The Financial Services Consultative Forum is confident that its proposed ‘risk- based approach’ to the ‘Know Your Customer Rules’ (KYC) will ensure a high level of vigilance in a sector that has been repeatedly infiltrated with illegal funds.
Deputy Chairman of the Forum, Maria Ferere, was optimistic on Thursday that the recommendations for amendments to the Financial Transactions Reporting Act, would enhance the system.
Her comments come on the heels of The Bahamas being added to a list of eight countries in which the assets of individuals and firms allegedly linked to Colombia’s notorious Cali drug cartel were ordered frozen by the U.S Treasury Department.
The action means banks must comb through their records and freeze any assets they find that belong to those listed.
“You have crooks all over the world and there will always be people trying to infiltrate a system, but we believe that the amendments now being proposed will enhance our system and we’ll hopefully have fewer of these situations,” Ms. Ferere said.
She added, “The proposed amendments would comply fully with the 40 recommendations issued by the Financial Action Task Force. These amendments are similar to amendments being made in other countries, including OECD countries like the United Kingdom.”
The approach being pushed by the Forum is an alternative whereby financial institutions would be under the obligation to verify accounts based on general guidelines, but taking into consideration a “risk-based approach” to each account.
President of Fidelity Bank and Trust Greg Bethel explained that senior executives of financial institutions would be given discretion regarding what documents are required under the KYC rules.
“Everyone has the same guidelines, but for example, where you have a client of the bank who has been a client for 30 years, you know the client has been conducting his affairs in an exemplary manner, you don’t rough up that customer to provide a photocopy of his voter’s card, otherwise ‘we close your account,’ because that client is well known to the management of the bank,” Mr. Bethel said.
He pointed out, “There is no discretion for new accounts. This discretion is for long, established relationships, where the clients are well known to the bank and they are reputable clients…for example, if you need a copy of the passport, you will not say to the client, ‘give the copy now or we will close the account,’ because this is a client you know, so you will exercise your discretion and give the client six weeks, for example, to produce the missing document.”
Ms. Ferere noted that despite the less rigorous identification process, the proposal is fully compliant with regulations and guidelines of relevant international agencies like the Financial Action Task Force (FATF), the Organisation for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF).
“Basically, the proposed amendments are not intended to shift the standards or reduce the standards in any way, shape or form,” she reiterated. “So, there’s no shift of the Know Your Customer Rules at all. I would say that the proposed amendments would enhance the Know Your Customer Rules. The amendments are simply looking to conduct a more workable approach to achieve the same level of vigilance.”
Another well-placed source in the financial services sector who spoke with The Bahama Journal on the condition of anonymity, also emphasized that the standards would not be diluted under the risk-based approach. Customers are still required to provide banks with sufficient information, he said.
But he added, “There isn’t any sense making everybody fulfill the same requirement because the little old lady who is getting her pension in her bank account, chances of her being a money launderer is minimal.”
By Hadassah Hall, The Bahama Journal
