0

Bahamas ‘shooting ourselves in foot’ on insurance regulation

* Bahamas ‘going beyond’ AML standard * AG: ‘We’ll give general insurers one year’ * Fears captive revival undermined

FEARS were raised again yesterday that the Bahamas could be “shooting ourselves in the foot” by including general and captive insurers within its anti-money laundering regime.

Emmanuel Komolafe, the Bahamas Insurance Association’s (BIA) chairman, urged the Government to provide the “benchmarking” studies and data to support its decision to define both market segments as financial institutions under the Financial Transactions Reporting Act (FTRA).

Expressing concern that such a move would undermine the Bahamas’ efforts to revive a captive/external insurance industry, Mr Komolafe said this nation was “going beyond” what was necessary to comply with global standards. The BIA chair said none of the Bahamas’ international financial centre (IFC) rivals defined external insurers as ‘financial institutions’ under their anti-money laundering regimes, suggesting this nation would be unable to compete on a ‘level playing field’.

And Mr Komolafe also questioned the ‘medium-high’ risk rating attached to the insurance industry by the Bahamas’ just-released National Risk Assessment (NRA) on financial crime, arguing that it was inconsistent with the ‘low’ or ‘medium risk’ designations employed by other countries.

Mr Komolafe was speaking after Carl Bethel QC, the Attorney General, reiterated the Government’s determination to include property and casualty, and external, insurance as ‘financial institutions’ under the FTRA.

Disclosing that he intended to meet with the BIA “possibly early next week to bring them up to speed with where we are”, Mr Bethel acknowledged the insurance industry’s position was contrary to the Government’s.

“We begged to differ with them on that,” he said of FTRA inclusion, revealing that the Government would give Bahamas-based property and casualty underwriters, agents and brokers one year to obtain the necessary Know Your Customer (KYC) information on clients.

“They came back and [asked for] a lower level of KYC information,” Mr Bethel said of the insurance industry. “We gave them a period of one year in which they would be able to go through their entire portfolio of clients.

“We’ve given them that period during which it’s expected they will obtain the required degree of due diligence and KYC commensurate with their risk profile, determined in conjunction with their regulator.”

Mr Bethel said that extending the KYC regime to property and casualty insurers would expose persons living above their means, such as persons with no obvious source of income seeking “to insure a Maserati or Mercedes”.

He added that including the sector under the framework was “not peculiar to the Bahamas”, given that global insurance bodies had now adopted the same standard.

Mr Komolafe, though, said the BIA’s own research suggested the opposite. He added that the Financial Action Task Force’s (FATF) 40 recommendations, widely used as the global standard for anti-money laundering, did not include general and external insurers in their ‘financial institution’ definitions.

And the July 2017 assessment of the Bahamas’ financial crime defences by the FATF’s Caribbean affiliate did not link any of the uncovered deficiencies, or recommended solutions, to not including general and captive insurers in that definition, the BIA chairman added.

Mr Komolafe said the July 2017 report had been cited “on multiple occasions” as the rationale for bringing these insurance sectors under the FTRA, but this assertion was not backed by its contents.

He added that the Bahamas’ ambitions to rebuild a captive insurance sector, which is one of the industries targeted by the Commercial Enterprises Bill, could also be undermined by imposing the extra costs and bureaucracy associated with KYC due diligence.

“It’s important to make sure we’re attractive,” he told Tribune Business. “If Bermuda, Cayman and the BVI have external insurance in their definition of financial institutions, fine, there’s a level playing field.

“We lost captive insurance several decades ago: Could we find ourselves in the same position again? What is the rationale, factors driving these decisions?”

Mr Komolafe continued: “We want to be an industry compliant with accepted international standards, and don’t want the Bahamas to be on any adverse listing, but it’s important at the same time that we don’t shoot ourselves in the foot and remain competitive with IFCs that compete in the same space, and have a thriving insurance industry.

“There’s a cost to complying with all this, and the cost and ease of business. Whatever decisions we make have to be well thought-out and supported by benchmarking and data. In the absence of that, maybe we’re going beyond what we should be doing and putting ourselves at a competitive disadvantage.”

Mr Komolafe also expressed concern that part of the rationale for branding the insurance sector as ‘medium-high risk’ in the Bahamas NRA was, again, the fact that property and casualty insurers were not included under the FTRA.

He pointed out that nations such as the UK, Ireland and Singapore all attached a ‘low risk’ rating to the insurance industry in their own NRAs, while Turks & Caicos ranked it as ‘low to medium’ risk.

Comments

evalynC 4 years, 11 months ago

I am disappointed with Mr Komolafe's comments above. The Government does not decide on what the rating in the "National Risk Assessment" for any given sector should be. The rating is determined by a survey of agencies operating in and regulating the sector. The medium-high rating is due to insufficient training and anti-money laundering controls in the General Insurance sector - which the Insurance Commission of The Bahamas will address in due course. It is commendable that the ICB has noted this vulnerability and will address it as not doing so can result in greater REPUTATIONAL damage for the country - if criminals take advantage of such deficiencies in the future. This kind of outcry by Mr. Komolafe is really not called for and is very unproductive. The issue here is facing the perceived problem and taking steps to correct them - after-all a stitch in time saves nine!

0

Sign in to comment