By NEIL HARTNELL
Tribune Business Editor
Two outspoken Bank of the Bahamas shareholders yesterday said they had no objection to it accepting deposits from a legalised web shop gaming industry, and questioned why other Bahamian institutions were not following its lead.
Dionisio D’Aguilar, Superwash’s president, and Dr Johnathan Rodgers, the well-known eye doctor, both said they had “no problem” with the BISX-listed institution accepting such funds, especially given that it had received clearance to do so from its US correspondent bank, JP Morgan Chase.
“I don’t have a problem with that,” Mr D’Aguilar told Tribune Business, after this newspaper revealed last Friday that Bank of the Bahamas had received the ‘all clear’ from JP Morgan Chase.
“They’re trying to bring them into the formal economy, and this is the whole mechanism to get from the informal into the formal. Once we accept the fact numbers money is legally earned and generated, I don’t have a problem. The whole purpose of legalising the numbers business was to get the money into the formal economy.”
Mr D’Aguilar said the fear of losing correspondent banking relationships, and access to the US financial system, had always been cited as the reason why Bahamian commercial banks would refuse to accept deposits from even a legalised web shop gaming industry.
Yet JP Morgan Chase’s decision, he added, questioned the validity of such a position, as why would such a major international and US bank raise no objections to Bank of the Bahamas accepting such funds.
“It puts doubt into what the other banks are saying,” Mr D’Aguilar told Tribune Business. “Why would JP Morgan Chase, a world-renowned US bank, accept it and the other correspondent banks not?”
JP Morgan Chase, sources said, also acts as a US correspondent for other Bahamas-based commercial banks, including Scotiabank.
However, the Canadian banks have cited their internal global policies as reasons why they will not deal with Bahamian web shop operators, repeatedly stating they are barred from accepting Internet gaming-related deposits.
Dr Rodgers, meanwhile, said US banks agreed to become correspondents for their Bahamian counterparts based on two sets of criteria - balance sheet strength, solvency and liquidity, and the fact they were not dealing with deposits/funds placed by questionable sources.
“If JP Morgan feels they’ve satisfied that criteria, they will be a correspondent bank,” Dr Rodgers added.
Bank of the Bahamas’ confirmation that it has been given approval by its main US correspondent bank to conduct business with legalised web shops clears a significant hurdle for both the sector and the Government.
A major policy objective for the Christie administration in legalising the domestic web shop industry is to ensure the multi-million dollar funds it generates can be accepted into the formal Bahamian commercial banking system.
With the legality of web shop gaming ‘in question’ prior to the new Gaming Act’s passage into law, Bahamian banks had refused to transact businesses with web shops or accept their funds.
This had the effect of creating a ‘parallel banking system’, as web shops sought other avenues to obtain returns on their revenues and profits.
The result was an ‘informal economy’ where web shops were issuing mortgages and other loans, and investing in productive sectors of the economy such as real estate.
To address this, and the potential weaknesses this created in the Bahamas’ anti-money laundering regime, the Government was ‘banking’ on legalisation opening the financial industry’s doors to licensed web shop operators.
However, this objective ran into an immediate roadblock as a result of the commercial banking industry’s resistance to accepting web shop deposits.
All three Canadian-owned banks - Royal Bank of Canada (RBC), CIBC FirstCaribbean and Scotiabank - said worldwide guidelines prevented them from accepting funds related to Internet gaming.
And the Bahamian-owned institutions, Commonwealth Bank and Fidelity Bank (Bahamas), have both indicated they are not interested in having web shops as clients due to fears they would lose their correspondent banking relationships, and be cut off from the US financial system.
But the disclosure by Bank of the Bahamas effectively breaches this resistance, and will give legalised web shops a way to access both the domestic and global financial systems.