Since 2001 international organisations such as the Financial Action Task Force (FATF) have pressured offshore financial centres like The Bahamas to pass legislation in order to increase transparency within their respective financial services sectors. On 20 December 2018 the Register of Beneficial Ownership Act 2018 came into effect in The Bahamas, following recommendations by the Organisation for Economic Cooperation and Development (OECD)(1) and the FATF.(2)
The Register of Beneficial Ownership Act seeks to create a private search registry containing details of beneficial owners of domestic and international companies in The Bahamas. According to the act, the Attorney General's Office will serve as the competent authority,(3) which will establish a secure search system that allows every registered agent to upload particulars of the beneficial ownership of legal entities over which they have responsibility.(4) The competent authority will appoint designated persons to access the search system. Only designated persons under the act will be allowed to access the search system, which they must do from a secured location.(5)
The search system will allow for the name of individuals or entities(6) to be searched and restrains designated persons from informing any other person of a search being conducted.(7) Designated persons will be permitted to conduct searches only on behalf of the Attorney General's Office, the Financial Intelligence Unit, the Central Bank of The Bahamas, the Compliance Commission, the Securities Commission and the Insurance Commission.(8) These bodies must produce a certification that their request for information is lawful and in compliance with their governing legislation or applicable international agreements.(9)
Registered agents must establish and maintain a database that is accessible by the secure search system and enter into said system particulars specified under the act.(10) The legislation requires all legal entities to notify their registered agent of changes in beneficial ownership or particulars specified under the act. The registered agent must then take steps to immediately make such changes in its database.(11) The retention period for information kept by registered agents is five years after:
- the dissolution of the legal entity;
- the legal entity ceasing to be a legal entity; or
- the registered agent ceasing to act for the legal entity.(12)
Nevertheless, not all legal entities must provide particulars of their beneficial ownership. There are several exempted persons under the act, such as:(13)
- investment condominiums under the Investment Condominium Act;
- legal entities registered under the Investment Funds Act;
- legal entities whose securities are listed on The Bahamas international securities exchange or any other regulated securities exchange;
- legal entities which are a subsidiary of a legal entity that falls within the scope of the Investment Condominium Act and the Investment Funds Act; and
- any other legal entities that the minister may exempt by regulations.
Licensees under the act include registrants under:(15)
- the Bank and Trust Regulations Act;
- the Investment Funds Act;
- the Security Industry Act 2011;
- the Insurance Act; and
- the Financial and Corporate Service Providers Act.
Therefore, some level of anonymity can be maintained by investors with legitimate desires for anonymity.
The consequences for violating the act will result in fines of up to B$250,000, imprisonment of up to five years or both.(16) Any legal entity or registered agent has one year from the act coming into force to meet the legislation's requirements (ie, until 20 December 2019).(17)
It is unlikely that the implementation of a register of beneficial ownership will have a negative impact on clients doing business in The Bahamas as it will not be accessible to the public.(18) This differs substantially from its UK equivalent, which allows the public to access information relating to companies and partnerships.(19) The Bahamas must ensure that such information is not accessible to the public as this would undermine one of the key advantages of selecting The Bahamas as a financial services centre.
The Bahamas must ensure that it pays more than lip service when it comes to implementing a secure search system. It is notable that what constitutes a secured location is not defined under the act. The Bahamas was recently embarrassed by the Panama Papers, which leaked information from the Company Registry regarding shareholders, officers and directors of companies on the Internet.(20) If a similar event was to occur in relation to the registry of beneficial ownership, the consequences would be catastrophic to The Bahamas' standing as a leading offshore financial services centre and could potentially put lives at risk.
Further, the enforcement and monitoring of such a system is critical to ensure that the act's objectives are achieved. If there are no checks and balances, a legal entity could register an individual as a beneficial owner and subsequently change their beneficial ownership without updating the competent authority, even though that they are obliged to do so.(21)
The Bahamian registry of beneficial ownership has attracted some criticism suggesting that it violates attorney-client privilege and confidentiality. It remains to be seen whether such criticism will result in any legal challenges.(22)
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