The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank is proposing to slash by 60 per cent the time allowed for owners of some $86 million in inactive accounts to claim their funds, as it moves “more in line” with global standards.

John Rolle, the Central Bank’s governor, told Tribune Business yesterday that the regulator aimed to complete consultation on further proposed changes to the dormant accounts regime within the next month.

Among the major amendments for consideration in the second consultation round is the Central Bank’s proposal that account/asset owners have only 10 years in which to claim their property, as opposed to the initially recommended 25 years.

“The Central Bank proposes to reduce the period during which a claim may be brought for dormant account funds from the 25 year period, proposed in the previous draft Bill, to 10 years,” the explanation attached to the proposed changes reads.

In addition, Bahamian bank and trust companies will have to retain records on dormant accounts “for a maximum period of 15 years after the transfer is made to the Central Bank, or for five years after the assets are paid out to a valid owner.

The regulator is also expanding the definition of “unclaimed balances” or ‘dormant accounts’ beyond traditional bank accounts, specifically including securities accounts - those containing shares and debt instruments - among the facilities that must be transferred to the Central Bank.

Several of the key recommended amendments were supplied by the Association of International Banks and Trusts (AIBT) and other industry organisations, with the Central Bank deciding to exempt jewellery from so-called ‘dormant assets’ that must be transferred to it.

“We’re trying to get the Bahamas framework more in line with the approach other countries take for unclaimed assets,” Mr Rolle told Tribune Business.

“It [the second consultation round] was just to clarify one or two small details in the framework. We expect that once the consultation is completed, that over the remainder of the summer months, we’ll be able to put this directly under the Government’s control, so they can take a decision to move the process forward.”

The Central Bank governor added that existing legislation “only provides protection for deposits”, hence the need to expand the definition of ‘dormant assets’ to include securities accounts, as well as gemstones, but excluding jewellery.

“This expands it to include other assets in the custody of banks,” he explained. “It protects more holistically the deposits, and it puts in place a more transparent regime for interest rates that the Central Bank pays as the custodian of those assets.”

The regulator said the change to its policy on dormant securities accounts followed consultations with both the AIBT and Securities Commission of the Bahamas, plus “further research/benchmarking exercises”.

“At present, banks are required to transfer cash dividends and other cash returns realised on such assets to the Central Bank, but to retain custody of the securities themselves,” the Central Bank said, noting that this will now alter.

It is also proposing to clarify the definitions of ‘customer’, and ‘communication, acknowledgment,request or instruction’, following representations from the AIBT.

“The definition [now] includes situations that are common to private banking arrangements, including where the customer has authorised another person to operate his/her account,” the Central Bank said.

It said such circumstances might involve an external asset manager, agent or person acting under power of attorney for the account holder, or where the latter has died.

“The lack of clarity as to what constitutes a ‘communication, acknowledgment,request or instruction’ was particularly concerning to licensees that offer private banking services,” the Central Bank added, “as the nature of the customer relationship often requires them to carry out their customers’ verbal instructions, issued either via telephone calls or face-to-face meetings.”

The Central Bank also proposes that cash found in dormant safety deposit boxes be transferred to it, while banks and trust companies will be permitted to “deduct reasonable costs from the proceeds of sale of the assets” to cover costs incurred in liquidating them.

The proposed reforms, if accepted, will require amendments to both the Central Bank of the Bahamas Act, and Banks and Trust Companies Regulation Act.

“We have a fairly robust regime currently,” Mr Rolle told Tribune Business. “For financial institutions, it [the changes] will mostly mean updating their reporting to the Central Bank on new types of assets, and accounting in their systems of the new timelines for forfeiture.”

The Central Bank last year said it was also mulling legislative reforms that would transfer 79 per cent of existing dormant account balances to the Treasury within two months of receiving them.

The monetary policy regulator, in its 2014 annual report, revealed that all dormant accounts with balances under $500 would be earmarked for rapid transfer to the Public Treasury via proposed reforms to the Central Bank of the Bahamas Act and Banks and Trust Companies Regulation Act.

Based on data contained in the Central Bank’s annual report, 79 per cent of the 37,900 dormant accounts it held at-end 2014 had balances below $500. These total $3.4 million, and 81.3 per cent of this sum - $2.8 million - are denominated in Bahamian dollars.

Mr Rolle indicated the Central Bank was still likely to proceed with this reform, and said: “Right now, there is no expressed provision in the legislation for that to happen, and funds can lie dormant in perpetuity.

“After a certain number of years, the funds go to Government by default.”