BUSINESS MONDAY: STRICTER REGULATIONS

SOME Barbadians are now facing the distinct possibility of not being able to open bank accounts or even maintain them at commercial banks.

That’s because new global Anti-Money Laundering (AML) regulations in addition to Combating the Financing of Terrorism (CFT) standards are being tightened by financial institutions.

Governor of the Central Bank of Barbados (CBB), Cleviston Haynes, highlighted these new developments in an address he gave to the Barbados Association of Insurance and Financial Advisers (BARAIFA) at the Lloyd Erskine Sandiford Centre.

He said that the intent of AML/CFT regulations is to prevent bad actors from using the financial system to cleanse their ill-gotten gains.

“This does not mean that legitimate accounts should be closed where documentation to verify client identity may not be readily available. Indeed, the international standards allow for an approach to customer due diligence based on risk,” the Governor remarked.

“Compliance with AML/CFT guidelines must not mean that ordinary Barbadians should be deprived of the ability to open or retain a bank account,” the Governor told the meeting.

Haynes pointed out that this situation would put financial inclusion by those seeking to borrow and those who want to open deposit accounts, at the risk of being excluded.

In fact, he made it clear that the AML/CFT standard setting body, the Financial Action Task Force (FATF), had itself committed to financial inclusion, that is, the application of measures that enable more individuals and businesses, especially low-income, unserved and underserved groups, to access and use regulated financial services.

“We all know that local financial institutions must comply with the international standards, which require financial institutions to conduct due diligence on their current and potential customers,” Haynes said.

The BARAIFA members heard him say that over time, the requirements had become more stringent and the costs of non-compliance more severe.

“Some financial institutions, faced with the ever-present risk of loss of correspondent banking relationships, have chosen to de-risk some of their customers,” he pointed out.

Noting that de-risking as a single incident would be troubling, the Governor declared that at a systemic level, it could be dire not only for individuals but also for the Barbados economy.

For the self-employed like taxi drivers, hair braiders, and dressmakers, there is often no job letter to present when seeking to open a bank account.

According to him, picture the recent school-leaver who has just gotten his first job. He lives at home, so he has no bills in his name, he has never travelled and has no passport, and he has no driver’s licence.

The CBB top Economist maintained that legitimate prospective customers must be able to access the financial system, and existing legitimate account holders must be able to continue to obtain the financing they will need to expand their businesses.

The irony of the situations cited is that maintaining many of these customers is not incompatible with the standards.