By NEIL HARTNELL
Tribune Business Editor
THE Central Bank wants to tell the world that the Bahamas' international banking sector "cannot launder cash", with virtually all institutions having ceased taking such deposits.
The regulator, unveiling the results of an anti-money laundering/counter terror financing survey that drew responses from 80 licensees, said the sector's non-acceptance of cash was an "important signal" of how seriously the Bahamas and its institutions take their regulatory obligations.
"Only six of 72 international SFIs (supervised financial institutions) reported accepting cash deposits," the regulator said of the survey findings. "Upon follow-up, the Central Bank discovered that four of the six had already ceased taking cash deposits, and the other two were reconsidering their position.
"The Central Bank intends to take additional steps to clarify that the Bahamian international banking and trust sectors do not accept cash. This is perhaps an obvious but important signal that this sector not only does not launder cash, it cannot launder cash."
Such a message assumes additional importance ahead of the Bahamas' June assessment by the Financial Action Task Force (FATF), the global standard-setting body on anti-financial crime measures.
The FATF will be assessing whether the Bahamas has satisfactorily addressed the deficiencies in its anti-money laundering/counter terror financing (AML/CFT) regime that were identified last year by its sister body, the Caribbean Financial Action Task Force (CFATF).
Elsewhere, the Central Bank said the survey showed the impact of recent international regulatory initiatives on the financial services industry's client base, with portfolios increasingly featuring Latin American customers amid a "substantial decline" in tax avoidance business.
"Generally, the results indicate that the international sector's historic focus upon European clients is shifting to a focus upon North and Latin American and other regional clients," the Central Bank said.
"This reflects the substantial decline of the Bahamas as a jurisdiction for tax avoidance, and its growing importance as a preferred western hemisphere centre for private wealth preservation. A substantial Swiss and British base of business, however, has remained with the Bahamas, on a tax-compliant basis.
"It is clear that, by and large, Bahamian international banking and trust clients are not conducting their main operating accounts in the Bahamas. Instead, they are using this jurisdiction as a repository of wealth."
The Central Bank, meanwhile, said the survey showed that "at least a minority of the industry needs to improve its performance" when assessing whether their institution's policies and procedures comply with Bahamian anti-financial crime laws and regulations.
"This is a point of clarity to be communicated to SFIs. SFIs cannot rely solely or primarily upon regulators for such assessments," the Central Bank added: "The Central Bank intends to look more closely at the quality and depth of board reviews on AML/CFT risk.
"We consider that a quarterly board review is reasonable in many cases. The Central Bank will expect to see evidence, however, that in addition to regular reviews, Boards are conducting at least an annual, in-depth review of their SFI's AML/CFT risks, controls and realized outcomes."
The Central Bank survey found that licensees deemed almost 15 per cent of their accounts to be 'high risk', while the figure for the domestic commercial banking industry is just 1 per cent. Around 2.9 per cent of international financial institution accounts were related to politically exposed persons or PEPS, meaning persons who are either government ministers, senior civil servants and their friends and families.
In total, across the domestic and international banking sectors, some 12,392 accounts containing a collective $67.032 million were flagged by institutions as 'high risk'. This compares to 472,756 non-risky accounts containing $111.147 million, although the latter figure does not include a dollar value for the domestic commercial banks.