Banks & Trusts: Supervisory and Regulatory Guidelines

The Central Bank of The Bahamas, regulatory and supervisory authority for the banking and trust operations in The Bahamas, has issued Interim Guidelines for Anti-Money Laundering and Know Your Customer Procedures, such provisions taking effect this past Thursday, April 1, 2004.

In introducing the Guidelines, the Central Bank referenced its duty, in collaboration with financial institutions, to promote and maintain high standards of conduct and management in the provision of banking and trust services. It noted that all licensees are expected to adhere to the regulatory authority’s licensing and prudential requirements and ongoing supervisory programmes, including periodic onsite inspections, and required regulatory reporting. Licensees are also expected to conduct their affairs in conformity with all other Bahamian legal requirements.

The Banks and Trust Companies Regulation Act, 2000 directs the Inspector of Banks and Trust companies to ensure that banks have in place strict Know-Your-Customer (KYC) rules that promote high ethical and professional standards, and so prevent the use of the bank for criminal purposes. The Inspector is required to ensure effective off-site supervision of licensees and is empowered to conduct on-site examinations for the purpose of satisfying himself that the provisions, inter alia, of the Financial Transactions Reporting Act, 2000 are being complied with.

The Central Bank has prepared these Interim Guidelines to inform licensees of their obligations under the Financial Transactions Reporting (Amendment) Act, 2003 (the Amending Act) and the Financial Transactions Reporting Amendment) Regulations, 2003 (the Amending Regulations).

These amendments maintain the current high standards which exist in The Bahamas, while offering increased flexibility in the application of the AML-KYC requirements.

To adequately apply the Amending Regulations, licensees need to adopt a risk based approach to customer due diligence. These Interim Guidelines set out for licensees, the minimum criteria for developing a risk based approach to verifying customer identity.

The Central Bank will shortly issue for consultation, Guidelines for Anti-Money Laundering and Know Your Customer Procedures for Licensees. These Guidelines will replace the existing Guidelines on Anti-Money Laundering and Suspicious Transactions Reporting issued by the Financial Intelligence Unit in 2001, but only in relation to anti-money laundering and know your customer procedures. Licensees should continue to adhere to the FIU’s Guidelines insofar as they relate to suspicious transactions reporting.

In the meantime, these Interim Guidelines apply to all licensees of the Central Bank of The Bahamas.

In February, the Central Bank issued a Public Notice to licensees detailing the Reporting Requirements in respect of customers with existing facilities which remain unverified as of 1st April as well as requirements relating to the implementation of a risk rating framework. Licensees are required to submit to the Central Bank, not later than 30th April 2004, a listing of all unverified facilities, while the rating framework is required to be in place no later than 30 June, 2004.