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Web Shops Hit Banks’ ‘Dangerous’ Rejection


Tribune Business Editor

Web shops yesterday argued it was “dangerous and counterproductive” for the majority of Bahamian banks to reject research showing the sector is “clean” with the country under attack.

The Bahamas Gaming Operators Association (BGOA), in a statement sent to Tribune Business, hit back at the rationale given by Gowon Bowe, the Clearing Banks Association’s (CBA) chairman, for its members’ continued reluctance to accept the industry’s deposits.

Arguing that Mr Bowe’s comments to this newspaper effectively “discredit” the Gaming Board’s research, the association said their timing was especially troubling given the European Union’s (EU) decision to last week brand this nation as posing a “high risk” of financial crime.

It asserted that the web shop industry’s Know Your Customer (KYC) scrutiny of patrons was just as rigorous as that applied by CBA members to their customers, meaning that the sector had already “met the litmus test” and therefore there should be no money laundering-related concerns to deter banks from accepting its monies.

“The BGOA is clear that banks can choose whoever they want to do business with, and that their business choices are their own, but statements like the one made by the CBA chairman are counterproductive, dangerous and unfounded,” the association said.

Describing Mr Bowe’s comments as “disturbing” because they were not backed by empirical evidence or data, it added that besides questioning a regulator’s work they had also occurred “at a time when The Bahamas is contesting an onslaught of ‘blacklistings’ which threaten the survival of our financial services industry”.

In fact, Mr Bowe did not challenge the Gaming Board’s work or its integrity, but merely said its research on average patron accounts and transaction balances did not go far enough. Nor, he added, did it address the fundamental concerns and challenges Bahamian commercial banks had in accepting web shop deposits.

Top among them, he explained, was the “elevated risk” involved in dealing with cash intensive businesses and the extra compliance/due diligence costs that banks will incur in handling such sums.

Web shops, likely the largest cash generators in The Bahamas, would fall at the peak of this “risk” scale. Mr Bowe pointed out that the costs involved in dealing with large cash sums often exceeded the potential earnings from accepting them, creating an unfavourable risk/reward situation for the banks that would likely result in losses.

The other obstacle he identified was the opposition of Bahamian bank’s foreign correspondents to accepting gaming-linked deposits, meaning that if local institutions institution accepted such funds they – and all Bahamian businesses – could be cut-off from the global financial system links the economy depends upon for its “survival”.

Gershan Major, the Bahamas Gaming Operators Association’s chief executive, last night told Tribune Business that “the key” was for the web shops to meet with the banks, hear and understand their concerns, and for all parties to then develop a workable solution.

Noting that web shops were “already part of the banking system” through Bank of The Bahamas’ acceptance of their deposits, he added: “The question is what are the hurdles as the see CAB sees it as it relates to its members and correspondent banks.

“Let’s clearly determine what these hurdles are. Currently, we don’t know. Let’s sit down and have that conversation around these hurdles. Now that we are back in business we need to engage the parties that are part of the stakeholder process of this industry, the financial services industry. We need to understand the specifics, the concerns, the hurdles.”

Mr Major reiterated the Association’s position that Mr Bowe’s remarks were unhelpful given that they came at a time when The Bahamas was confronting renewed threats relating to alleged deficiencies in its anti-money laundering and terror financing defences.

“It doesn’t help the financial services sector to be making these statements at this time,” he added. “We are, based on legislation, a legal entity with the same KYC requirements as the clearing banks.”

The Association’s statement, pointing out that the Gaming Board had found there was no evidence to show web shops were “conduits for material money laundering”, argued that the regulator had also validated its strict KYC processes.

“The rigorous Know Your Customer (KYC) rules, which apply to CBA members when establishing accounts for their customers, are the very same criteria applied to and by domestic gaming house operators,” it said.

“If the KYC measures are the same for both domestic gaming operators and members of the CBA, one would think that the aggregate deposits from gaming customers would have already met the litmus test.”

The Association then suggested that Bahamian commercial banks were continuing to discriminate against web shops by pointing to cash deposits accepted from hotel casinos, supermarkets and liquor stores – a charge Mr Bowe has vehemently rejected.

“Mr Bowe referred to a second hurdle related to the existing relationships with corresponding banks, and the fear that those relationships may be jeopardised if local banks receive deposits from BGOA members,” the Association added.

“The reason for this fear is still unclear given that the CBA has not clearly articulated what those concerns are to the domestic gaming industry, and certainly not formally to the BGOA which represents them.

“The ‘business decision’ of individual banks cannot make illegal what the Parliament has declared legal. Gaming house operators and banks, as regulated financial institutions, should work together to strengthen confidence in the group of financial services regulators rather than erode domestic and international confidence in this jurisdiction.”

The Association concluded by calling for “an open and productive dialogue” with the CBA to resolve all concerns.