The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Securities Commission’s top executive yesterday said it has “ramped up” efforts to combat escalating “major breaches” of Bahamian anti-financial crime laws by its licensees that totalled 223 last year.

Christina Rolle, the regulator’s executive director, told Tribune Business it was “very concerned” by both the number and nature of Financial Transactions Reporting Act (FTRA) violations and is now levying financial penalties against violators to ensure they “change their behaviour”.

Emphasising that these sanctions are not designed “to drive licensees out of the jurisdiction or out of business”, she added that Bahamas-domiciled broker/dealers, financial and corporate service providers, fund managers and administrators and digital assets firms must strike the correct balance between “getting business in the door” and complying with global regulatory standards.

Ms Rolle told this newspaper there is “a very high level of compliance” with this nation’s anti-money laundering and counter-terror financing laws, with many of the breaches stemming from “minor issues” - such as failing to ensure a client’s passport is renewed for Know Your Customer (KYC) purposes - that can morph into major ones if not addressed.

Speaking after the Securities Commission, in its just-released 2023 annual report, revealed it has “consistently” detected “in excess of 200 anti-money laundering regulatory breaches by licensees in both 2022 and 2023, she said: “We’re very concerned by it, and in terms of actions we have begun penalising licensees for their anti-money laundering and counter-terror financing breaches this year.

“They are major breaches. They are breaches of the Financial Transactions Reporting Act, and we are very concerned by the level of these breaches. We have certainly ramped up our efforts this year to counter these breaches by imposing penalties.

“These penalties are not designed to push licensees out of the jurisdiction or to put them out of business. The penalties are really designed to change the behaviour and ensure licensees are taking these issues very seriously.”

Asked by Tribune Business whether most of the breaches are being caused by deficiencies in licensee processes and procedures, Ms Rolle replied: “I wouldn’t characterise it in that way at all. I would characterise it that, for the most part, the jurisdiction has a very high level of compliance and our licensees, for the most part, have robust policies and procedures in place.

“I think there are minor issues that can flip - not getting a passport renewed, not doing a risk assessment on a client. This things can slip, particularly for smaller licensees that are more focused on getting business in the door. We as a jurisdiction have to make sure that when we are trying to get business we are also adhering to global standards.”

Asked whether the fines were having the desired effect, Ms Rolle said it was “too early to tell” given that the Securities Commission has just started imposing penalties this year. She added that the regulator would be in a better position to judge at year-end 2025, and declined to comment on the number of licensees penalised to-date or the collective amount of these sanctions.

However, the Securities Commission’s executive director added that it will likely publish a report in early 2025 “aggregating” all the penalties levied and their number, although the identities of those found guilty will not be included.

Asked how confident she and the regulator are that the penalties will help reduce anti-financial crime law breaches, Ms Rolle replied: “Penalties are a strong incentive to improve behaviour, so we’re hopeful.”

The Securities Commission, in its 2023 annual report, said the consistently high level of anti-money laundering breaches by its licensees and their “failure to demonstrate improvement year-over-year” had led to it taking a much harder line.

During 39 “routine” examinations of licensees last year it uncovered some 223 anti-financial crime breaches along with 135 “other” violations. A collective $125,600 worth of fines were imposed on Securities Industries Act licensees, while another $134,150 was levied on fund administrators, managers and funds licensed under the Investment Funds Act.

“During the year, the Commission focused on gaining a deeper understanding of the nature of anti-money laundering, counter-terror financing and counter-proliferation financing deficiencies observed in on-site examinations statistics,” Ms Rolle wrote in the annual report.

“Year-over-year trends indicate rising and persistent breaches among our constituents. As a result, the Commission is conducting a thorough a review of registrant and licensee anti-money laundering, counter-terror financing and counter-proliferation financing procedures and practices, and will commence enforcement of financial penalties for cited breaches.

“We will continue to carefully monitor these failures and will require appropriate remediation. The Commission has moved to ensure it is able to act swiftly through proposed changes to the Securities Industries Act legislation.” That Act has been passed by Parliament and is now in effect.

Detailing the extent of the breaches, the Securities Commission revealed: “During 2023, the Commission observed 358 breaches in the conduct of 39 routine examinations of registrants and licensees by the Examinations Department. Of the breaches, 223 were anti-money laundering, counter-terror financing and counter-proliferation financing, and 135 were related to other matters.”

The most frequent anti-money laundering, counter-terror financing and counter-proliferation financing breaches appeared to relate to Know Your Customer (KYC) verification of clients, where some 32 infractions were reported. Another 23 were labelled as disclosures to the Financial Intelligence Unit (FIU) relating to “terrorist property”.

“During the period from fiscal year 2021 to fiscal year 2023, the Commission has completed an average of 34 on-site examinations - 31 in 2021, 32 in 2022 and 39 in 2023 - and has consistently noted and identified in excess of 200 anti-money laundering related breaches, with 221 in 2022 and 223 in 2023,” the regulator said.

“Given the consistency in elevated anti-money laundering-related breach statistics from year-to-year, and licensees’ failure to demonstrate improvement year-over-year, the Commission deems it necessary to enforce its powers under the respective legislation to impose proportionate financial penalties on licensees with a view to dissuading organisations from repeating anti-money laundering offences”.

The Securities Commission added that most of these were “predominantly related to on-going obligations (filing requirements), ongoing (client) monitoring, client verification & KYC, client risk ratings and risk assessments, employee training and policies and procedures”.