Fraud can happen anywhere in the world The purpose of this article is to provide some guidance as to the options available in The Bahamas, a well-established and regulated International Financial Centre, to business entities and individuals upon discovering that a significant fraud has been perpetrated against them and the key considerations that should be kept in mind when responding to the situation. For the purpose of this article we assume that the business entity or individual either does not have a legal obligation to report the fraud to a regulatory or other body or has complied with that duty. We describe the options available in The Bahamas below.

THE OPTIONS

Victims of fraud generally have three options:

1. contacting the relevant regulator or law enforcement to commence an investigation,
2. contacting a commercial attorney to pursue a civil action, or
3. contacting both to pursue parallel investigations and actions.

Option 1 – Regulatory and Criminal Proceedings

Both regulatory and criminal proceedings rely on governmental resources. Regulatory bodies have been provided powers to investigate, confiscate assets, conduct hearings, and impose penalties and imprisonment. The general consensus in The Bahamas is that regulators are aggressive in their approach to tackling financial wrongdoing. In the Bahamas there are several authorities that play an integral role in the investigation, prosecution, and deterrence of economic crime:

Securities Commission of the Bahamas (“SCB”): The SCB is responsible for the supervision and regulation of investment funds, the securities and capital markets, and financial corporate service providers. The SCB investigates violations of the relevant legislation and regulations exercising the power to search, compel evidence, inspect records, and confiscate assets. They also can conduct regulatory hearings and deny, suspend and or cancel a registration. They prohibit and suspend trading, disciplining market participants that are involved in illegal activity. The SCB has the power to impose penalties of up to $300,000, imprisonment of up to 2 years, or both. Parties defrauded by entities supervised and regulated by the SCB should report the fraudulent act to the SCB.

Insurance Commission of the Bahamas (“ICB”): The ICB is responsible for the regulation of all the insurance licenses, brokers, agents, and salespersons. The ICB has the power to make rules and issue directives, impose conditions and limitations on licensees, investigate violations by compelling the provision of information, amend and revoke any registration, authorization, or permission, and assist local and overseas regulatory authorities. Parties defrauded by entities supervised and regulated by the ICB should report the fraudulent act to the ICB.

Central Bank of the Bahamas (“CBB”): The CBB responsibilities include the supervision and regulation of banks and trust companies, money transmission companies, and private trust companies. The CBB has the power to investigate violations and revoke licenses. Parties defrauded by entities supervised and regulated by the CBB should report the fraudulent act to the CBB.

Financial Intelligence Unit (“FIU”): The FIU is responsible for receiving, analyzing, obtaining and disseminating information that relates to or may relate to proceeds of crime in an effort to combat money laundering and terrorist financing. Its target audience is financial institutions, regulatory bodies for all financial institutions, and the general public at large. Any individual concerned with combating proceeds of crime as dictated by the Proceeds of Crime Act, while detecting criminal activity relating to money laundering and terrorist financing can approach the FIU.

The Office of the Attorney General (“AG’s Office”): The AG’s Office is responsible for the prosecution of all crimes, including fraud, charged by the Police.

The Royal Bahamas Police Force (“the Police”): The Police maintains a unit called the Commercial Crimes Unit which is responsible for the investigations of economic crimes including fraud. All of the above entities have a critical role to play in the Bahamas in the investigation and prosecution of fraud.

Advantages of Pursuing a Regulatory or Criminal Response

The advantages of a regulatory or criminal response are powerful and should be considered carefully relative to the loss incurred:

• Retributive justice – Regulatory action or criminal prosecution offers the prospect of retributive justice. This is especially compelling when the offender is not financially able to repay what was taken.
• Low cost – A regulatory investigation or criminal investigation will cost significantly less for the victim than pursuing a civil investigation and recovery proceedings.
• Recovery – A regulatory or criminal action may result in compensation. The regulators and the Police are able to take steps to restrain property and to confiscate such property in the event of a conviction. The Court also has powers to award compensation to the victims of fraud from sums confiscated.
• Availability of information – Regulators and law enforcement have wide powers to acquire information and documents. Regulators can compel information to be provided and perform investigations. Law enforcement can enter homes and offices to execute search warrants and can arrest suspects. Where there is sufficient evidence to charge the suspect, they can be remanded in custody to ensure their attendance at trial.

Click below to read about the disadvantages and the rest of the Options.

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