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Regional bankers urged to embrace technology

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Turnquest

(CMC) – Bahamas Finance Minister K. Peter Turnquest has told Caribbean bankers that digitisation is not just the new normal in banking, but a new normal in life and part of the global shift towards openness, transparency, access and engagement.

“Technology is the engine fuelling these shifts. It is the vehicle being used to drive more productivity, efficiency and added value in ways that are quantifiable,” Tunrquest told the 45th annual general meeting of the Caribbean Association of Banks Inc (CAB) underway here.

He told the bankers that the private sector is being pushed to adapt and so are governments.

“We must embrace the opportunities presented by these changes. We must be at the forefront of innovation to secure our position in this normalised, not new, digital era” he said, noting also that among the major concerns affecting the regional financial sector are what appears to be the imbalance of pressure and scrutiny from the international regulatory framework and the blacklisting of Caribbean countries.

Turnquest said that regardless of the progress made, no matter the commitment, the goal posts seem to keep moving.

“Countries in the region continue to be discredited due to negative perceptions that do not accurately reflect the current strength of their local regulatory regimes,” he said, noting that the consequences that black and grey lists have on access to correspondent banking at the micro level, and economic stability at the macro level needs to be quantified and rationalized.

Turnquest said that last month, he called on the International Monetary Fund (IMF) to take a more active role in developing objective data on Anti-Money Laundering and Countering Financing of Terrorism ​(AML/CFT) ​reforms in Caribbean jurisdictions in two specific areas.

He said these areas are independently quantifying the economic and fiscal costs posed by international financial services regimes in the region particularly to the European Union and countries in the Organisation for Economic Cooperation and Development (OECD) and quantifying how the returns to the OECD and EU from their emphasis on our jurisdictions line up with the costs they continue to impose on us relative to the tax base and financial crimes base which they seek to impact

“We must increase our collective efforts to challenge the system that disproportionately costs the region, undermining our efforts to attract foreign investments, to promote economic diversity and resilience and development for our people.”

Turnquest said that the latest knock to the region came from the inclusion of the Bahamas and Trinidad and Tobago on a United Kingdom watch list for money laundering.

He said this was a direct consequence of the Financial Action Task Force (FATF) list of jurisdictions that it deemed as having strategically deficient anti-money laundering measures.

“There are a few things we can say about this: Governments in the region are not blind to the needs for enhanced enforcement when it comes to AML/CFT. Our standards of enforcement must reinforce the no-tolerance stance of our governments and the quality of our domestic regulatory regimes”.

He said while there is clearly room for improvement, “we cannot let the perception stand that our financial regulatory agencies and the financial intelligence units somehow lack competence or quality; that they are failing to produce any results.”

He said speaking for his country, Nassau has made quantifiable progress since 2015.

He said between 2016 and 2017 there was a 46 per cent increase in the number of suspicious transactions received and a 69 per cent increase in the number of cases sent to the Royal Bahamas Police Force.

He said between 2015 and 2017, suspicious transactions that were analysed and reported closed by our financial intelligence unit represented between 35 and 60 per cent of all cases received.

“Of course, we can and we will do more. We want to see more prosecutions and more convictions, and we want to see stronger communication and follow up with financial institutions. After all, when the perception of our enforcement is weak, the financial institutions are ultimately the ones that directly suffer. I am sure this is something all jurisdictions can relate to”

But he said “to strengthen these efforts we must all buckle down and increase our assessments and improve the outturns of our enforcement teams to bolster their efforts and to add greater technical resources and infrastructural support.

“In the end, the enormous reputational damage on small nations caused by blacklisting and watch listing mechanisms is a penalty too high to impose on the region. No matter how we strengthen our regimes, we will not be able to lift the deeply entrenched stigma on our nations if we are constantly viewed as injurious to the international banking system.

“I am sure you will all agree: It is time for the international community to act in true partnership in the true spirit of harmonious and respectful cooperation towards transparent and mutually accepted goals,” Turnquest said, noting that each country has its own unique circumstance when it comes to enforcement, “but we can all appreciate the broader point.

“There is an imbalance of international pressure and scrutiny on countries in the region that have demonstrably high levels of political will, and are doing the work and producing results in line with our shared values and international commitments.

“The model of blacklisting and watch listing is causing our countries disproportionate and unjustifiable harm, and it is time to create a better way for international cooperation,” Turnquest said.

The conference is being held under the theme “Banking in the Era of Digitization,” and Turnquest said that Bahamas has developed a new system that could be a model for the region.

He said with all of the changes in the industry, “we all have to contend with the potential loss of correspondent banking relations (CBRs).

But he acknowledged that technological innovations will not replace these, but they can help to improve the region’s AML risk profiles, and make it easier to retain or expand access to CBRs.

“For the Bahamas, the Central Bank has embarked on a project to pilot a digital version of the Bahamian currency that will close gaps that still leave us more vulnerable to money laundering and related risks. The Central Bank’s approach is to maintain and safeguard integration with retail banking services.”

He said the central government is supporting this initiative with a commitment to develop a digital national identity infrastructure, which would stress the sovereignty of the individual over the access to and use of their personal data.

“The public sector will also be a dominant user of the digital infrastructure to make and receive payments. The design of a digital currency system, foremost for retail transactions, addresses several key needs for The Bahamas.”

Turnquest said that aside from reducing cash dependence, it would accelerate the push for a more interoperable domestic payments system, and provide access to domestic financial services on a more even footing for all persons.

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