If The Bahamas had enforced the know-your-customer regime long ago, it might not have faced fallout for the potential of money-laundering practices in its offshore banking and eventual blacklisting, the chairman and CEO of the Bermuda Monetary Authority said.
Cheryl-Ann Lister said that, recognising the value of a KYC regime, nations such as Bermuda have been implementing it for about 50 years.
While addressing some of the nation’s top financial analysts, Mrs. Lister said the success of her country’s banking sector was due to strict KYC enforcements.
She was guest speaker at a meeting of the Bahamas Society of Financial Analysts Friday at the British Colonial Hilton.
In Bermuda, if a proposal is given for a new bank, it must be at least 60-per-cent locally owned, and offshore banking is non-existent.
“We, as I understand, made a deliberate decision that because offshore banking could potentially be more susceptible to money-laundering, we felt it would be more difficult to control the players and their actions, and so it was decided that we would not get involved in that market in Bermuda.”
In the first quarter of 2002, analysts argued that if the banking regulatory process and the KYC regime were strongly implemented, it would not have been necessary to amend the Financial Transactions Report Act, 2002.
The FTRA came after the blacklisting of The Bahamas financial services sector by the Financial Action Task Force (FATF) and the Organisation for Economic Cooperation & Development (OECD), which labelled The Bahamas and more than 30 other countries as “harmful tax havens.”
After the country complied with international standards, it was removed from the blacklist.
Financial institutions were given a Dec. 1, 2002, deadline to verify existing clients accounts. Failure to do so would have had that customer’s account transferred to the Central Bank.
However, due to rigorous requirements to produce documentary evidence on clients of financial institutions, a call was made to have the KYC deadline extended.
Extension of the KYC for verification of bank accounts has been allowed a Dec. 31, 2003, deadline.
In Bermuda, the KYC decision was made when offshore banking was just starting in the Caribbean.
“It was also seen as protection for the local banks. I believe that because of our restrictions, because of our KYC stand, because of the fact that we did not allow bearer shares and because there were a lot of things that we did not do, we have been successful in this area,” Mrs. Lister said.
By Lisa Albury, The Nassau Guardian
