By NEIL HARTNELL
Tribune Business Editor
The Central Bank says “there is nothing” to suggest money laundering occurs “on any scale” in The Bahamas based on its analysis of currency circulation trends.
The regulator, in research on both Bahamian and US dollar denominated currency, said it was highly unlikely that the former will be used in cross-border money laundering schemes and other illicit financial activities because of its lack of convertability due to exchange control restrictions.
“The Central Bank does not observe any pattern here that would suggest large scale money laundering using Bahamian currency,” it said of its findings. “Due to exchange control restrictions, Bahamian Dollar notes are most unlikely to serve as a material vehicle for cross-border money laundering, particularly given the ready international availability of freely convertible US dollar notes.”
That finding is likely to be seized upon by advocates calling for a “lighter touch” regulatory approach to Bahamian dollar-denominated transactions and accounts - something that they argue is justified because the local currency’s usefulness for financial criminals is limited.
The Central Bank’s analysis, published as part of The Bahamas’ first-ever annual report on its efforts to combat money laundering and terror financing, said national currencies employed for money laundering “will tend to be biased towards large denomination notes.
“Furthermore, these large denomination notes are likely to turn over less frequently than smaller denomination notes,” it added. The Central Bank said such “bias” was not apparent with the local currency given that $100 Bahamian bills, as a proportion of the total value of currency in circulation, had remained constant for seven years - never varying beyond the 40-42 percent range.
“Just over half the value in Bahamian notes are represented by $50 and $100 denominations, while over half the number of notes are represented by the $1 denomination,” the study found. “The Bahamian note composition has been stable in recent years, with the median note by value the $50 denomination, and the average note value around $10.
“The value of notes per capita has increased slightly in recent years, from around $800 to around $1,000. The value of notes as a proportion of GDP has also increased slightly, from 3 percent in 2012 to around 3.8 percent currently.”
The value of outstanding Bahamian dollar bills rose steadily over the period between 2012 to mid-2018, the Central Bank added, growing from $324.812m to peak at $411.038m in 2017 - a growth of 26.5 percent.
As for US currency circulating in The Bahamas, the Central Bank said the data suggested flows through this nation’s financial system were driven by tourist spending rather than money laundering. It added that the amount of local spending financed by US dollars was likely underestimated given that merchants often issued change in the same currency.
“The median note in number, and dominant note by value, is the $20 denomination, which is consistent with travelers making withdrawals in this denomination from ATMs before arriving in The Bahamas,” the Central Bank said.
“The value of the average note purchased is about the same as for Bahamian currency, from $10 to $11. $100 denomination notes make up only 1 percent of total notes presented, whereas $1 notes make up about 40 percent of notes presented.”
It added: “As a point of comparison, about 80 per cent of the value of US dollar currency outstanding globally is in the $100 denomination, which has more notes on issue than the $1 denomination. The Bahamian pattern shows 10 per cent of value in the $100 denomination, and 40 times’ the number of $1 notes compared to $100 notes.
“The data suggest the flow of US dollar denominated notes through the Bahamian financial system looks very much like tourist expenditure, and very little like money laundering.”
Acknowledging that it had more work to do in assessing the link between circulating currency and money laundering, the Central Bank concluded: “The data at hand suggests that patterns of currency use are reasonably stable over time.
“There is nothing in the US dollar data to suggest Bahamian money laundering on any scale, [and] there is little in the Bahamian dollar data to suggest material money laundering domestically. This trend will continue to be monitored.”