The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading businessman believes the Government will be forced to establish a National Lottery because it will find it impossible to legalise web shop gaming.

Rupert Roberts, Super Value’s owner, told Tribune Business that the unwillingness of Bahamas-based banks to accept deposits from licensed/regulated web shops, plus the potential ‘blacklisting’ risk that the sector posed, would stymie the Government’s plans to legalise it.

Expressing personal opposition to “any form of gambling” beacuse of its negative social consequences, Mr Roberts said he had to fire “too many of our store managers” over the years for taking Super Value monies to fund their gaming habit.

“I don’t expect [the Bill to legalise web shop’ gaminng to be passed,” Mr Roberts told Tribune Business. “I expect them to have to go with a National Lottery owned by the people. That’s the only thing they can do.

“I don’t think they can work that with the banking laws and the international bodies. It’s not going to work, they’re [the Government] not going to work it out, and that why the Bill’s been delayed.”

The reluctance of Bahamas-based commercial banks to accept web shop deposits, even from a legalised and regulated industry that adheres to Know Your Customer (KYC) anti-money laundering practices, has created an obstacle for both the Government and sector players.

The Christie administration had been hoping that legalisation would allow millions of dollars in web shop revenues to be accepted into the formal economy via the banks, rather than be kept ‘underground’, thereby boosting overall economic activity.

However, several banks fear that accepting deposits from web shops could potentially jeopardise their US correspondent banking relationships and lead to their being cut off from the world’s leading financial system.

Of particular concern is the Internet-based aspect of a web shop’s business, given that the US frowns on this especially.

And Royal Bank of Canada’s (RBC) own global internal policies prevent it from accepting gaming/gambling-associated deposits from any source, as it views the industry as a ‘high’ risk for money laundering.

Tribune Business understands that the other Canadian-owned banks, Scotiabank and CIBC FirstCaribbean International Bank, are adopting a similar ‘no’ approach to Bahamian web shop deposits.

And Tribune Business sources also confirmed that BISX-listed Fidelity Bank (Bahamas) would refuse to accept deposits from a legalised web shop sector. The 50 per cent RBC ownership in its RoyalFidelity affiliate is also a stumbling block.

Commonwealth Bank, in which Mr Roberts is a major shareholder, has also indicated it would do likewise. Industry sources have speculated that the Government could use its 65 per cent majority shareholding in Bank of the Bahamas to force that BISX-listed institution to accept legalised web shop money. But this is rumour, and in any event could jeopardise the latter’s correspondent relationships.

“The banks are not going to buck the trend and do anything,” a senior banker told Tribune Business. “They don’t have to accept it, and we don’t need the association. Those guys will never do they KYC and anti-money laundering stuff. They’re not equipped to.”

The senior banker, speaking on condition of anonymity, agreed with Mr Roberts that the previously-unforeseen complexities associated with regulating web shop gaming would force the Government into a National Lottery as a compromise solution.

“They’re between a rock and a hard place,” the source said of the Government. “Web shop gaming is too deeply entrenched. They’re stuck.”

Substituting a National Lottery for a legalised web shop industry would harm all existing players, and potentially result in hundreds of Bahamians losing their jobs. The senior banker, though, said there would be “collateral damage” whatever the Government did, and added that a financial services sector free from ‘blacklisting’ was more valuable to the Bahamas.

The Government is hoping that the banks will be won over in time, especially if it gets the Financial Action Task Force’s (FATF) blessing and web shops can show they have implemented proper KYC and anti-money laundering procedures.

But, if it moves ahead without the banks on board, the Government risks merely legalising the status quo - which has seen web shops develop a parallel lending/banking system, and investing in legal areas of the economy. It is possible the web shops could even try to form their own bank.

“An unregulated shadow banking system is very dangerous. It would be terrible,” the senior banker said.

Mr Roberts, meanwhile, gave full vent to his opposition to all gaming.

“I’m not in favour of any gambling because it takes the grocery monies, the school fees, the BEC money,” he told Tribune Business. “I think the grassroots would be devastated. It [web shop legalisation] would create too many social problems.

“It’s part of our problems now, and would just exaggerate those that exist. Something for nothing gambling in any form doesn’t work.”

Backing the Christian Council and its successful ‘No’ vote stance in the January 2013 ‘opinion poll’ on whether web shop gaming should be regulated and taxed, Mr Roberts said he had seen the negative consequences of gambling first-hand via its impact on Super Value’s business.

“I’ve seen too many of our store managers clean out safes to feed their habit, and they’re fired on the spot,” he told Tribune Business. “I’ve seen too much of that; their cycle of taking our monies, they win, they lose, and can’t put it back. Of course it’s theft.”

Attorney General Allyson Maynard-Gibson has yet to brief Cabinet on her discussions with the FATF, and whether they anti-money laundering body felt the Bahamas’ plans to regulate web shop gaming are consistent with global standards and best practices.

The Government was forced to ignore the January 2013 opinion poll’s results, and move on legalisation, after Central Bank governor Wendy Craigg and others warned that the web shop ‘status quo’ could potentially lead to the Bahamas being ‘blacklisted’ again by the FATF.

The Christie administration is seeking to restrict web shops’ customer bases to Bahamian and resident expatriate gamers only, and prevent them from taking foreign bets via the Internet. Yet questions about whether the Government can truly regulate the latter persist.

It also wants to restrict the number of licensed web shops to eight, a development that together with performance bonds and taxation/licencee fees seems likely to drive industry consolidation that favours the larger players.

The Government also wants web shop owners to have integrity, and be ‘fit and proper’ persons. That, though, may cause problems in several cases.

FML Group of Companies owner, Craig Flowers, is currently appealing his 2011 conviction for breaching the Lotteries and Gaming Act by running an illegal lottery from one of his web shops.

And Adrian Fox, Sebas Bastian’s partner in Island Luck, has been charged by the US government in the southern New York court for alleged immigrant smuggling. The indictment and case against Mr Fox remain live and outstanding.