The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A PROMINENT accountant yesterday blasted “it’s crazy, absolutely insane” that Bahamian businesses face an average wait of more than two months to open a bank account compared to “20 minutes” in the US.

Philip Galanis, the HLB Galanis principal, told Tribune Business this nation must “find ways to remove impediments” to the ease of doing business with many of the obstacles “starting with the commercial banking system and ending there”.

Speaking after the Central Bank of The Bahamas released results from a survey of 402 companies and entrepreneurs on the ease of opening a corporate bank account, he voiced “surprise” that 23 percent of respondents revealed they were able to open a facility in less than a week given that it typically takes a month in his experience.

Mr Galanis, who has frequently voiced concern at public forums about the difficulties the Bahamian private sector encounters in opening bank accounts, told this newspaper of a situation where a company that “does a tremendous amount of business in The Bahamas”, employing local staff and paying significant taxes, was forced to use a trust company’s account to pay its local bills.

He also cited instances where commercial banks had closed accounts belonging to long-stand- ing legitimate customers

without explanation, and contrasted banking strug- gles in The Bahamas with his “personal” experi- ence in being able to open accounts with the likes of Bank of America and Wells Fargo in the US in just 20 minutes.

The former MP reiterated his belief that The Bahamas has “gone overboard on regulations” since 2000 in response to multiple black- listings and other pressures, and suggested that the likes of the Organisation for Economic Co-Operation and Development (OECD) have achieved their goal of entangling international financial centres (IFCs) in bureaucracy and red tape so as to deter investors.

“I wasn’t surprised by the length of time it took,” Mr Galanis said of the Central Bank’s two-month finding. “I was surprised that a sig- nificant number of accounts were open in a few weeks. That was really a bit of s surprise as it normally takes a month. Sometimes it takes longer.”

The banking industry reg- ulator, unveiling the survey results, said that based on the responses just one-third of business bank accounts were opened within two weeks or less of the applica- tion being made.

It added that just 11 percent of accounts were opened on the same day with another 12 percent occurring within one week, meaning that fewer than one in four applications were processed within seven days. Around 40 per- cent “took more than one month in absolute time” to be opened, with 33 per- cent of applications taking longer than one month but less than six to be approved.

“What’s most annoying about the banks is you may already have an account with them or be a long- standing customer and, if you want to open another account, they ask you for the same information they have on file already - your passport, National Insurance Board number,” Mr Galanis said. “It’s ridiculous.

“These kind of things seem to be done by rote without much thinking. That’s what complicates things and frustrates a lot of businesses.... This is very frustrating to those small and medium-sized enterprises, many of whom need an operating bank account in order to be in business.”

The HLB Galanis chief added that his last statement applied to companies of all sizes, and revealed: “I know of a company that does a tremendous amount of business in The Bahamas that had to use a trust company’s account in order to pay their bills.

“They’ve hired five Bahamians and pay hundreds of thousands of dollars into the Public Treasury either in Business Licence fees or VAT and other government fees... There are companies that have no risk at all attached to them and the banks put them through the same routine, and some- times an even more arduous routine, than companies that present a greater risk” of infractions.

Contrasting the situation in The Bahamas with that of the US, Mr Galanis added: “I can walk into a bank in the US, and I’ve done this personally, where I’ve opened a bank account with Bank of America, Wells Fargo in 20 minutes and walked out with a debit card and cheque book to facilitate operation of the account. It’s crazy, absolutely insane.”

He argued that improv- ing the speed and ease with which companies and investors are able to open bank accounts in The Bahamas is “very low-hanging fruit that we can reap and pick in order to reap enormous benefits for the jurisdiction”.

“We cannot move the country forward and cannot expect Bahamians and investors to have confidence in the country if they cannot open a bank account in reasonable time,” Mr Galanis said.

“It doesn’t help, doesn’t facilitate the ease of doing business in this country, and if we want to move this country forward and grow the economy we are going to have to find ways to remove impediments that exist, many of which start in the banking system and end there...

“We’ve got to remove these impediments, these strictures that are put in place. We’ve gone over- board in terms of our regulations, in terms of what compliance officers perceive to be their purpose. Rather than looking at things on a risk basis, they have a check list where all the boxes need to be checked off,” he added.

“If they are not all checked, then the account is not opened. But some of those boxes may not apply, yet if any are left unchecked they don’t open the account.” The Central Bank, in its summary of the survey findings, affirmed it is seeking to further move the commercial banking industry’s Know Your Customer (KYC) account opening processes away from such a prescriptive approach to one that is risk-based.

Mr Galanis said The Bahamas had been forced to adopt such stringent due diligence by blacklistings and regulatory pressures imposed by the world’s largest economies, acting through the likes of the OECD, even though these same states fail to abide by such measures.

“I think that’s precisely what they wanted us to do to discourage people from doing business in international financial centres,” he added. And, the HIB Galanis chief said, inconvenience was not limited just to account openings but also closures.

“There is a Canadian- owned bank, which I won’t name, that simply closed a customer’s account without explaining why,” he said. “They were a long-standing customer with no malfeasance, no complaints, nothing untoward. I’m fully aware of the customer.

“When I sought to gain an explanation they said ‘no, it’s confidential’. When I said explain it to the customer, they said ‘no, it’s confidential’. It’s absolutely ridiculous with nothing ostensibly untoward being done by the customer. Those are the kinds of things we have to deal with.”