The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian accountants yesterday expressed concern over the Securities Commission’s decision to stop using them as its anti-money laundering (AML) inspection agents from 2014, a former BICA president describing the move as “incomprehensible”.

Reece Chipman, head of the SMSChipman accounting firm, told Tribune Business that the profession’s main concern was that accountants were being “placed outside the process”, something that could have repercussions for the Bahamas, Securities Commission and its licensees.

Apart from questioning whether the Securities Commission had the resources and technical expertise to take the AML inspection process in-house, as it planned to do, Mr Chipman said taking accountants out of the equation could also impact the ability of financial and corporate services providers to meet legislative recordkeeping requirements.

This, he pointed out, was also a concern where the OECD was concerned, as the organisation’s ‘Peer Review’ of the Bahamas had identified accounting records and record-keeping and this nation’s principal deficiency.

And Mr Chipman said dispensing with accountants as agents would also deny the Securities Commission a source of expert, impartial work, plus take business away from small Bahamian firms.

For the past 12 years, and following the 2000 passage of multiple financial services Bills during the ‘blacklisting’, the Compliance Commission - and subsequently the Securities Commission - hired Bahamian accountants as their ‘agents’ to conduct AML inspections of their licensees.

The inspections, rather than being full audits, are designed to assess financial providers’ Know Your Customer (KYC) records’ compliance, and whether proper systems are in place. Yet the Securities Commission has decided to now take this process in-house.

Mr Chipman told Tribune Business the regulator had confirmed, in both writing and at a Wednesday industry briefing, that “as of 2014 accountants will no longer be agents for the Commission for the examination of their registrants”.

Apart from the loss of “a key area” of business for small and medium-sized accounting firms, Mr Chipman questioned whether the Securities Commission would be able to cope with the inspection workload, especially given that the definition of financial and corporate services providers had recently been expanded.

Now included in this category, which comes under the Securities Commission, are the likes of leasing companies, pay day lenders, escrow agent services and advisory services. This is separate and apart from the capital markets and investment funds sector, also regulated by the Securities Commission.

“We were concerned how the Commission, resources wise, first of all will be able to handle such volume, especially after broadening the scope,” Mr Chipman told Tribune Business, noting that it regulated several hundred firms and entities.

“And, on the other end, we thought that in terms of national development it was a key issue for improving accounting records of financial and corporate services providers, as well as assisting the Commission in providing quality, independent examinations on their behalf.”

Acknowledging that as a small accounting firm himself, he would have liked AML inspections to stay with accountants, Mr Chipman added: “We are also able to help with bookkeeping and recordkeeping functions required by the Acts.

“They want proper records to be kept by these companies that allow them to present proper financial statements. We’re saying that if you take accountants out of the process, how prepared would they be to meet the accounting requirements of these Acts.”

Suggesting that the Securities Commission was denying itself access to the expertise of BICA’s 600 members, and 250 licensees, by taking the AML inspections in-house, Mr Chipman said there might also be ramifications where the OECD Peer Review was concerned.

“The main concern is that accountants are not part of the process of examination any more, which could have only helped with proper recordkeeping, one of the requirements of the Financial and Corporate Services Providers Act and one of the OECD’s requirements,” Mr Chipman warned.

He added that the Bahamas had amended multiple laws to require that proper accounting records by prepared, and maintained for a minimum six years.

But, with accountants’ involvement in the inspection process set to end, Mr Chipman said that from 2014 they would not be able to identify gaps - and provide assistance to close them - in Bahamian financial firms.

“The concern is more so that accountants remain a part of the process, particularly with organisations like the Securities Commission, that depend on us heavily internationally to provide independent, relevant information for the protection of the public,” Mr Chipman told Tribune Business.

With the Bahamas about to become a full member of the World Trade Organisation (WTO), and tax reform in the works, he said the need for accountants and their services would only increase.

“To take accountants out of the process, to me, is in comprehensible,” Mr Chipman said.

Tribune Business attempted to contact Securities Commission executive director, Dave Smith, for comment but despite leaving a voice mail message the call was not returned before press time.