Financial Crime World

The Bahamas Tightens Its Regulatory Grip on Financial Institutions

Overview

The Bahamian government has introduced significant legislative updates aimed at strengthening its regulatory framework and combating tax evasion. These changes are expected to impact financial institutions operating in the country, requiring them to obtain a business license, meet economic substance obligations, and increase transparency.

Business Licensing Requirements

Effective July 1st, 2023, financial services entities must obtain a business license under the revised Business Licence Act 2023. This applies to:

  • Banks
  • Insurance companies
  • Fund managers
  • Leasing firms
  • Headquarters operations
  • Distribution centers
  • Shipping companies
  • Commercial users of intellectual property
  • Holding businesses

Economic Substance Obligations

To demonstrate genuine economic presence, corporate entities must meet the following requirements:

  • Direction and management: The business’s direction and management must be located in The Bahamas.
  • Adequate number of employees: An adequate number of full-time equivalent skilled employees must be physically present in The Bahamas.
  • Operating expenditure: Proper operating expenditure must be incurred in The Bahamas.
  • Suitable premises: Suitable premises and physical equipment must be maintained in The Bahamas.
  • Core income-generating activities: All core income-generating activities must be conducted in The Bahamas. If these activities are conducted by a third party, the entity’s management must be able to monitor and control them.

Declaration Requirements

Entities must hold an adequate number of board meetings in The Bahamas each year, ensuring that a quorum of the Board of Directors is physically present within The Bahamas for the board meetings. All records and minutes must be kept and maintained in The Bahamas.

Economic substance declarations must be filed by an entity’s Registered Agent (RA) in the portal within nine months of the financial year-end. Failure to comply will trigger warning notices and penalties.