The Bahamas is an independent and sovereign nation, and member of the Commonwealth of States. Its domestic legal system finds its foundation in the common law. The jurisdiction is politically stable, has a robust regulatory environment and an inviting approach towards foreign direct investment and non-resident company formation. The result is that over 25.000 active International Business Companies, with foreign management and control, and around 270 bank and trust companies hold a license from the Central Bank of the Bahamas.
Banking and other financial related activities require a license from the Securities Commission or the Central Bank of the Bahamas. Although local regulators can only impose regulatory requirements and codes of conduct on supervised institutions, local company laws allow civil action for misuse of the legal person. It is therewith possible to bring a case in front of the civil court following a top-down approach but also contract parties can sue or be sued in the Bahamian courts. Where criminal acts of one of the contract parties is alleged, a statement must be filed with the Crime Unit of the local police. The police can refer the case to the Attorney General who can take start civil as well as criminal proceedings against the wrongdoer.
Financial institutions are divided between those servicing the local market and others who act as a non-resident bank or trust company. The latter allows the institution to freely engage in activities with and for non-residents in foreign currencies. The result is that several banks and trust companies do not hold local accounts. They are therefore excluded from deposit insurance protection, as managed by the Deposit Insurance Corporation (DIC).
The large number of Supervised Financial Institutions compared with the local Bahamian economy, contributes to some non-active licensees. These may be involved in voluntary winding up, liquidation procedures, or even under special and statutory administration. An example of the latter is Lucayas Bank Ltd, formerly known as Private Investment Bank Limited (PIB). The conditional acquisition of PIB leaves several capital shortages that must be resolved before further steps are announced.
The Bahamian legal system is one of the most robust in the area. Although it is considered by many as an offshore financial center, premeditation by illicit actors is often done in other jurisdictions with little chance of getting caught and punished. Having said, the legal system in the Bahamas is derived from the judge-made law as predominant in the common law regime. Both civil and criminal action can be launched against individual and corporate wrongdoers. Even though the Bahamas do not participate in the UNCITRAL model for cross-border insolvency, common law jurisprudence ordered in other jurisdictions and the decisions of the privy council are binding. In matters relating to the suspicion of money laundering and terrorism financing, the following organizations may assist: the Central Bank of the Bahamas, the Securities Commission of the Bahamas, the Compliance Commission, the Registrar of Insurance, and the Inspector of Financial and Corporate Service Providers. Their mandates are provided for by a number of local Statutes.