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. The 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 English Privy Council is the supreme legal authority in the jurisdiction
Paul Winder, Global Head of Wealth Planning, Deltec Bank & Trust Limited
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 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: The Fraudulent Dispositions Act.
- 1998: The Trustee Act.
- 2003: The Investment Funds Act.
- 2004: The Foundations Act and the Purpose Trust Act.
- 2007: 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.
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
Paul Winder, Global Head of Wealth Planning, Deltec Bank & Trust Limited
Central to trusts, foundations and dedicated offices are three uniquely Bahamian assets: SMART Funds, ICON Foundations and Bahamas Executive Entities.
Read The Full Article
The Bahamas Financial Services Board has set out developments in the Caribbean jurisdiction in a two-part series, entitled The Bahamas: A Complete and Compelling Choice, which can found on the Family Wealth Report website.
Read the full article here – the first of the two publications – is produced in conjunction with WealthBriefing.
The publication includes commentaries about legal developments in the jurisdiction, such as moves to update 2020 digital assets legislation – the DARE Act (Digital Assets and Registered Exchanges Act), the ICON fund structure – designed for the Brazilian market; the Bahamas Executive Entity (BEE). It provides a trust with resolute organization and governance, and SMART funds, touching on the area of purpose trusts to help investors meet their objectives and risk limits.
WealthBriefing has interviewed a range of senior financial sector, central bank and regulatory figures from the jurisdiction, and a number of articles will appear soon.
