The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamas Insurance Association's (BIA) chairman yesterday again challenged the Government's desire to "rewrite the rules" on the industry's anti-money laundering requirements.

Emmanuel Komolafe told Tribune Business that his own "extensive research", and that of the wider insurance industry, had left him "more convinced" than ever that the Bahamas "ought not to go down the path" of defining property and casualty insurance as 'financial institutions' under the Financial Transactions Reporting Bill. His comments came after BIA representatives were last week informed by Carl Bethel QC, the attorney general, and his officials that the Government is sticking to its position of defining this sector - and captive insurance - among the 'financial institutions' listed in a Bill set to be debated imminently by Parliament.

Mr Komolafe said the Government's rationale for its treatment of the two insurance market segments appeared to be that it would place the Bahamas 'ahead of the curve', and enable this nation to 'get out in front' of evolving global standards that would eventually include them as 'financial institutions' for customer due diligence purposes.

The BIA chairman, though, questioned why it was necessary for the Bahamas to exceed global benchmarks given that the Financial Action Task Force (FATF), the world 'standard-setter' for anti-money laundering and counter-terrorism financing rules, did not call for property and casualty or captive insurance to be treated as such.

He added that the International Association of Insurance Supervisors (IAIS), the global body that represents industry regulators, has adopted a similar stance to the FATF, further challenging the Government's position.

And Mr Komolafe also warned that going beyond FATF requirements will increase the insurance industry's costs through the imposition of enhanced Know Your Customer (KYC) scrutiny, potentially impacting the premium prices facing Bahamian consumers.

He suggested that this would negatively affect insurance affordability and the 'ease of doing business' at a time when the Minnis administration is focusing on improvements in both areas.

"It's quite an awkward, strange path they seem to be taking," Mr Komolafe told Tribune Business of the Government's position. "There's nothing in the public domain, on the Internet or in the arena of international compliance professionals to indicate that they [property and casualty, and captive, insurance] should be included in the Financial Transactions Reporting Bill."

Pointing out that the FATF and IAIS recommend that only life insurance, and related investments, should be subjected to enhanced KYC due diligence, the BIA chairman added: "It is still not clear to me why we are seeking to rewrite the rules to include the non-life sector.

"I have spent a great deal of time since the release of the Financial Transactions Reporting Bill trying to rationalise the approach we are seeking to adopt in this matter. This has led to extensive research of several documents, standards, as well as websites of the relevant international agencies to ascertain whether we are missing something in this discussion.

"However, I have found nothing to make me change my viewpoint on this subject. The more I look into this matter, the more I am convinced that we ought not to go down the proposed path."

Based on last week's discussions with the Attorney General, Mr Komolafe said the Government's position appeared to be that it was "going beyond" the existing FATF standard "in anticipation of what is expected to be the new standard or norm vis-à-vis the general insurance sector".

He added: "Specifically, it was indicated that the standard is evolving and subject to change; hence the decision to be proactive. We are aware that the Government has the final say at the end of the day, but would hope that they will reconsider this matter in a rational and holistic manner."

Mr Bethel declined to comment when contacted by Tribune Business, although he indicated he may comment after reviewing the insurance industry's remarks.

Mr Komolafe, though, said some in the industry had likened the Government's stance to "killing a mosquito with a sledgehammer". However, he was quick to point out that last week's meeting between the BIA and Attorney General's Office was "cordial".

Expressing hope that further talks would occur once the regulations accompanying the Bill are issued, Mr Komolafe added: "The BIA was assured that there will be provisions incorporated in the legislation or regulations to minimise, as much as possible, the impact on the industry.

"Additionally, a one-year transition period will be given to both the life and health, and property and casualty, sectors of the industry to provide adequate time for compliance with the requirements of the new legislation."

Mr Komolafe, who is Colina Insurance Company's chief risk and compliance officer, and a former policy officer with the Central Bank's bank supervision department, said the FATF's standards were not alone in exempting property and casualty, plus captive, insurance from such KYC and customer due diligence requirements.

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 the 'financial institutions' definition.

And nor did the Bahamas' recently-published National Risk Assessment (NRA) of financial crime threats "foreshadow" such treatment for these two sectors in the Financial Transactions Reporting Bill.

While the NRA report imposed a 'moderate to high' risk rating on the Bahamas' non-life insurance sector, Mr Komolafe said this "conclusion seems to be erroneously justified on the premise that the risk profile is due to the exclusion of the non-life sector from the definition of financial institution in the" Bill.

He added that the IAIS 'core principle' dealing with financial crimes also indicated that property and casualty, and captive, insurance were never intended to be covered by this definition.

And, should it be determined that these segments pose a risk, Mr Komolafe said the IAIS remedy was for anti-money laundering and counter terror financing measures to be imposed via a risk-based - rather than 'blanket' - approach.