The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Prime Minister Perry Christie met Royal Bank of Canada (RBC) on Friday to discuss web shop gaming, with a Cabinet Minister pledging the Government “can’t at all compromise” the financial services industry’s integrity.

Obie Wilchcombe, minister of tourism, who has responsibility for gaming, said “significant consultation” with all financial services stakeholders had occurred prior to the Gaming Bill’s ongoing House of Assembly debate.

Emphasising that the Bill, and accompanying legislative package, was designed to give “a sense of security” to commercial banks when it came to accepting web shop deposits, Mr Wilchcombe asserted: “You can’t do harm to the banks and not destroy your country.”

His comments came as Opposition finance spokesman, K P Turnquest, pledged to “pre-empt” the Prime Minister in today’s House debate ‘wrap-up’ and ask if there was “local consensus” on whether the Gaming Bill and associated amendments achieved the necessary goals.

These are ensuring the Bahamas, and a legalised web shop industry, meet all international anti-money laundering regulatory standards, and that both the Central Bank of the Bahamas and the commercial banks are comfortable enough to accept the sector’s deposits into the formal economy.

Mr Turnquest said he had been prompted to ask this question following Friday’s Tribune Business article, in which Central Bank governor Wendy Craigg said the regulator was still “evaluating and reviewing” the Gaming Bill and associated reforms.

The Clearing Banks Association (CBA), too, said it might be in a position to comment on the issue this week. Tribune Business was told that the CBA had failed to achieve a “consensus” on gaming/web shop reform and other questions this newspaper had posed, with some senior industry executives saying they were still waiting to see the legislation.

It is possible that both the Central Bank and CBA are being ‘polite’, and do not want to comment ahead of the Gaming Bill’s passage through the House of Assembly for fear of being dragged into a political spat.

But Mr Turnquest, the FNM MP for east Grand Bahama, said the comments from both Mrs Craigg and the CBA raised concerns over whether the Gaming Bill would satisfy both domestic regulators and banks, plus international regulators.

He said “nothing’s changed” unless Bahamian commercial banks accept web shop deposits, for a sector-wide refusal by these institutions would effectively undermine the legalisation thrust’s main objective - to bring these monies ‘in from the cold’ and into the formal economy.

Mrs Craigg had previously expressed concern that the web shop industry had evolved into an unregulated parallel banking system, with its own mortgages and pay day loans.

And top commercial bank executives have previously expressed concern that this could lead to the Bahamas’ ‘blacklisting’ again for failure to enforce international anti-money laundering and Know Your Customer (KYC) standards.

The Government’s efforts to allay these fears hit a potential snag, though, when it emerged that a combination of commercial banks’ global policies (in the case of RBC) and desire to protect their US correspondent banking relationships saw few indicate a willingness to accept web shop deposits.

It is unclear what the Prime Minister’s meeting with RBC, the Government’s bank and one of the largest commercial institutions in the Bahamas today, discussed.

But Mr Wilchcombe, who confirmed the meeting to Tribune Business, definitely implied that it was held in the context of web shop gaming. It is likely to have focused on whether RBC would accept web shop sector deposits, and to get a final opinion on whether the legislative package meets the bank’s - and international - anti-money laundering/KYC requirements.

RBC’s global policies prevent its entire international network from accepting monies generated by online gaming, because this is viewed as a high money laundering risk. The US also frowns on Internet gaming, which is why Bahamian banks are reluctant to deal with web shops for fear their correspondent banking relationships will be endangered.

Both RBC’s two fellow Canadian-owned institutions, plus Commonwealth Bank and Fidelity Bank (Bahamas), have all indicated a reluctance to deal with web shops - something that threatens to stymie the legalisation/regulation plan at birth.

“The Prime Minister met with Royal Bank of Canada today, and I’m sure he will have some comments on Monday,” Mr Wilchcombe told Tribune Business.

He pledged that the Government, via the Gaming Bill and accompanying reforms, was “seeking at all times” to protect the Bahamian financial services sector’s integrity while eliminating “this perception of unregulated monies” moving about the country.

Mr Wilchcombe said the amendments to the Financial Transactions Reporting Act and Proceeds of Crime Act were designed to eliminate any doubts that the Bahamas’ regulation of web shops complied with global KYC and anti-money laundering standards.

They were also intended to “give domestic banks a sense of security”, with Mr Wilchcombe asserting: “You can’t do harm to the banks and not destory your country.

“What’s important is integrity. We can’t compromise the integrity of the financial services sector at all. We have to ensure the pieces are in place, because one piece out of place could do tremendous harm.”

The Minister suggested that Mrs Craigg’s “evaluation and review” comments related to an assessment of the whole legislative package, once it was put together.

While his team had not spoken to the Central Bank and commercial banks themselves, Mr Wilchcombe said there had been “considerable consultation” with them via the Prime Minister and minister of state for finance, Michael Halkitis, plus the Attorney General’s Office.

“I feel comfortable we had a significant consultation,” Mr Wilchcombe said, adding that feedback from the financial services industry was “taken into account” and passed to the Bills’ drafters.

Acknowledging that the reforms were “really new”, the Minister said the Government had “put the country’s best interests forward”.

The legislation had been benchmarked against other jurisdictions, and Mr Wilchcombe said:” “Furthermore, we are not afraid to make changes if changes are required. I believe we’ve done a tremendous job.”

Yet Mr Turnquest said the remarks by the Central Bank governor and CBA had only raised fresh questions as to whether regulators and the private sector were fully ‘on board’ with the reforms.

Referring to the Prime Minister’s anticipated closing address on the Gaming Bill today, Mr Turnquest told Tribune Business: “I’m going to pre-empt him and ask the question: ‘Have we gotten local consensus with this Bill that it meets the standards that they require in order for this money to be put into the banking system, and conform with international best practices?’

The FNM finance spokesman said it was unclear whether the Financial Action Task Force (FATF), the author of so-called ‘blacklists’, had approved the gaming legislation as the Government had yet to publish details of the discussions with it.

“The whole idea is to bring these web shops into compliance and some kind of regulatory structure,” Mr Turnquest told Tribune Business. “But if the financial institutions say we don’t accept the funds, what’s changed?

“Nothing. You’re still going to have all this money outside the financial sector. It’s a huge concern.”

While the gaming aspects had taken most attention, Mr Turnquest said the Financial Transactions Reporting Act and Proceeds of Crime Act were “the heart of the whole issue”.

“For those of us who are more concerned about the reputation of the jurisdiction and the long-term effect this has on the Bahamas as a regulated, compliant jurisdiction, we’re more concerned about the effect this has on the financial sector,” he added.

“”We don’t want to satisfy a few people to the detriment of the industry. It’s a big test, and from what you’re saying to me, we haven’t passed the first test.”

Mr Turnquest said Mrs Craigg’s comments raised questions about how widespread the consultation on the Gaming Bill and associated amendments had been.

He added that it would have been especially odd if the Central Bank was not properly consulted, as Cabinet Ministers frequently cited the Governor’s remarks as reasons for the Government’s decision to override the results of the January 2013 ‘No’ vote against legalising web shops.