By C. E. HUGGINS, Business Editor

huggins@nasguard.com

Following the 2000 debacle when the financial services sector found itself blacklisted by bureaucrats hiding behind a forest of acronyms, the sector has been attempting to shed the burden of being considered no more than a mere haven for tax evaders by creating new products and establishing legislative regimes designed to encourage best practices.

Through the coordinated efforts of the Bahamas Financial Services Board, several pieces of legislation were enacted including amendments to the International Business Company Act; Segregated Accounts Companies Act; Data Protection Act; Computer Misuse; Electronic Communications and Transactions; the much heralded Foundations Act with its regulations and amendments; Financial Transactions and Reporting with its amendments and regulations; Purpose Trust; Trustee Amendments and the The Investment Funds Act (SMART Fund).

The regulatory regime - The Central Bank, Registrar of Insurance Companies, The Registrar General - was expanded to reflect the new realities, hence the Inspectorate of Financial and Corporate Services, the Compliance Commission of The Bahamas and the Financial Intelligence Unit.

Not withstanding all the effort, a body of opinion holds that the sector's underlying structure precludes the hoped for expansion and development driving the sector's efforts to become a major player.

Dr. Gilbert Morris notes that "back office is important but it is not financial services". It is the result of financial services, he said at a recent presentation at George Washington University.

But this was not always the case. A retired banker who was active in the financial sector between 1979 and 1989 said that although the majority of the 300 to 400 banks were primarily back office operations, there were about 30 to 40 banks in which Bahamians and non Bahamians alike traded and dealt in the foreign exchange and securities market.

"We had a foreign exchange club, which began in about 1980 or 1981, and had between 55 and 60 members", the banker said.

The club was in recognition of the fact that its members were actual traders and dealers finding the best "prices in the world" for their clients.

"We actually did deal rather than just cover trades," he said. "We did not have the advantage of London and New York of just pressing a button and placing the order with a broker but we spoke with brokers by phone and made the deals."

The banker noted that today the sector, from what he has been able to observe, is primarily back office operation with little or no trading.

"Today they merely place with a sister bank in the group," another former banker stated.

Dr. Morris observed that the current underlying "structure of the system" sees "financial services professionals becoming more and more certified to no real end".

He maintains that until "we grow up in our thinking and our self-discipline" we will be unable to "craft a financial services platform that attracts inward investment toward Bahamian security and debt instruments."

Although the effort by the BFSB, in tandem with the sector's stakeholders, is commendable, Dr. Morris is suggesting that the sector will be taken seriously only when it becomes proactive.

And this is a point forcibly made by tax expert Marshall Langer during his presentation on Wednesday at the BFSB's annual product development seminar.

Mr. Langer said that stakeholders as well as the relevant government agencies had to take the initiative and go forward to demand what the sector wanted.

"You can't wait for the French or the Germans to come with a list of demands [about the structure of your tax regime]," he said. "You have to go and find those countries you can negotiate with and also get them to agree to assist you, for instance, in being removed from the blacklists."