Rbc Withdrawal May Send Bahamas ‘Rogue’ – Bahamas Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas could be perceived as having gone rogue if Royal Bank of Canadas (RBC) pull-out drives Bimini and Spanish Wells residents to use web shops for mainstream financial services transactions, a local provider warned yesterday.

Paul Moss, Dominion Management Services president, told Tribune Business that the Bahamas financial services reputation and integrity could be undermined if web shops became de facto banks in Family Island communities.

While the web shop industrys legalisation via the Gaming Act 2014 was intended to bring it and its finances into the formal economy, Mr Moss pointed out that all commercial banks - with the exception of Bank of the Bahamas - were accepting the sectors funds and deposits.

As a result, he warned that the Bahamas anti-money laundering regime, and international regulatory standing, could be compromised if Family Island residents increasingly turned to web shops and the underground economy to conduct their daily banking business.

That is what is going to happen; its happening even now, Mr Moss told Tribune Business of fears that web shops will fill the vacuum created by the withdrawal of RBC and other commercial banks from the Family Islands.

Web shops are going to see more financial banking business, and this is something the former Central Bank governor [Wendy Craigg] had concerns about.

John Rolle, her successor, has publicly sought to bridge the gap between the web shop industry and Bahamas-based commercial banks through education, exposing the latters compliance departments to the stringent regulatory regime imposed by the Gaming Act 2014.

Mr Moss, though, reiterated that this has yet to result in commercial banks outside Bank of the Bahamas accepting web shop deposits, thus potentially leaving hundreds of millions of dollars outside the regulated, formal banking system.

What were making now is a statement that the Bahamas might be a rogue in terms of its anti-money laundering regime, he warned.

What Im saying is that, if left unchecked - if theres no bank in Bimini or Spanish Wells, and the web shops are there - they will become de facto banks.

We know commercial banks, apart from Bank of the Bahamas, are not accepting web shop funds because of the perceived high risk attached, Mr Moss explained.

If that goes unchecked, almost implicit in that is we have allowed Bahamians to participate in unsupervised and unregulated financial transactions, and that creates a problem for the whole jurisdiction. Thats something weve got to guard against.

Web shops are already effectively used as money transmission providers, with Bahamians placing funds in their gaming accounts for pick-up on other islands.

However, concerns that they may be increasingly used for regular banking transactions have escalated since RBCs announcement that it will shortly close four branch locations, including three in the Family Islands.

The Bimini and Spanish Wells pull-outs will leave both islands without a physical commercial banking location, and force residents to travel to Freeport and Harbour Island, respectively, if they need to access a branch.

RBCs move has caused uproar among the residents and private sector on both islands, forcing Nathaniel Beneby, the banks Bahamas managing director, to meet with local government officials and some businesses on Bimini yesterday. Some complained, though, that they were unable to access the meeting.

RBCs pull-out follows Scotiabanks withdrawal from North Eleuthera and Long Island in 2015, as commercial banks seek to cut costs in a low-growth economy that has saddled them with a $1 billion-plus pile of non-performing loans.

The commercial banking industry is also trying to drive Bahamians to increasingly turn to electronic banking channels, such as the Internet and mobile apps, to conduct their financial services business rather than visit branches.

However, many observers feel the banks are trying to make Bahamians run before they can walk. This nation is still a cash-intensive economy, with many employees paid by cheque and requiring a branch to deposit and cash them, while many older Bahamians are not familiar with electronic banking technology.

Mr Moss said RBCs pull-out would cause tremendous hardship for Bimini and Spanish Wells residents, and expressed surprise the bank would choose to exit the former island given its strong economy.

Bimini, particularly over the last five years, has grown exponentially, with a number of Bahamians employed at the resort down there, he said. They have to use that bank because its the only facility there; they have to use it.

Its going to mean that people are going to have to use more cash, and its not good in any society where people cant have the banking services they desire. Its going to be tremendously hard.

With many Biminites likely to have to travel to Freeport just to cash and deposit their pay cheques, Mr Moss added: Its crazy. It doesnt make sense. Bimini is taking off.

I think RBC is making a strategic move, but the move is backwards. Bimini is poised for more development. There are more people looking at Bimini.

Mr Moss said the difficulty the Bahamas faced, especially with the Canadian-owned banks, was that branch closure decisions were taken either at Caribbean head offices or Toronto by persons who have no appreciation for the situation on the ground.

Arguing that banks played a vital role in sustaining Family Island communities, Mr Moss criticised what he described as a short-sighted hands-off approach towards ensuring financial services were available throughout the Bahamas.

He called for a proactive policy of promoting Bahamian bank/credit union development and ownership, and agreed that this nation look at legislative tools similar to the US Community Reinvestment Act.

This mandates that US-based banks not discriminate in the provision of financial services, and that these are provided to low income and remote communities on the same terms as received by more affluent persons.

It has also been used to require financial institutions to assist in the creation of credit unions, and savings and loan organisations, in neighbourhoods they have exited.

This is what the regulators should already be doing. We are at the mercy of the banks, Mr Moss told Tribune Business.

Weve had this hands-off approach to financial services. We stick our heads in the sand until we are forced to act. Were going to get these results, quite frankly with this hands-off approach to empowering Bahamians to own banks.

We should do that. Put the policies in place to make sure these banks dont get away from their obligations. Its an opportunity for the Government to look at policies so Bahamians can become owners of savings and loan institutions, or even fully-fledged banks.

Visit link:

Rbc Withdrawal May Send Bahamas 'Rogue' - Bahamas Tribune