Is the naked Bahamas, still a wealthy country? That is, without its golden, dream coat of foreign money and foreign direct investments, is this small island nation, still a wealthy country? For a generation of Bahamians, who grew up chanting that catchy jingle, “It’s Better In The Bahamas,” the very idea that the answer to the wealth question, could be anything other than a solid yes, is enough to send crowds rushing to church pews and liquor stores, in equal measure.
As a morsel for thought, consider a 2004 International Monetary Fund (IMF) report which noted in the domestic banking sector, of the $22 Billion in total cash and trust deposits held in The Bahamas, only $3.7 billion was due to Bahamian depositors. In other words, only 16.8% of total cash deposits was due to Bahamians.
For the offshore and private banking sector, assets under management in the Bahamas, at the end of 2001, totalled US$258 billion, with funds under management estimated at US$1 TRILLION.
Consider as well, the IMF 2018 Bahamas Banking Sector Report, which noted that the offshore component overshadowed the domestic some 21 times over.
“The off-shore component of The Bahamas banking system is large compared to the operations of the domestic financial institutions. As at June 30, 2018, seven commercial domestic banks with total assets of B$12.3 billion include three indigenous domestic banks (B$3.3 billion) and four foreign bank subsidiaries (B$9 billion). In addition, one development bank and ten credit unions, which represent only B$0.5 billion of total domestic assets, have a considerable number of small retail depositors.”
“The Bahamas international (offshore) financial sector, made up of many firms, had total off-shore balance sheet assets of B$255.6 billion. Of this total, 208 banks and trust companies, including 121 nominee trust companies, represented B$168.2 billion of total assets.”
1930 – Before Large Scale Tourism, There Were Large Scale Wealth Transfers…
The year 2030, give or take a few years or so, will mark the 100 year anniversary, since wealthy Americans, began to view The Bahamas as more than a wellness sanitarium. The British Bahamas’s proximity and no-tax status, drew American interest as an asset protection jurisdiction. Large scale asset transfers, have contributed to the wealthy status designation, bestowed upon the Bahama Islands, since the 1930s.
Even the inventor of the Schick razor blade fortune, Colonel Schick, had offshore companies set up in Nassau from 1933. The offshore Bahamas company became a must have fashion accessory for the wealthy.
The Bahamas offshore financial industry started with a concerted effort of the Bahamas Development Board to attract the wealthy of America and Europe to it shores. In 1930, Nassau was mostly pine forest. What the Bahamas Development Board sold was the future potential of the islands as a long-term wealth protection jurisdiction.
THE DEVELOPMENT OF NASSAU IS UPPERMOST IN THE MINDS OF THIS GROUP (1) His Excellency, Sir Charles Orr, Governor of the Bahamas (2) H. G. Christie, M. H. A. prominent leader in Nassau affairs (3) Maj. Hugh Bell, director of publicity of the Nassau Development Board (4) Miss Mary Mosley, publisher of The Nassau Guardian and member of Development Board (5) Sir R. H. Curry, chairman of the Nassau Development Board (6) Arthur H. Sands, member of Nassau Development Board (7) Sir George Gamblin, M. E. C. manager of Royal Bank of Canada and president of legislative council. —- The Herald Miami, Sunday, 2 February, 1930
CLOAKING THE BAHAMAS IN THAT GOLD DREAMCOAT OF FOREIGN DIRECT INVESTMENT AND FOREIGN TRUST DEPOSITS
Since the 1930s, the Bahama Islands, have enjoyed the attention of American foreign investors and their trust assets. There was a very purposeful reason for this. As the GDP boom of the rum-running years came to an end for The Bahamas, across the sea during the late roaring American 1920s, in the year 1929 to be exact, an unexpected crises gave rise to the Great Depression.
U. S. President Franklyn D. Roosevelt’s New Deal programs were popular, however the taxes he introduced to pay for the New Deal were not. Americans were leaving in droves to claim British citizenship in the no income tax Bahamas. Americans seeking to preserve whatever wealth they had left, after the ravages of the Great Depression, inflation and rising taxes, escaped to the luxuries afforded in no tax jurisdictions. Companies soon followed. More and more businesses, much to the chagrin of the US tax authorities, became domiciled in British Nassau.
Everything was going great, until Hitler invaded Poland, triggering World War II.
“Pity the poor Roosevelt-haters who went into exile in British Bahamas; because English subjects to escape New Deal taxes – now they’re at war; their new government confiscates securities, may draft them for front;”
“Most tragic joke played by feet on anyone during the last ten years probably is on the little band of Roosevelt-haters who became British subjects and moved to Nassau to escape the New Deal. There is no income tax in the British Bahamas, practically no property tax, no SEC restrictions on stock market trading. Americans moving to Nassau merely had to live there six months of the year to escape every penny of New Deal taxation. They could cable their orders to the New York Stock Exchange, blissfully ignore the Securities and Exchange Commission, the Holding Corporation Act and all the regulatory curbs which the New Deal has placed upon big business. Furthermore, while taking out British citizenship, they could commute – one hour and a half by air – to Miami and Palm Beach and they could spend their summers in Newport or Saratoga. But now, almost overnight, war has destroyed the blissful paradise. Now they are subjected to all the wartime hazards and penalties of any British subject.”
AFTER THE WAR, THE DEVELOPMENT OF FREEPORT, COMPANY REGISTRATION AND SECOND HOME MARKET BRINGS MASSIVE INVESTMENT INFLOWS
BANK SECRECY BEGAN IN THE BAHAMAS MORE THAN 150 YEARS AGO
“…All the banks and trust companies in the Bahamas provide nominee service at the nominal cost and will be fused to reveal the identity of the real person in interest …”
1988 – The Bahamas Now Rivals Switzerland as a Premier Off Shore Banking Centre
The Bahamas was so successful in the banking sector that by 1988, October 3, 1988 to be exact, it went into owning its own bank. The Bank of The Bahamas Ltd., was a joint venture with the Euro Canadian Bank. The Bahamas government owned 51%, while Euro Canadian would manage operations.
THE LONG ROAD TO THE BILLION DOLLAR GDP CLUB
In 1960, Bahamas GDP was still in the millions – 169.8 million USD. GDP per capita was $1,550.258
In 1967, Bahamas GDP was USD$390.2 million. GDP per capita rose to $2,556.634
By 1973, the year of national Independence, GDP was USD $670.9 million giving a GDP per capita of $3,696.032
1978 was the point of transition year, GDP stood at $832.4, yielding a GDP per capita of $4,131.386.
1979 – GDP of USD$1.14 billion propels the country into the billion dollar club for the first time. GDP per capita was $5,533.252.
THE LARGEST SINGLE JUMP IN BAHAMAS GDP IN 1997 GOT THE ATTENTION OF THE AMERICAN AND EUROPEAN TAX AUTHORITIES.
BY THE YEAR 2000, THE BAHAMAS WAS FACING AN OFFSHORE BANKING CENTRE BLACKLISTING
In 1996, Bahamas GDP stood at USD$ 3.609 billion, with a per capita GDP of $12,708.641
At the end of 1997, GDP had almost doubled to 6.332 billion with a GDP per capita of $22,036.101
WHY DID THE BAHAMAS GDP RISE SO DRAMATICALLY BETWEEN 1996 and 1997?
As well as the further expansion in the tourism product, substantial expansion in land sales to foreign investors, the banking offshore sector contributed significantly to Bahamas GDP. The passage of the Mutual Funds Act 1995, yielded significant growth and in the 12 months to November 1996 the number of license funds under management increased from 412 to 488. Funds under management increased by almost 40% to $55,000,000,000.
Undoubtedly, the country’s meteoric rise in GDP between 1996 and 1997, was one of the factors which drew the attention of the Financial Action Task Force (FATF) and Organisation For Economic Cooperation (OECD). Substantial pressure was brought down on The Bahamas. It’s offshore and private banking sector, which had flourished, almost undisturbed but highly envied, since the 1930s, now had its feet held to the fire.