The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas can stand “shoulder to shoulder” with any country on the strength of its anti-financial crime regime, the Central Bank’s governor said yesterday, as banks reported a “fourfold” rise in fraud attempts.

John Rolle told Tribune Business that evolving global standards mean The Bahamas has to “constantly up our game” in enhancing its anti-money laundering and counter terror financing regime, with the regulator now moving to ensure actual and attempted frauds are reported as suspicious transactions by its commercial bank licensees.

Unveiling the findings obtained from anti-money laundering data provided by all its licensees, the Central Bank said: “The domestic banks reported a number of instances of fraud. There was a fourfold increase in the number of frauds attempted during 2020, but a 64 percent reduction in actual fraud occurrences, when compared to the previous year.

“The Central Bank intends to review industry practice, to ensure that these actual and attempted fraud occurrences, which are typically for small sums, are reported as suspicious transactions.”

The regulator added: “Domestic banks reported filing 506 suspicious transaction reports (STRs) with the FIU (Financial Intelligence Unit) during 2020, which was twice the previous year’s filings. One bank, for which there is no reason to believe it would have a higher risk customer base, filed roughly 70 percent of these in both reporting periods.

“This is an instance of inconsistent industry practice, where the Central Bank intends to follow up as a supervisory matter. Compared to the 566 unusual transaction reports received internally by bank money laundering reporting officers (MLROs) for 2020, this represents a conversion rate of 89 percent for the domestic banking sector.

“The commercial banks required between seven and 23 days to file an STR from the initial point at which the unusual or suspicious transaction/activity was detected internally. This is, in global terms, reasonably good, but the Central Bank will encourage the slower end of the banking system to tighten their response times.”

Bahamian commercial banks reported no transactions in 2020 involving individuals and companies subject to international financial sanctions, and the Central Bank added that it was “only aware of one Bahamian citizen and one Bahamian company on two of the recognised international sanctions lists”.

“The domestic banks reported receiving 996 production orders from the Financial Intelligence Unit (FIU) in 2020, which represents a 13 percent decrease compared to 2019. These were spread roughly evenly among the retail banks,” the regulator added.

“A total of 2,365 accounts reportedly became dormant in 2020, which represented a 43 percent decrease when compared to 2019. On the other hand, there was a 10 percent increase in the number of inactive accounts over the same period.

“Approximately 11 percent of the total number of accounts were considered to be inactive, while less than half of one percent of accounts were considered to be dormant. One bank reported a disproportionate share of inactive and dormant accounts. The Central Bank is working with this bank to better understand their position.”

Overall, the Central Bank hailed the efforts made by the commercial banks, saying they “have made substantial progress in lifting their anti-money laundering risk management and governance to world class standards”.

This was echoed by Mr Rolle, who told Tribune Business: “We see ourselves as being shoulder to shoulder with others. We think relative to understanding risk in our jurisdiction that we have a good understanding and grasp of what is going on.

“The nature of financial transactions is evolving so rapidly that we know we have to constantly up our game to keep up with what is happening globally. Global standards keep us focused on new areas where risks can present themselves.”

Elsewhere, the Central Bank said cash deposits have almost been completely eliminated from the international banking sector. “The international sector’s use of currency is both vanishingly small and appropriate,” it said. “During 2019 in the international sector, one institution reported accepting a cash deposit in The Bahamas, reportedly due to a client having to refund money credited to their account in error.

“Two institutions reported taking in 35 and eight cash deposits, respectively, outside of The Bahamas during 2019. No international institutions reported taking in cash deposits in The Bahamas during 2020. One institution reported taking one cash deposit outside of The Bahamas.”

As for potential financial crimes activity, the Central Bank said: “There is more potential for true positive sanctions hits in the Bahamian international sector than in the domestic sector. However, during 2019 only one institution reported two positive hits, both positive against the OFAC sanctions list. Both of these instances generated appropriate de-risking and STR (suspicious transaction reporting) actions.

“The results for 2020 indicated that two institutions had 12 positive hits, one of which led to de-risking and STR actions. The other 11 were generated by attempting to transact with a sanctioned intermediary or beneficial financial institutions. All these transactions were rejected.

“False positive alerts generated by screening tools continue to plague systems and the compliance function. Approximately 112,000 false positive alerts were reported by 11 institutions for 2020, which usually require manual review to be cleared. As advancing technologies are leveraged and models used are continually optimised, it is expected that false positive alerts will be minimised.”