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‘Myth Debunked’: Web Shops No Illicit Finance Risk


Tribune Business Editor

The Gaming Board says its one-month study has “debunked the myth” that web shops are vulnerable to financial crime and pose a significant risk to The Bahamas’ integrity.

Crystal Knowles, the gaming regulator’s chief counsel, said research showed that the average patron transaction of $60 – and account balance of just $5 – were “far too small” to suggest the sector was being exploited for illicit financial activities.

Writing in The Bahamas’ first-ever anti-money laundering and counter terror financing annual report, which has just been released, Ms Knowles said long-standing fears that the domestic gaming industry could be open to such abuses was “unfounded”.

“Prior to regularisation, it was feared that the then-unregulated ‘web shops’ were conduits for money laundering and terrorist financing,” she wrote. “Despite the promulgation of the new legislation and the strides that have been made over the past three-and-a-half years to enforce the same, discussions in both domestic and international circles still focus on those previous fears.

“However, these discussions have proven to be largely unfounded, particularly following a study that was recently conducted by the board. The main focus of the study was to examine the financial data of the board’s licensees, over a one-month period, in order to determine the range of patron account balances and the volume of transactions that flow through the said patron accounts.

“The findings do not support any assertion that gaming houses are conduits for material money laundering. The average patron account balance was $5 and the average transaction amount was $60. These sums are far too small to support any pattern of substantial money laundering.”

The Gaming Board’s findings are likely to be seized upon by web shop operators as a vindication of their arguments that the industry is among the most heavily regulated sectors in Bahamian financial services.

They will also likely use it to reinforce their calls for the web shop sector to be treated as a “mainstream” part of the Bahamian economy, no longer treated or viewed as if it does not belong.

However, some observers – especially those long opposed to domestic gaming and its operators – are likely to question whether the Gaming Board can draw such conclusions on the basis of just a one-month study that only focused on transaction volumes and account balances.

One of the major drivers for the web shop industry’s legalisation, regulation and taxation by the Christie administration in 2014 was the need to bring the multi-million dollar sums it generates – estimated to be $500m annually by Dionisio D’Aguilar, minister of tourism and aviation – out of the informal economy and into the banking system to ensure it did not attract further international regulatory scrutiny of The Bahamas.

Previously, web shop bosses had invested their profits into sectors such as real estate and construction. However, the efforts to integrate web shop money into the formal banking system have so far met with limited success because only Bank of The Bahamas, which is more than 80 percent government-owned, has agreed to accept web shop deposits. The Canadian-owned banks have all said their global policies prevent them from doing so.

Ms Knowles acknowledged that “the gaming sector’s risk profile helped fuel the pressures placed on international correspondent banking relationships”. But she added that the Gaming Board’s work to protect the web shop industry from financial abuse was not done.

The regulator is now moving to ensure only the beneficial/registered owner of patron accounts can conduct transactions, following behind existing regulations that ban the use of anonymous patron accounts and fictitious names.

“The Board is actively taking additional measures to ensure compliance with the new legislation,” she wrote. “Of particular note, such additional measures will include, but not be limited to the development of enhanced protocols that effectively prohibit operators from allowing any person other than the registered patron from conducting transactions on that registered patron’s account.”

Ms Knowles added that the Gaming Board has “been more than equal to the task of imposing risk-based oversight procedures via its physical presence in the gaming houses, and via its remote access to the interactive gaming systems of its licensees”.

She said: “A good deal of the Board’s oversight efforts to-date have involved the integrity of the player account and the ‘Know Your Customer’ requirements applicable to licensees. Such licensees have likewise spent considerable resources to guide Bahamian players through the new patron account requirements, notably those limiting them to one account and prohibiting anonymous accounts or the use of fictitious names.

“It is important to note that gaming houses cannot be used to facilitate international transfers. There are no funds flowing from outside The Bahamas into patron accounts, neither are there any funds flowing from patron accounts outside The Bahamas.”

Ms Knowles wrote that the Gaming Board had recently conducted a risk assessment on its gaming house operators, and is working to develop “a comprehensive anti-money laundering audit programme” for the web shop sector.