By
Peter D. Maynard[1]
The Act, as amended by the Financial and Corporate Service Providers (Amendment) Act 2001, imposes a new requirement that all corporate and financial service providers must be licenced.
A licence may be approved or denied. That is an extraordinary provision, because lawyers and others, who have hitherto provided such service without a licence and are governed by the respective legislation for their professions, may find their livelihood in jeopardy.
The Act focuses on the regulations of corporate services in relation to international business companies and exempted limited partnerships. Other financial services are regulated by other right legislation, such as friendly societies, banks, companies, mutual funds, and insurance. Accordingly, the term “financial services” in the section 2 (a) is unclear in its scope. This provision should be retracted.
Mutual funds increasingly provide for daily settlement. A slow and cumbersome administrative framework in the Bahamas is what seriously jeopardizes the growth of mutual fund business. The Act requires a licensee to obtain two references and to keep a record of the beneficial owners under Sections 14 (2) (b) and 14 (3), except for the bodies exempt in Section 14(4). Frequently, institutional shareholders in mutual funds are bound to confidentiality in relation to their customers. With a cumbersome administrative procedure, the Bahamas will be at a considerable disadvantage compared to competitor jurisdictions.
Therefore, the Act should be amended to permit shareholder verification by a written confirmation of a financial institution, which may be in the Bahamas or on a list of approved countries. Then, there would be a prompt satisfaction that the beneficial owner has been verified and that due diligence has been conducted.
It is noteworthy that on the Section 20, banks and trust companies are exempt from the Act. This promotes a dual and inconsistent approach to know your customer regime. The compliance measures for licensees in Part V are unique to our legislation. Banks and trust companies would be exempt from maintaining the name and address of beneficial owners as set out in Section 14 (2) and (3). Part V should apply to banks and trust companies as well.
Regarding compliance measures, Section 14 sets out the information to be obtained prior to providing services to a customer, namely the principal place of business, business address, telephone, fax, telex numbers, and, in addition, the electronic address of the principals or professionals concerned with the client. An understanding of this provision is not helped by the use of vague words and expressions. Is the principal the beneficial owner, a director, or some other person? What are the precise limits of being “concerned with the client”, and which persons are included and which are not?
Moreover, Section 14 (2) requires certain information from the client, the principals and professionals, while Section 14 (3) calls for certain information from the beneficial owner. It should be satisfactory to require the same comprehensive information from all parties.
Section 2 (d) appears to capture individuals who act as directors in one or two IBCs.
The fee structure should be carefully considered. Law firms presently pay business license fees based on turnover or volume of business, while mutual fund administrators pay a yearly license fee.
[1]Counsel and Attorney at Law, specializing in commercial law, company law, trusts, banking, and civil and criminal litigation. President of the Bahamas Bar Association and President of the Organization of Commonwealth Caribbean Bar Associations. Admitted to practice law in 1979 in England, Wales and The Bahamas; and in 1986 in St. Lucia, St. Vincent and the Grenadines, Antigua and Barbuda and Trinidad and Tobago, in 1996, pro hac vice in the Turks and Caicos Islands. Education: McGill University (B.A., Hons.); Johns Hopkins University (M.A., Ph.D.); Cambridge University (LL.M.); Sorbonne University (1996); Cornell University (1968). Member os the Hon. Society of Gray’s Inn. Former posts: Legal Adviser, Bahamas Ministry of Foreign Affairs; Economics Affairs Officer, United Nations; and Acting Stipendiary and Circuit Magistrate. Contributing Editor, Journal of Financial Crime, Journal of Money Laundering Control, Amicus Curiae, International Journal of Banking Regulation, Company Lawyer and Caribbean Law and Business. PETER D. MAYNARD & CO., Chambers, Jehovah Jireh House, Bay & Deveaux Streets, P.O. Box N-1000, Nassau, Bahamas, telephone: (242) 325-5335 , fax: (242) 325-5411, email: peter.maynard@maynardlaw.com
