The Bahamas is on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 21 February 2020
In October 2018, The Bahamas made a high-level political commitment to work with the FATF and CFATF to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies. The FATF has made the initial determination that The Bahamas has substantially completed its action plan and warrants an on-site assessment to verify that the implementation of The Bahamas’ AML/CFT reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future. Specifically, the Bahamas has made the following key reforms: (1) developing a comprehensive electronic case management system for international cooperation; (2) demonstrating risk-based supervision of non-bank financial institutions; (3) ensuring the timely access to adequate, accurate and current basic and beneficial ownership information; (4) increasing the quality of the FIU’s products to assist LEAs in the pursuance of ML/TF investigations, specifically complex ML/TF and stand-alone ML investigations; (5) demonstrating that authorities are investigating and prosecuting all types of money laundering, including complex ML cases, stand-alone money laundering, and cases involving proceeds of foreign offences; (6) demonstrating that confiscation proceedings are initiated and concluded for all types of ML cases; and (7) addressing gaps in the TF and PF TFS frameworks and demonstrating implementation.
Compliance with FATF Recommendations
The last follow-up to the Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in The Bahamas was undertaken (FATF) in 2018. According to that Evaluation, The Bahamas was deemed Compliant for 13 and Largely Compliant for 17 of the FATF 40 + 9 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 of the Effectiveness & Technical Compliance ratings.
US Department of State Money Laundering assessment (INCSR)
Bahamas is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.
The Bahamas remains a transit point for trafficking in illegal drugs, firearms, and persons to and from the United States. As an international financial center, the country is vulnerable to money laundering in various sectors, such as financial services, real estate, casino gambling, and online gaming. Although The Bahamas has taken significant steps toward strengthening its AML regime, potential vulnerabilities in the online gaming and money transfer business sectors are further exacerbated by certain regulators’ reluctance to acknowledge them.
EU Tax Blacklist
The Bahamas was removed from the EU Tax Blacklist on 25 May 2018
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 64
World Governance Indicator – Control of Corruption 83
The Bahamas is one of the wealthiest Caribbean countries with an economy heavily dependent on tourism and offshore banking. Tourism together with tourism-driven construction and manufacturing accounts for approximately 60% of GDP and directly or indirectly employs half of the archipelago's labor force. Financial services constitute the second-most important sector of the Bahamian economy and, when combined with business services, account for about 35% of GDP. Manufacturing and agriculture combined contribute less than one 10th of GDP and show little growth, despite government incentives aimed at those sectors. The economy of The Bahamas shrank at an average pace of 0.8% annually between 2007 and 2011, and tourism, financial services, and construction - pillars of the national economy - remain subdued. Conditions are improving in the tourism sector, however, due to steady foreign investment led activity. New resort and marina developments are likely to provide sustained employment opportunities.
Agriculture - products:
citrus, vegetables; poultry
tourism, banking, oil bunkering, maritime industries, transshipment, salt, rum, aragonite, pharmaceuticals
Exports - commodities:
crawfish, aragonite, crude salt, polystyrene products
Exports - partners:
Poland 26.3%, Cote dIvoire 20.9%, US 15.9%, Dominican Republic 14.3% (2015)
Imports - commodities:
machinery and transport equipment, manufactures, chemicals, mineral fuels; food and live animals
Imports - partners:
US 22.3%, China 14.8%, Japan 9.5%, Poland 7.7%, South Korea 7.3%, Colombia 6.8%, Brazil 5.6%, Singapore 5.5% (2015)
The Bahamas maintains a stable environment for investment and demonstrates a long tradition of parliamentary democracy, respect for the rule of law and a well-developed legal system, and security of life and personal property. U.S. companies find that The Bahamas' proximity to the United States, common English language, and the exposure to U.S. media and culture contribute to Bahamian consumers having general familiarity and positive attitudes towards U.S. goods and services. The Bahamas conducts approximately 85% of its international trade with the United States.
The Bahamian economy remains heavily dependent on tourism and financial services, although the government has made efforts to encourage diversification, particularly in agriculture and light manufacturing. The Bahamas relies primarily on imports from the United States to satisfy its food needs for local and tourist consumption. More than six million tourists visit the country annually.
In the financial services sector, The Bahamas is experiencing growth in investment funds and has seen significant increases in investments from Brazil in particular. According to the Bahamas Securities Commission, the increase is due to the development and approval of SMART Funds -- risk-adjusted, low-cost investment structures.
The Bahamas Investment Authority actively promotes The Bahamas' liberal tax environment and freedom from many types of taxes, including capital gains, inheritance, and corporate or personal income taxes. The Bahamas continues to attract significant foreign direct investment (FDI) from various parts of the world. These investments are primarily in the tourism sector and range from multi-billion dollar resort developments to millon dollar homes on the major islands of the archipelago.
The major challenges to investment in the country include the relatively high cost and uncertain reliability of electricity, high unemployment combined with a limited pool of skilled labor, cumbersome and sometimes opaque administrative requirements, and an escalating crime rate. In addition, certain sectors of the economy are reserved under the National Investment Policy for Bahamian only investment.
U.S. and Bahamian companies alike report that the resolution of business disputes often takes years, and collection of amounts due can be difficult even after court judgments. Companies also report that the approval process for foreign direct investments and work permits can be cumbersome and time-consuming. The government of the Commonwealth of The Bahamas (GCOB or the Government) asserts that the majority of foreign investment applications are processed quickly and without significant issues. Applications that are subject to more extensive review, or those that do not fall within the National Investment Policy, may take longer to approve given the Government’s desire to balance local versus foreign investment interests. Some U.S. and Bahamian companies also complain that the tender process for public contracts is not consistent and that it is difficult to obtain information on the status of bids. GCOB officials have told the Embassy that the Government is preparing legislation to address concerns related to its investment policy and Public Procurement Regime.
On January 1, 2015, the Government introduced a 7.5% Value Added Tax (VAT) on most goods and services, a measure designed to strengthen the fiscal balance sheet. Implementation of the tax and other fiscal measures including efforts to enhance revenue administration has yielded positive results and the Government has reduced its deficit from $539M three years ago to $141M in this fiscal year (2016). The Government continues its efforts to develop a central revenue agency and modernize its fiscal administration.
In March 2016, Moody’s Investor Service confirmed The Bahamas’ issuer and senior unsecured ratings at Baa2 with a stable outlook. (https://www.moodys.com) In its January 2016 report, Standard and Poor’s (S&P) (http://standardandpoors.com) affirmed the country as investment grade and maintained the sovereign credit rating at BBB-/A-3. (http://standardandpoors.com) In its April 15, 2016 update on The Bahamas, S&P continued its negative outlook but maintained the country’s investment grade credit rating.
With over a billion USD in new resort development committed and the potential for over 5,000 permanent jobs, the Bahamian government continues to assert that benefits from foreign investment-led activities are imminent. The Bahamas Central Bank, in its January-June 2015 Financial Stability report estimated the 2015 GDP growth rate at 1.2%.
The Bahamas remains the only country in the Western Hemisphere that is not a member of the World Trade Organization (WTO). The government has committed to accelerating its efforts to become a member and has taken steps to remove barriers to international trade and facilitate foreign trade and investment. In 2015, the Government enacted new and amended existing laws to provide enhanced protection of intellectual property rights. The new laws are comprehensive but have not been implemented and still require the approval of supporting regulations. While these are vital to economic growth, the government likely will face internal and external challenges to successfully implementing its plans to become more fully integrated into the the global trading system.
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