF, FATF and OECD in reviewing the activities of what they term “offshore” financial centres, but which we prefer to call simply international financial centres. We believe that our financial services business is not dissimilar to that taking place daily in Zurich, New York, Miami, Toronto, London, Paris, Frankfurt, Madrid, or Tokyo

Our desire to “play in the big leagues” with the “big boys” requires that our laws, supervision and regulation of the financial services industry be of “big league” quality.

It has never been the intention or design of The Bahamas financial services sector to assist or accommodate crime and so to the extent to which identified weaknesses in our system may be used for criminal profit we are acting to amend legislation, to enhance regulation and supervision, and to expand international cooperation to counter the laundering of criminal or fraudulent money, to improve mutual legal assistance and to implement fully the Basel Committee Agreement on Bank Supervision, including making possible the cross-border supervision by banking regulators of foreign banks and trust companies with branches or subsidiaries operating in or from The Bahamas

Already legislative amendments have been enacted and entered into force as follows:

(1) amendment to the Money Laundering (Proceeds of Crime) Act, and

(2) the enactment of a new Evidence (Proceedings in other Jurisdictions) Act, replacing the Foreign Tribunals Evidence Act, 1856.

In addition, debate in the House of Assembly has concluded on new legislation to provide for the establishment of a new Financial Intelligence Unit and for a new Criminal Justice (International Cooperation) Act.

Yesterday, two additional pieces of financial services legislation were introduced in the House:

-The Central Bank of The Bahamas Act, 2000, and
-A new Banks and Trust Companies Regulation Act, 2000.

Still to come are further amendments and new legislation to provide for:

– a new Proceeds of Crime Act, 2000;
– a new International Business Companies Act, 2000;
– a new Financial Transactions Reporting Act, 2000; and
– a Mutual Legal Assistance (Amendment) Act, 2000.

We are satisfied that when this new legislative package enters into force later this year, coinciding with the expansion and strengthening of supervisory and regulatory human resources capacities in the Bank Supervision Unit of the Central Bank, The Bahamas will be in full compliance with the new international standards and practices for governing the international financial services sector.

My Government is satisfied, as are our various partners in the financial services sector, that these amendments and enhancement of rules and practices governing the sector, are properly crafted to meet the concerns of the various international agencies which have included The Bahamas on lists as a result of identified weaknesses in our systems and processes as regards money laundering, and international financial regulation.

As regard the “harmful tax competition” initiative of the OECD, my Government has indicated its willingness to cooperate internationally to combat criminal tax crime – that is, tax fraud. It is not the intention of The Bahamas to permit fraudsters to use our banking system to criminally defraud their home countries of their legally required tax obligations.

However, I must also say that tax issues are complex. The laws of The Bahamas, much as the laws of the United Kingdom, other members of the European Union, the United States of America and the vast majority of OECD member states, permit and provide for tax planning so as to minimize tax liability. We have no intention to legislate against tax planning in The Bahamas. Nor do we propose, in any fashion, to derogate from the principle of banking confidentiality which is the hallmark of the industry in our tradition, a tradition shared with Switzerland, the United States of America and the United Kingdom.

As regards international cooperation on fiscal matters, I wish to reiterate that The Bahamas is quite rightly opposed to acting in any way so as to place our financial services jurisdiction at an uncompetitive disadvantage vis-a-vis financial centres in OECD countries. And so, The Bahamas is agreed to pursue cooperation in fiscal matters to the extent that such cooperation is agreed and implemented between the member countries of the OECD. Separate and apart from this, and taking into account the unique relationship between The Bahamas and the United States of America, my Government has signaled and does expect to conclude a Tax Information Exchange Agreement with the United States of America, the terms of which will provide inter alia for reciprocity of assistance to The Bahamas and eligibility for The Bahamas’s tourism industry eligible to receive convention tax deduction benefits with respect to US corporate clients holding business meetings in Bahamian resorts.

(Extract from Prime Minister H.A. Ingraham’s Remarks on the Official Opening of New Premises for Banca del Gottardo, November 8, 2000)