The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank believes planned legislative amendments will enhance the “transparency and effectiveness” with which it and Bahamas-based institutions administer $63.5 million worth of dormant accounts.

The regulator, in a consultation document issued last week on the 34,278 dormant accounts it administers, is proposing to change the Central Bank of the Bahamas Act so it can transfer those with balances of less than $500 to the Public Treasury within two months of receiving them.

As for dormant accounts with balances greater than $500, they can only be transferred to the Treasury, along with accrued interest, after being held by the Central Bank for 25 years.

While some may see this as a revenue grab by the Government, it also probably reflects the Central Bank’s desire not to have responsibility for handling or administering dormant accounts.

“The purpose of these provisions..... is to provide a means by which dormant account balances that remain unclaimed for 32 years in total (including the initial seven-year dormancy period) can be pooled, brought under the control of the Treasurer and employed for the benefit of the people of the Bahamas,” the consultation paper said. No distinction will be made between the treatment of dormant accounts owned by residents and those owned by non-residents.”

The document added: “This proposal aligns with the practices pursued by many of the benchmarked jurisdictions, and provides for an orderly disposition of dormant account balances, which could accumulate ad infinitum if not claimed.

“As at December 31, 2013, there were 34,278 dormant accounts totalling some $63.5 million, of which 27,774 were Bahamian dollar accounts aggregating $12.6 million.

“As regard the utilisation of funds transferred to the Treasurer, the Central Bank has recommended to the Government that the funds be used for societal or community benefit.

“For example, the funds could be used to support charitable organisations, youth programmes, sporting clubs and/or community centres, in line with how dormant account balances are utilised by the state in a number of other jurisdictions.”

Dormant accounts are those where there is no activity, transactions or customer contact for a period of seven years. When this time limit is hit, they have to be transferred by Bahamas-based banks to the Central Bank.

The regulator is proposing amendments to the Bank and Trust Companies Regulation Act so that institutions will not consider accounts ‘dormant’ if their beneficial owners still have a relationship with the bank via other facilities.

The dormant account regime, and its definition, are expanded, with clearly defined timelines proposed for calculating the seven-year period for determining if they are inactive.

And banks that retain ‘exempted dormant accounts’ will have to report on them to the Central Bank every three years.

“Some banks have sought the Central Bank’s guidance on how retained assets and facilities should be treated, and have developed internal procedures for this purpose,” the consultation paper said.

“The proposed new provision is intended to increase the level of accountability, transparency and recordkeeping, commensurate with the Central Bank’s aim of sound customer protection.

“The three yearly reporting requirement is seen as a pragmatic way of achieving dual objectives - introducing new reporting requirements, while establishing a reporting regime that would permit the Central Bank to maintain effective oversight of dormant accounts retained by banks.”

Elsewhere, the legislative changes propose allowing the Central Bank to deduct “reasonable expenses” incurred in administering dormant accounts, while provisions is made for account holders to recover their funds - but only up to 25 years after they have been transferred to the regulator. This applies to account balances either side of the $500 threshold.

“The expectation is that the changes to the dormant accounts administration regime should markedly improve the transparency and effectiveness with which dormant accounts are administrated by banks, and enhance the Central Bank’s oversight in this area,” the consultation paper said.

“Over the years, the Central Bank has invested the dormant account funds that it has received and, to date, dormant account balances held by the Central Bank are substantial, with very few claims made annually.”