The Bahamas will be actively seeking more ways to exploit the trend of high-net-worth individuals (HNWIs) plowing hundreds of thousands -- in some cases millions -- of dollars into jurisdictions in order to qualify for "economic residency", according to Financial Services Minister Hope Strachan, who confirmed the thrust during her opening remarks at the Nassau Conference 2015.
The conference was sponsored by the Association of International Banks and Trust Companies in The Bahamas (AIBT) under the theme "Strengthening our competitiveness - Securing opportunities for the next decade".
Strachan spoke to a broad panoply of issues relating to the financial services sector, including the fact that intense competition has spawned a new trend of products tailor-made for HNWIs and ultra-high-net-worth individuals (UHNWIs) who have what the minister called "the advantage of choice of jurisdiction for residency and, in some cases, citizenship".
"The economic impact that initiatives tied to immigration through residency can have on an economy have been proven and there are positive examples globally of the success of such programs; the U.K., Canada, Singapore and Malta come to mind. These products can be tied to investments, home ownership, business ownership or investment, education, infrastructure, commodities or even corporate social responsibility.
"My ministry has studied models to determine the feasibility of such a policy and will actively engage our partners in consultation in short order We must ensure that we are giving ourselves the best opportunity to compete in this arena while guarding against reputational risks in every respect," she said.
The golden visa
Such programs -- often called "golden visa" schemes -- are offered by a number of countries as a means of foreign direct investment. These programs are not automatic guarantees of citizenship, and some are tied to a minimum stay. One of the most frequently cited is the Portuguese golden visa scheme, which enables non-European Union individuals to obtain the right to reside in Portugal and the right to travel within the Schengen Zone for a period of five years.
In this case, the arrangement can lead to permanent residence after five years and then to Portuguese citizenship and the right to a Portuguese passport at the end of the sixth year of being classified as resident in Portugal. In order to qualify for a golden visa, an individual must meet and maintain, for at least five years, one of three investment options: Investment of at least EUR1 million in Portugal (deposit in a bank account, or shares or quotas in a company or companies); acquisition of real estate with a value of at least EUR500,000 and the creation of at least 10 jobs (temporary work contracts are eligible and the worker does not have to live in Portugal as long as social security is paid there).
The minimum stay requirement is only seven days in the first year and fourteen days in the subsequent two-year periods. It is therefore possible to benefit from this scheme without becoming tax resident in Portugal.
The advantage The Bahamas would have is that Bahamian citizenship or permanent residency with the right of return would give the economic citizen access to whatever the rights are that are afforded to the holder of a Bahamian passport, which means ease of travel not only to Schengen Europe but also U.K., Ireland, Canada and the U.S.
The Bahamas already offers accelerated consideration of permanent residence application to major international investors and owners of residences valued at B$500,000 or more. Should the investment in The Bahamas or residence be valued at B$1.5 million or more, a response from the Immigration Department is guaranteed within 21 days of submission of a complete application.
The pitfall
While the programs remain popular, they are not without risk. For instance, Portuguese officials in July 2015 said the granting of "golden visas" for foreign investors had been frozen following a scandal surrounding the issuing of the residence permits and new legislation. The attendant investigation led to the decision by Portuguese prosecutors, who said they planned to charge former Interior Minister Miguel Macedo for his role in a money laundering scandal involving the golden visas that also implicated the former head of border police. Later in July, the program was reinstated, but the suspension exposed some serious potential flaws in the system.
Still, Portugal counted 2,420 such visas issued by the end of June 2015, which had brought EUR1.46 billion of investment into the country.
And Joan Muller, writing in South Africa's "Financial Mail", noted that the advent of more intermediaries trying to lure people into residency and citizenship schemes requires investors to adopt some caution. Experts say prospective investors should know exactly who they are dealing with and what they are paying for. Investors are not always fully informed about the difference between a residency and a citizenship scheme.
Ease of doing business
Meanwhile, Strachan also reiterated that World Bank Group's Doing Business 2015 data ranked The Bahamas 89th, well below the regional average for ease of doing business of 60.66.
"It is no secret that there is much room for improvement when it comes to facilitating the ease of doing business in The Bahamas. Comparatively, businesses and governments across the Caribbean and Latin American region are positioning themselves to be competitive and best in class while The Bahamas appears to be stagnant and/or falling behind.
"Areas have been identified for reform to improve the ease of doing business in The Bahamas," she said, citing the technological upgrading of the Registrar General's Department and the restructuring of the Bahamas Electricity Corporation to increase its efficiency.
"On a more practical level, it simply takes too long to get things done, from work permits, business licenses, the list goes on. These peripheral matters do have an effect on our industry. We must do better."
Restructuring for monitoring
Strachan reported that her ministry is being structured and staffed to monitor developments in the sector both regionally and globally.
"Monitoring market developments assists us in proactively addressing and adjusting to market changes that impact our industry. The objective is to allow us to adjust policies, steer the creation and amendment of legislation, for creativity and compliance and to keep pace with the fluid, ever changing environment that is today's financial services industry.
"To a great extent, the global regulatory initiatives of recent times dictated a shift in focus from creativity and innovation in market and products to creating and innovating legislation for compliance, regulating compliance, training for compliance and executing compliance. To an extent we are now playing catch up. There is a critical need now to be ambidextrous, juggling many obligations all at once.
"There is a need to be well-regulated and compliant, resilient and responsive, creative and innovative, and competitive all at the same time," Strachan said.
She noted that a "true and sincere partnership between the government and the private sector" is necessary to see this accomplished.
"Collaboration between these agencies is therefore crucial. It ensures transparency, creates an environment that fosters confidence and minimizes the occurrence of costly errors. This is a rational approach which allows challenges as well as opportunities to be more easily identified making for a strong and sustainable financial services industry," she said.
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