THE insurance industry “is not oblivious” to the need for the Bahamas to comply with global anti-financial crime standards and avoid sanctions, its chairman said yesterday.
Emmanuel Komolafe, the Bahamas Insurance Association’s (BIA) head, told Tribune Business it “doesn’t take lightly the importance of the Bahamas meeting its international obligations”, but felt recent legal changes impacting the sector amounted to “overreach”.
He pointed out that the insurance industry would be impacted as badly as other financial sectors if the Bahamas was ‘grey-listed’ or subjected to financial sanctions, should its regulatory regime not meet anti-money laundering and counter-terror financing standards.
Countering suggestions that insurers were too narrowly focused on their own interests over impending changes to the Financial Transactions Reporting Act, and not alive to those of the Bahamas generally, Mr Komolafe urged the Government to quickly release the accompanying regulations. Without these, and regulatory guidelines from the Insurance Commission, the BIA chair warned that the sector - and all other financial services industry segments - would struggle to implement the necessary policies, procedures and system adjustments to effect the new legislation.
“We don’t take lightly the importance of the Bahamas meeting its international obligations,” Mr Komolafe told Tribune Business. “We appreciate the importance of this initiative of complying with the Financial Action Task Force’s (FATF) 40 recommendations. That’s extremely important.”
He was speaking after Carl Bethel QC, the Attorney General, said the insurance industry’s interests could not be placed ahead of the wider Bahamas as this nation seeks to escape the FATF’s ‘enhanced review process’ that was sparked after its Caribbean affiliate identified significant gaps in the country’s financial crime defenses.
Tribune Business last year revealed that the Bahamas seemed to have regressed on its financial crime defences, with the CFATF’s 2017 Mutual Evaluation Report (MER) finding this nation only ‘partially compliant’ on 21 - more than 50 per cent - of 40 ‘technical’ standards.
While the Bahamas was deemed ‘non-compliant’ with just one standard, and found ‘compliant’ and ‘largely compliant’ on eight and 10, respectively, the CFATF report also rated this nation as in either ‘moderate’ or ‘low’ compliance with its 11 ‘effectiveness’ ratings.
Should the Bahamas remain in the ‘enhanced review process’ it could be subjected to financial sanctions, an outcome Mr Bethel said the Government wants to avoid at all costs. But the insurance industry expressed concern that the specific reforms impacting its business went further than the global standards set by the FATF.
In particular, it warned against including property and casualty insurers among the Financial Transactions Reporting Bill’s list of ‘financial institutions’ that have to apply risk-based customer due diligence (KYC) to their clients, pointing out that the sector was not defined as such by the FATF.
And insurers also warned that applying the risk-based approach to life and investment-related insurance would remove the previous $2,500 annual aggregate premium threshold below which clients were not subjected to such KYC measures. With 75-80 per cent of existing policyholders set to be impacted, the sector asked for a year’s ‘grace period’ to bring current portfolios in line with the change.
Both requests were ultimately granted by the Government, and Mr Komolafe said yesterday: “We have seen nothing in that definition of ‘financial institutions’ to show that it includes general insurance. We don’t take it lightly, but we can only go on what’s happening now.”
He emphasised that the Bahamian insurance industry’s position was based on facts, not his opinion or that of others, and added: “If it’s a requirement of international standards we do it, but if it’s not a requirement it’s overreach.
“I don’t want this to be construed as an industry oblivious to the international standards. We have to maintain the Bahamas as a compliant jurisdiction so it does not appear on any ‘grey’ or ‘black’ list, or we lose our correspondent relationships. We are very much aware of these things.
“We want the best for the Bahamas and have to deal with the issues at hand. If we lose our correspondent banks it impacts the insurance industry. If we’re blacklisted it impacts our ability to get new business,” Mr Komolafe continued.
“We support conceptually what the Government is doing, meeting our obligations and complying with international standards, but it has to be in a way to make sure we’re not overreaching.”
Mr Komolafe said the Insurance Commission had informed the industry that health insurance would not be captured by the legislation, and added: “We understand the intent is to pass the legislation as soon as possible, but we don’t have the regulations.
“The regulations provide the details on how we implement the legislation. Without regulations you can’t begin to address your policies and procedures. Following from that are the guidelines issued by the regulators.
“We may have to do some internal or external adjustments with our policies, procedures, train line staff and agents and brokers.”