Bahamas’ Securities Sector Under Enhanced Monitoring Amid FATF Concerns
Background
The Bahamas Securities Commission has announced that it will be intensifying its monitoring of the country’s securities sector following a recent report by the Caribbean Financial Action Task Force (CFATF) highlighting several areas of concern.
CFATF Report and Recommendations
In 2017, the CFATF published a report identifying deficiencies in The Bahamas’ Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) regime. In response, The Bahamas committed to implementing and maintaining an effective AML/CFT framework.
Prioritized Areas for Examination
To address these concerns, the Securities Commission has prioritized several areas for examination in 2020:
* Desk-based thematic reviews and follow-up*
- By Q2 2020, the Commission will introduce desk-based thematic reviews as part of its supervisory toolkit.
- Examiners will prioritize high-risk licensees and registrants to ensure proper remediation in key areas.
* Risk management*
- The Commission will assess the effective implementation of self-risk assessment and client risk-rating frameworks for SIA/IFA/FCSP registrants/licensees.
- Ensuring that risk-mitigating efforts are effective and new or emerging areas of concern are properly identified and controlled.
Focus Areas
The Commission has also flagged tax evasion as a predicate offense for money laundering in The Bahamas, and examinations will focus on:
* Complex structuring that may confuse reporting responsibilities*
* Improper, inadequate, or non-existent tax reporting*
The Commission will test the robustness of the securities sector’s disaster recovery plans, focusing on:
* Wireless restoration
* Client access to data during downtime
* Data protection
Risk-Based Approach
These areas of priority are not exhaustive, and the nature and scope of any onsite examination will be determined by a risk-based approach that considers a licensee’s operations, products offered, financial position, and other risk factors.
Examination Program
The Risk Analytics and Examinations Department is responsible for conducting examinations of entities registered under:
* Securities Industry Act
* Investment Funds Act
* Financial and Corporate Service Providers Act
The Commission has identified over 160 registered firms, nearly 700 investment funds/fund administrators, and over 350 FCSPs as part of its examination program.
Expected Outcomes
The examination results will serve to enhance the Commission’s risk monitoring process, improve industry standards, identify and address areas of market misconduct, and protect investors in The Bahamas.