CONSULTATION PAPER on the Draft Banks and Trust Companies

The Central Bank of The Bahamas

CONSULTATION PAPER on the Draft Banks and Trust

Companies Regulation (Amendment) (No. 1) Bill, 2013 and the Draft Banks and Trust Companies (Administrative Monetary

Penalties) Regulations, 2013

March, 2013

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TABLE OF CONTENTS

I. Introduction

II. Key Proposed Amendments to the Banks and Trust Companies Regulation Act, 2000

III. Introduction of Banks and Trust Companies (Administrative Monetary Penalties) Regulations,

2013

IV. Consultation Period

Annex 1: Draft Banks and Trust Companies Regulation (Amendment) (No.1) Bill 2013

Annex 2: Draft Banks and Trust Companies (Administrative Monetary Penalties) Regulation

2013

Annex 3: Draft Central Bank Guidelines on the Administration of Monetary Penalties

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I. INTRODUCTION

1. As the regulator with responsibility for the supervision of banks, trust companies, Registered

Representatives, non-bank money transmission businesses and money transmission agents

operating in and from within The Bahamas, the Central Bank of The Bahamas (the Central

Bank or the Bank) keeps under review the effectiveness of the various regulatory tools at its

disposal, including the legislative instruments which set out the parameters of the Central

Bank’s authority. The Central Bank has undertaken a review of the Banks and Trust Companies

Regulation Act, 2000 (the principal Act) and has identified certain areas that require legislative

amendments and the introduction of related subsidiary legislation and supervisory guidelines.

The Bank believes that its proposals will strengthen the regulatory framework for its licensees

and will give the Central Bank more flexibility and wider powers to address supervisory issues.

The Bank also seeks, through the proposed amendments, to facilitate better understanding of its

regulatory requirements by clarifying certain provisions of the principal Act.

2. This Consultation Paper invites comments on the Bank’s proposals which are set out in the

following draft Bill, regulations and guidelines:

(i) the Banks and Trust Companies Regulation (Amendment) (No. 1) Bill, 2013 (the Bill);

(ii) the Banks and Trust Companies (Administrative Monetary Penalties) Regulations,

2013 (the Regulations); and

(iii) the Central Bank’s Guidelines for the Administration of Monetary Penalties (the

Guidelines).

II. KEY PROVISIONS OF THE PROPOSED BANKS AND TRUST COMPANIES

REGULATION (AMENDMENT) (NO.1) BILL, 2013

3. The draft Banks and Trust Companies Regulation (Amendment) (No. 1) Bill, 2013 is set out at

Annex 1.

4. The Key provisions of the Bill relate to the following matters.

(a) Enhancement of fit and proper requirements for controllers, directors and officers of licensees

5. In carrying out its duty of promoting and maintaining high standards in regulated institutions,

The Central Bank is charged with the responsibility of assessing the fitness and propriety of

persons nominated to perform regulated functions, as such, ensuring the probity and

competence of directors, executive and senior officers and significant shareholders, is critical to

the Central Bank’s achievement of this supervisory objective.

6. The proposed insertion of section 3E into the principle Act is intended to expand and clarify the

general criteria to be used by the Bank in assessing the fitness and probity of individuals to

perform regulated functions or to acquire an interest in a regulated institution. The proposed

new sections, 6A, 6B, 6C and 6D, which relate to shareholders who exercise significant

influence over the management of a licensee (controllers of licensees), provides the Central

Bank with enhanced powers to object to an existing or proposed controller of a licensee, to

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make directions with regard to the controllers of a licensee, and provides for offences, penalties

and defences in connection with obligations of controllers.

(b) Introduction of reporting requirement for directors

7. The proposed insertion of section 13B into the principal Act seeks to strengthen the Central

Bank’s ability to obtain timely, accurate and relevant information on the quality of a licensee’s

operations and financial condition. The new section imposes a positive obligation on the

licensees’ directors to report any developments that pose material risks to the safety and

soundness or reputation of licensees.

(c) Introduction of powers for the Central Bank to impose prohibition orders

8. The Bill proposes the insertion into the principal Act of sections 18E, 18F and 18G to empower

the Central Bank to issue prohibition orders against any person if the Bank is satisfied that the

person is not or has ceased to be a fit and proper person to perform a regulated function for or

in a licensee (i.e., acting as director, officer or auditor of a licensee or serving or acting in any

other capacity in or for a licensee which requires approval, supervision or monitoring by the

Central Bank). This is an administrative power, the effect of which is to exclude unfit

individuals from being employed within Central Bank regulated institutions, or to limit the

scope of their duties within or in respect of a licensee. The power is exercised for the protection

of the public and the country’s financial services industry. Criminal sanctions are also proposed

in respect of persons who act in contravention of a prohibition order issued by the Central

Bank. A person against whom a prohibition order is issued will have the right to apply to the

Central Bank to have the order varied or revoked. A decision of the Bank to issue a prohibition

order may be referred to the Supreme Court.

(d) Enhancement of the Central Bank’s powers to impose administrative monetary penalties

9. The proposed amendments to sections 24 and 24A of the principal Act, the proposed insertion

of sections 24B, 24C, 24D, 24E, 24F, 24G and 24H into the principal Act and the introduction

of the Regulations are intended to consolidate, strengthen and clarify the Central Bank’s

enforcement regime. These amendments and new provisions will empower the Central Bank to

impose administrative monetary penalties on any person if the Bank is satisfied that that person

has contravened any provision of the Act or regulations made under the Act, has failed to

comply with any order or direction issued by the Central Bank or breached any condition

and/or limitation imposed by the Central Bank. It is hoped that a more comprehensive and

transparent administrative monetary penalties regime will encourage persons to comply with

the provisions of the principal Act and regulations made under it and their regulatory

obligations.

III. INTRODUCTION OF BANKS AND TRUST COMPANIES (ADMINISTRATIVE

MONETARY PENALTIES) REGULATIONS, 2013

10. The draft Banks and Trust Companies (Administrative Monetary Penalties) Regulations, 2013

is set out at Annex 2.

11. The key provisions of the Regulations relate to the following matters. The Regulations will:

(a) designate the following as a contravention in respect of which an administrative

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monetary penalty may be imposed against any person by the Central Bank:

(i) a breach of the provisions of the Act or any regulation listed in the Schedule to the

Regulations;

(ii) non-compliance with any direction and/or order issued by the Central Bank; and

(iii) non-compliance with any condition and/or limitation imposed by the Central

Bank;

(b) classify each contravention as minor, serious or very serious, and

(c) provide for the imposition of a fixed daily penalty up to a prescribed maximum for the

late or erroneous filing of returns.

12. The Central Bank’s draft Guidelines for the Administration of Monetary Penalties are set out at

Annex 3. The primary purpose of the draft Guidelines is to assist supervised financial

institutions in understanding the Central Bank’s administrative monetary enforcement regime

by explaining the Central Bank’s approach to the assessment and imposition of administrative

monetary penalties and providing information on the process that the Bank will follow in

arriving at a decision as to whether or not an administrative monetary penalty should be

imposed.

IV. CONSULTATION PERIOD

13. The Bank invites your comments on the proposed changes by the 22nd

April, 2013. Your

comments and questions regarding the proposed changes should be directed to:

The Policy Unit

Bank Supervision Department

Central Bank of The Bahamas

Frederick & Market Streets

P.O. Box N 4868

Nassau, Bahamas

Tel (242) 302-2615

Fax (242) 356-3909

Email: [email protected]

March, 2013

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DRAFT

ANNEX 1

BANKS AND TRUST COMPANIES REGULATION (AMENDMENT)

(NO. 1) BILL, 2013

1. Short title and commencement.

(1) This Act which amends the Banks and Trust Companies Regulation Act may be cited as the

Banks and Trust Companies Regulation (Amendment) (No. 1) Act, 2013.

(2) This Act shall come into force on such date as the Minister may appoint by Notice in the

Gazette.

2. Amendment of section 2 of the principal Act.

Section 2 of the principal Act is amended by

(a) the insertion in its appropriate alphabetical position of the following —

―administrative monetary penalty‖ or ―penalty‖ means a monetary sanction imposed by the

Central Bank and includes a fine payable pursuant to section 24B of this Act;‖.

―Bank‖ has the same meaning as in section 2 of the Central Bank of The Bahamas Act, Ch

321

―controller‖ means a person

(a) in accordance with whose directions, instructions or wishes the directors or

officers of a licensee, or of another company of which the licensee is a

subsidiary, are accustomed or are under an obligation, whether formal or

informal, to act;

(b) who is able to exercise a significant influence over the management of a licensee

or another company of which it is a subsidiary by virtue of—

(i) a holding of shares or other securities in; or

(ii) an entitlement to exercise, or control the exercise of, the voting power at

any general meeting of, the licensee, or as the case may be, the other

company concerned.

(c) who is in a position to determine the policy of the licensee, but does not include

any person--

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(i) who is a director or officer of the licensee whose appointment has been

approved by the Central Bank; or

(ii) in accordance with whose directions, instructions or wishes the directors of

the licensee are accustomed to act by reason only that they act on advice

given by him in his professional capacity.‖

(b) The deletion of the word ―Governor‖ in the definition of ―Registered Representative‖ and

the substitution of the words ―Central Bank‖.


Section 3 of the principal Act is amended

(a) by the deletion of subsection (1) and the substitution of the following —

―(1) No banking business shall be carried on from within The Bahamas,

whether or not such business is carried on in The Bahamas, except

by a company in possession of a valid licence granted by the

Central Bank authorising it to carry on such business.‖

(b) in subsection (6) by the deletion of the word and letter ―and (g)‖ and the substitution

of the following: ―(g), (h) and (i).‖

4. Amendment of section 3C of the principal Act.

Section 3C of the principal Act is amended by the deletion of the reference to the numbers and

symbols ―5,‖ and ―10(a)‖.

5. Insertion of section 3D and 3E into the principal Act.

The principal Act is amended by the insertion immediately after section 3C of

the following new sections —

“3D. Application in case of a proposed company.

(1) A group of persons may, where the group proposes to form a

company for the purpose of carrying on a business referred to

in subsections (1) and (2) of section 3 or in paragraph (a) of

section 3A, make application to the Central Bank for an intimation

as to whether or not the company will be authorised to carry

on such business upon its incorporation.

(2) Except in the case of an application made to carry on a business

referred to in section 3A, the provisions of section 4 shall apply to an

application made under subsection (1).

3E. Criteria to determine if person is fit and proper.

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(1) The Central Bank shall, in determining for the purposes of this Act, or of any

regulation made under this Act, whether a person is a fit and proper person, have

regard to all the circumstances, including such person's —

(a) previous disciplinary record, general compliance history and whether the

Central Bank, or any other domestic regulatory authority or a Supervisory

Authority, has previously imposed a disciplinary sanction on the person;

(b) honesty, integrity and reputation;

(c) character and competence;

(d) business record and experience;

(e) capability and soundness of judgement; and

(f) financial soundness.

(2) The Central Bank shall, where an application is made —

(a) pursuant to section 3A;

(b) pursuant to subsection (1) of section 4; or

(c) by a licensed Financial and Corporate Service Provider for approval to carry

on the business of a Registered Representative,

consider whether the applicant, and in such cases as the Bank deems fit, any

person who is or is to be a controller, director, or officer of the business to which

the application relates, is a fit and proper person to be a controller, director or

officer.

(3) The Central Bank shall refuse to grant a licence or an approval, or to register any

person, as the case may be, where the Bank is of the opinion that the business to

which the application relates would not be carried on by persons who are fit and

proper persons to be controllers, directors or officers, as the case may be.‖


Section 4 of the principal Act is amended

(a) in subsection (1) by the deletion of the word ―person‖ and the substitution of the word

―company‖;

(b) by the deletion of subsection (2) and the substitution of the following —

―(2) An application made pursuant to subsection (1) shall be in writing

and contain such information and particulars, accompanied by such

references, as may be prescribed and the Central Bank —

(a) shall, in considering the application, have regard to the

following —

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(i) the incorporation and ownership structure of the company;

(ii) the nature and sufficiency of the financial resources of

the applicant to provide continuing financial support

for the bank or trust company, as the case may be;

(iii) the soundness and feasibility of the business plan; and

(iv) the best interests of the financial system in The

Bahamas;

(b) may, if satisfied with respect to the matters set out in subparagraphs

(i) to (iv) of paragraph (a) and in subsection (2) of section 3E, grant a

licence to the applicant subject to such terms and conditions, if any, as the

Bank may deem necessary; and

(c) shall, in every case in which application is made pursuant to

subsection (1), advise the Minister of the Bank's decision to

either grant or refuse the grant of a licence to the applicant.‖

(c) in subsection (7)

(i) by the insertion of the following words in the proviso immediately after the

words ―Registered Representative‖:

―or other relevant person.‖

(ii) by the deletion of the word ―Governor‖ and the substitution therefore of the

words ―Central Bank‖;

(c) in subsection (8)

(i) by the deletion of the word ―Governor‖ and the substitution therefore of the

words ―Central Bank‖; and

(ii) by the deletion of the word ―he‖ and the substitution therefore of the words

―the Bank‖;

7. Insertion of new sections 6A, 6B, 6C and 6D in the principal Act.

The principal Act is amended by the insertion immediately after section 6 of the following new

sections:

―6A. Approval of Applications by Controllers

(1) The Central Bank may approve an application made by a person under

subsection (1), of section 6 in any case where,

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(a) the acquisition of the shares or other securities of a licensee, would result

in the person, becoming a controller of the licensee; or

(b) the person is an existing controller of a licensee and the acquisition of the

shares or other securities of the licensee, would result in the increase of

that person’s influence over the licensee,

if the Bank is satisfied that—

(i) the person is a fit and proper person;

(ii) having regard to the likely influence of the person, the licensee will or

will continue to conduct its business prudently and to comply with the

provisions of this Act; and

(iii) it is in the best interests of the financial system of The Bahamas to do

so.

(2) In respect of an approval granted under this section, the Central Bank may at

any time make the approval subject to such conditions as the Bank may

determine, including but not limited to any condition—

(a) restricting the person’s disposal or further acquisition of shares or other

securities or voting power in the licensee; or

(b) restricting the person’s exercise of voting power in the licensee.

(3) The Central Bank may at any time add to, vary or revoke any condition

imposed under subsection (2).

(4) Any condition imposed under subsection (2) shall have effect notwithstanding

any provision of the Companies Act, any other law, or anything contained in

the memorandum or articles of association of the licensee.

6B. Objection to an existing controller of a licensee

(1) The Central Bank may serve a written notice of objection on any person

referred to in subsection (1) (a) or (b) of section 6A, to whom approval has

been granted to acquire shares or other securities in a licensee, if satisfied

that—

(a) the person has ceased to be a fit and proper person;

(b) having regard to the likely influence of the person, the licensee is no

longer likely to conduct or is no longer conducting its business prudently

or to comply with or is no longer complying with the provisions of this

Act;

(c) any condition of approval imposed on the person under subsection (2) of

section 6A has not been complied with;

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(d) the person has furnished any false or misleading information or document

in connection with an application made pursuant to section 6A(1);

(e) the Bank would not have granted approval under section 6A(1) had it been

aware, at the time, of circumstances relevant to the person’s application for

such approval; or

(f) it is no longer in the best interest of the financial system for the person to

continue to be a controller of a licensee.

(2) The Central Bank shall, in any written notice of objection, specify a reasonable

period within which the person to be served the written notice of objection

shall —

(a) take such steps as are necessary to ensure that he ceases to be a controller

or an indirect controller, as the case may be; or

(b) comply with such direction or directions as the Central Bank may make

under section 6C.

(3) Any person served with a written notice of objection under this section shall

comply with the notice.

6C Power to make directions

(1) Without prejudice to section 6D, if the Central Bank is satisfied that any person

has failed to comply with any condition imposed under section 6A(2) or if the

Central Bank has served a written notice of objection under section 6B,the

Central Bank may, by notice in writing —

(a) direct the transfer or disposal of all or any of the shares or securities in the

licensee held by the person or any of his associates (referred to in this

section as the specified shares) within such time or subject to such

conditions as the Central Bank considers appropriate;

(b) restrict the transfer or disposal of the specified shares; or

(c) make such other direction as the Central Bank considers appropriate.

(2) Any person to whom a notice is given under subsection (1) shall comply with

such direction or directions as may be specified in the notice.

(3) In the case of any direction made under subsection (1) (a) or (b), until a transfer

or disposal is effected in accordance with the direction or until the restriction

on the transfer or disposal is removed, as the case may be, notwithstanding any

of the provisions of the Companies Act, any other law or anything contained in

the memorandum or articles of association of the licensee —

(a) no voting rights shall be exercisable in respect of the specified shares

unless the Central Bank expressly permits such rights to be exercised;

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(b) no shares of the licensee shall be issued or offered (whether by way of

rights, bonus or otherwise) in respect of the specified shares unless the

Central Bank expressly permits such issue or offer; and

(c) except in a liquidation of the licensee, no payment shall be made by the

licensee of any amount (whether by way of dividends or otherwise) in

respect of the specified shares unless the Central Bank expressly authorises

such payment.

(4) In this section, a person, A, is an associate of another person, B, if —

(i) A is the spouse or a parent, remoter lineal ancestor or step-parent or a

son, daughter, remoter issue, step-son or step-daughter or a brother or

sister, of B;

(ii) A is a company whose directors are accustomed or under an obligation,

whether formal or informal, to act in accordance with the directions,

instructions or wishes of B, or where B is a company, of the directors of

B;

(iii) B is a company whose directors are accustomed or under an obligation,

whether formal or informal, to act in accordance with the directions,

instructions or wishes of A, or where A is a company, of the directors of

A;

(iv) A is a person who is accustomed or under an obligation, whether formal

or informal, to act in accordance with the directions, instructions or

wishes of B;

(v) B is a person who is accustomed or under an obligation, whether formal

or informal, to act in accordance with the directions, instructions or

wishes of A;

(vi) A is a related company of B;

(vii) A is a company in which B, alone or together with other associates of B

as described in paragraphs (ii) to (vi), is in a position to control not less

than 20% of the voting power in A;

(viii) B is a company in which A, alone or together with other associates of A

as described in paragraphs (ii) to (vi), is in a position to control not less

than 20% of the voting power in B; or

(ix) A is a person with whom B has an agreement or arrangement, whether

oral or in writing and whether express or implied, to act together with

respect to the acquisition, holding or disposal of shares or other interests

in, or with respect to the exercise of their voting power in relation to, the

licensee.

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6D. Offences, penalties and defences

(1) Any person who contravenes section 6(1), 6B(3) or 6C(2) shall be guilty of an

offence and shall be liable on summary conviction —

(a) in the case of an individual, to a fine not exceeding $50,000 and, in the

case of a continuing offence, to a further fine not exceeding $500 for every

day or part thereof during which the offence continues; or

(b) in the case of a company, to a fine not exceeding $100,000 and, in the case

of a continuing offence, to a further fine not exceeding $1,000 for every

day or part thereof during which the offence continues.

(2) Any person who fails to comply with any condition imposed under section

6A(2), shall be guilty of an offence and shall be liable on summary conviction

—

(a) in the case of an individual, to a fine not exceeding $50,000 or to

imprisonment for a term not exceeding 3 years or to both and, in the case

of a continuing offence, to a further fine not exceeding $500 for every day

or part thereof during which the offence continues; or

(b) in the case of a company, to a fine not exceeding $100,000 and, in the case

of a continuing offence, to a further fine not exceeding $1,000 for every

day or part thereof during which the offence continues.

(3) Where a person is charged with an offence in respect of a contravention of

section 6(1) it shall be a defence for the person to prove that —

(a) he was not aware that he had contravened section 6(1) and

(b) he has, within 14 days of becoming aware that he had contravened section

6(1), notified the Central Bank of the contravention and, within such time

as determined by the Central Bank, taken such actions in relation to his

shareholding or control of the voting power in the licensee as the Central

Bank may direct. ―

8. Amendment of section 8 of the principal Act

Section 8 of the principal Act is amended by the insertion of the following new subsection

immediately after subsection (3):

―(4) Every licensee shall within four months of the end of its financial year provide

a copy of its annual financial statement to the Central Bank, unless prior

written approval for an extension of time has been granted by the Bank.

(5) The Central Bank may, for such further period not exceeding sixty days it

deems expedient, extend the time periods referred to in subsections (1) and

(4).‖

9. Repeal and replacement of section 9 of the principal Act

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Section 9 of the principal Act is repealed and replaced by the following:

―9. Information to be furnished to the Central Bank.

(1) Every person that is subject to the supervision of the Central Bank pursuant to

this Act, shall furnish the Central Bank with such information (including

returns) at such times and in such form as the Bank may reasonably require for

the proper discharge of its functions under this Act or any regulations made

under this Act.\

(2) Any person who fails without reasonable excuse to furnish any information

required by the Bank under this section shall be guilty of an offence and shall

be liable on summary conviction to a fine not exceeding fifty thousand dollars

and, in the case of a continuing offence, to a further fine of one thousand

dollars for every day during which the offence continues after conviction.‖

10. Repeal of section 10 of the principal Act

Section 10 of the principal Act is repealed.


The principal Act is amended by the repeal of section 11 and its replacement with the following:

―11. Information on insolvency.

(1) Any licensee which is or is likely to become insolvent, or which is or is likely

to become unable to meet its obligations, or which has suspended or is about to

suspend payments, shall immediately inform the Central Bank of that fact.

(2) The Central Bank, in relation to a licensee which is or appears to become

unable to meet its obligation or which in the opinion of the Central Bank is

carrying on business in a manner detrimental to the public’s interest or to the

interest of its depositors or the beneficiaries of any trust, or other creditors,

may by instrument in writing require the manager or authorised agent of such

licensee to supply within such reasonable time as may be specified in the

instrument —

(a) the financial statement of that licensee as of a date determined by the

Central Bank audited by an auditor who shall be a chartered accountant or

a certified public accountant approved of by the Bank; and

(b) such other information relating to the licensee as may be so specified,

and any person who contravenes the requirements of such an instrument or

who in response to such an instrument knowingly or wilfully supplies false

information to the Central Bank shall be guilty of an offence and shall be liable

on summary conviction to a fine not exceeding one hundred thousand dollars

or to imprisonment for a term not exceeding two years or to both such fine and

imprisonment.‖

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Section 12 of the principal Act is amended by the repeal and replacement of subsection (4) with

the following:

―(4)(a) An auditor or former auditor of a licensee shall give written notice to the

Inspector of any fact or matter of which he has or had become aware and

which is likely to be of material significance for the discharge, in relation to

the licensee, of the functions of the Inspector under this Act.‖

(b) Notice required to be given pursuant to paragraph (a) shall be given

(i) in the case of an auditor, immediately after he becomes aware of the

matters in respect of which notice is to be given to the Inspector

pursuant to paragraph (a); and

(ii) in the case of a former auditor, as soon as reasonably practicable

following the commencement of this provision.‖


Section 13 of the principal Act is amended:

(a) in paragraphs (d) and (e) of subsection (3) by deleting the word ―bank‖ and substituting

the word ―licensee‖;

(b) in paragraph (e) of subsection (3) by adding the words and symbol ―or the beneficiaries

of any trust, ‖ immediately after the word ―shareholder‖.

(c) by the repeal of subsections (7) and (8).

14. Amendment of section 13A of the principal Act.

Section 13A of the principal Act is amended in subsection (3) by the deletion of the word

―Governor‖, immediately following the words ―while discharging his functions in good faith

and the‖ and the substitution therefore of the words ―Central Bank‖.

15. Insertion of New section 13B in the principal Act

The principal Act is amended by the insertion of the following new section 13B immediately

after section 13A:

―13B. Duties of Directors

(1) The directors of a licensee shall, immediately notify the Inspector of any

developments that pose material risks to the safety and soundness or reputation

of the licensee.

(2) A director who contravenes subsection (1) commits an offence and is liable on

summary conviction to a fine of one hundred thousand dollars.‖

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Section 18 of the principal Act is amended —

(a) in paragraph (a) of subsection (1) as follows —

(i) by the insertion in sub-paragraph (i), immediately after the

word ―depositors‖, of the words ―, or the beneficiaries of any trust,‖;

(ii) by the insertion immediately after sub-paragraph (iii) of the following —

―(iv) if a licensee is or appears likely to become unable to meet its obligations as

they fall due;

(v) if a licensee has failed to comply with a direction of the Central Bank made

pursuant to section 18(1)(h);

(vi) if it appears to the Central Bank that the licensee has furnished information

or documents to the Bank in connection with its application for a licence

which is or are false or misleading in a material particular or has failed to

inform the Central Bank where there has been a material change in respect

of the information so supplied.‖

(b) in sub-paragraph (i) of subsection (1)(g), by the insertion immediately after the word

―creditors‖ of the words ―or the beneficiaries of any trust‖;

(c) In subsection (7) by the insertion of the words ―without delay‖ immediately following

the words ―the petitioner shall‖.

(d) In subsection (8) by the insertion of the words ―without delay‖ immediately following

the words ―Central Bank‖.

17. Amendment of section 18C.

Section 18C of the principal Act is amended:

(a) by the deletion of the word ―and‖ and the substitution of a comma immediately

following the reference to section ―18A‖;

(b) by the insertion, immediately following the reference to section 18B of a comma and

the following: ― 18F(6), 18G(6) and 24B‖.

18. Amendment of section 18D.

Section 18D of the principal Act is amended —

(a) by the deletion immediately after the words ―of section 18‖ of the words ―or under‖ and

the substitution of a comma; and

(b) by the insertion immediately after the words ―under section 18A‖ of

the words ―or under section 18F.‖

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19. Insertion of sections 18E, 18F and 18G into the principal Act.

The principal Act is amended by the insertion immediately after section 18D of the following

new sections —

―18E. Prohibition orders.

(1) The Central Bank may, if it appears to the Bank that an individual is not or is no

longer a fit and proper person to perform a regulated function, make an order

prohibiting such individual from performing a regulated function.

(2) For the purposes of this section, ―regulated function‖ includes—

(i) serving as a director of a licensee;

(ii) serving as an officer of a licensee;

(iii) acting as the auditor of a licensee; and

(iv) serving or acting in any other capacity in or for a licensee which requires

approval, supervision or monitoring by the Central Bank.

(3) An individual who performs or agrees to perform a regulated function in breach

of a prohibition order commits an offence and shall be liable on summary

conviction —

(a) to a fine not exceeding fifty thousand dollars; and

(b) in the case of a continuing breach, to a fine not exceeding five hundred

dollars for each day, or part of a day, during which the offence continues.

(4) In proceedings for an offence under subsection (3) it shall be a defence for the

accused to show that he took all reasonable precautions and exercised all due

diligence to avoid committing the offence.

(5) The Central Bank may, on the application of the individual named in the

prohibition order, vary or revoke it.

18F. Bank to issue warning, decision notices.

(1) The Central Bank shall, where it proposes to make a prohibition order, issue a

warning notice to all interested parties including —

(a) the individual affected by the decision; and

(b) if the Bank deems fit, the relevant licensee.

(2) A warning notice issued under subsection (1) shall —

17

(a) set out the terms of the prohibition and the grounds on which the Bank

proposes to act; and

(b) afford the individual named in the notice within such time as is specified in

the notice, an opportunity to submit to the Bank a written statement of

objection to the proposed order.

(3) The Bank shall, following the issuance of a warning notice under subsection (2),

advise the individual named in the notice of its decision.

(4) The Bank shall, where it decides to make a prohibition order, issue to the

individual named in the warning notice, a written decision notice.

(5) A decision notice issued under subsection (4) shall —

(a) name the individual to whom the prohibition order applies;

(b) set out the terms of the order;

(c) state the date on which the Bank's decision is to take effect;

(d) be delivered to the individual named in the order; and

(e) if the Bank deems fit, be delivered to the relevant licensee.

(6) An individual against whom a decision to make a prohibition order is made may

refer the matter to the Supreme Court.

18G. Variation, revocation of prohibition order and referral to the Supreme Court.

(1) A person against whom a prohibition order has been made may apply to the

Central Bank to have the order varied or revoked.

(2) The Central Bank shall —

(a) where the Bank decides to grant an application for variation or revocation

of a prohibition order, give the applicant and if the Bank deems fit, the

relevant licensee, written notice of its decision; and

(b) where the Bank proposes to refuse such application, issue to the applicant

and if the Bank deems fit, the relevant licensee, a written warning notice.

(3) A warning notice issued under paragraph (b) of subsection (2) shall —

(a) set out the reasons for the Bank's proposed refusal to vary or revoke the

prohibition order;

(b) contain a statement that the individual named in the warning notice may,

within such time as is specified in the notice, submit to the Bank a written

statement of objection to such proposed refusal.

18

(4) The Bank shall, following the issuance of a warning notice under subsection (3),

advise the individual named in the notice of its decision.

(5) The Bank shall, where it decides to refuse the application for variation or

revocation, issue to the applicant a written decision notice which shall comply

with the requirements of subsection (5) of section 18F.

(6) An applicant issued a decision notice under subsection (5) may refer the matter

to the Supreme Court.‖


Section 19 of the principal Act is amended in subsection (5) by the deletion of the word

―Governor‖ and the substitution thereof of the words ―Central Bank‖.


Section 24 of the principal Act is amended by the deletion of paragraph (b) and the re-lettering

of paragraphs (c) and (d) as paragraphs (b) and (c) respectively.

22. Amendment of section 24A of the principal Act.

Section 24A of the principal Act is amended:

(a) in subsection (1) by:

(i) the deletion of the words ―or licensee‖ wherever they appear;

(ii) by the deletion of paragraph (b) and replacement with the following:

―(b) the Financial Transactions Reporting (Wire Transfers) Regulations, 2009.

(b) by the deletion of subsection (2).

(c) in subsection (3):

(i) in the chapeau by –

(a) the deletion of the word ―fine‖ and replacement with the word ―penalty‖; and

(b) the deletion of the words ―or licensee‖.

(ii) by the deletion of the word ―or‖ at the end of paragraph (b);

(iii) by the insertion immediately following paragraph (b) of the following:

―(c) any condition and or limitation imposed by the Central Bank;

(d) any direction issued by the Bank pursuant to subsection 6C(1) or paragraph

(h) of subsection 18(1);

19

(e) an order made by the Central Bank under this Act or under a regulation made

pursuant to this Act.‖

(iv) by the deletion of paragraph (c);

(v) by the re-numbering of subsection (3) as subsection (2).

(d) by the insertion immediately following subsection (2) of the following:

―(3)(a) The Central Bank, where it makes an order under this section, shall

specify in the order:

(i) the name of the person believed to have committed a contravention or an

offence;

(ii) the nature of the contravention or offence which the person has committed;

and

(iii) the penalty imposed by the Central Bank.

(b) The Bank shall give a copy of the order to the person named in the order.‖

(e) by the deletion of subsection (4);

(f) by the re-numbering of subsection (5) as subsection (4);

(g) by the re-lettering of section 24A as section 24B.

23. The principal Act is amended by the insertion of the following new section immediately

following section 24:

―24A. Contraventions and penalties

(1) The Governor may make regulations –

(a) designating, as a contravention that may be proceeded with under section

24B, the breach of a specified provision of this Act or of a specified

provision of a regulation made under this Act or the non-compliance with –

(i) conditions and or limitations imposed by the Central Bank;

(ii) any direction issued by the Central Bank pursuant to subsection 6C(1)

or subsection 18(1) (h);

(iii) an order made by the Central Bank under this Act or under a regulation

made pursuant to this Act.

(b) classifying each contravention as minor, serious or very serious; and

20

(c) fixing, in accordance with subsection (2), a penalty, or a range of penalties,

in respect of any contravention of the provisions of this Act or any

regulations made under this Act.

(2) The maximum penalty for a contravention (except in the case of a contravention

described in section 24B(1)) shall be —

(a) in the case of a contravention that is committed by an individual two

thousand five hundred dollars for a minor contravention, five thousand

dollars for a serious contravention and ten thousand dollars for a very

serious contravention.

(b) in the case of a contravention that is committed by a company ten

thousand dollars for a minor contravention, fifty thousand dollars for a

serious contravention and one hundred thousand dollars for a very

serious contravention.

(3) A minor contravention that is a late or erroneous filing which is continued on

more than one day, constitutes a separate contravention for each day during

which it is continued.

(4) The amount of a penalty (except for a penalty fixed under paragraph (c) of

subsection 24A(1)) shall, in each case, be determined by taking into account —

(a) the degree of intention or negligence on the part of the person who

committed the contravention;

(b) the harm done by the contravention;

(c) the history of the person or licensee who committed the contravention

with respect to any prior contravention or conviction under this Act

within the five-year period immediately before the contravention;

(d) whether the contravention or non-compliance was brought to the

attention of the Central Bank by the licensee or person concerned;

(e) the seriousness of the contravention or non-compliance;

(f) whether or not the contravention or non-compliance was inadvertent;

(g) what efforts, if any, have been made to rectify the contravention or non-

compliance and to prevent a recurrence;

(h) the potential financial consequences to the licensee or person concerned

and to third parties, including customers and creditors of the licensee, of

imposing a penalty;

(i) the penalties imposed by the Central Bank in other cases; and

(j) any other criteria that may be prescribed by regulation.‖

21

24. Insertion of new sections 24C, 24D, 24E, 24F, 24G, 24H and 24I

The principal Act is amended by inserting the following new sections immediately after section

24B:

―24C. Election

The Central Bank shall, where under this Act a breach or non-compliance may be

proceeded with either as a contravention under section 24B or as an offence, proceed

with the matter in one manner only and after such proceeding shall be precluded

from proceeding in the other manner.

24D. Publication of fines and penalties

Where the Central Bank imposes a penalty on a person, the Bank may publish in

such manner as it deems appropriate a statement of the contravention or offence in

respect of which the penalty is imposed.‖

24E. Proceedings.

Whenever the Central Bank is of the opinion that any action under subsection (1) or

(2) of section 24B should be taken against a person, the Central Bank may before

taking such action, give that person, notice in writing of its intention so to do setting

out in such notice:

(i) the name of the person believed to have committed a contravention or

an offence;

(ii) the nature of the contravention or offence;

(iii) the penalty that the Central Bank intends to impose;

(iv) the right of the person, within 30 days after the notice is served or

within any longer period that the Central Bank specifies, to pay the

penalty or to make representations to the Central Bank with respect to

the contravention or offence and the proposed penalty, and the manner

for doing so; and

(v) the fact that, if the person does not pay the penalty or make

representations in accordance with the notice, the person will be

deemed to have committed the contravention or offence, as the case

may be and the Central Bank may issue an order imposing a penalty, in

respect of it.

24F. Determination of Responsibility and Penalty

(1) If the person pays the penalty proposed in the notice of contravention, the person

is deemed to have committed the contravention or offence and proceedings in

respect of it are ended.

22

(2) If the person makes representations in accordance with the notice, the Central

Bank shall decide, on a balance of probabilities, whether the person committed

the contravention or offence and, if so, may, subject to any regulations made

under section 24A,

(a) by order impose the penalty proposed or a lesser penalty; or

(b) impose no penalty.

(3) A person who neither pays the penalty nor makes representations in accordance

with the notice is deemed to have committed the contravention or offence and

the Central Bank may, subject to any regulations made under section 24A(1)(c),

(a) by order impose the penalty proposed or a lesser penalty; or

(b) impose no penalty.

24G. Time Limit

(1) No proceedings in respect of a contravention may be commenced later than six

months after the subject-matter of the proceedings became known to the Central

Bank, in the case of a minor contravention, or two years after the subject-matter

of the proceedings became known to the Central Bank, in the case of a serious

contravention or a very serious contravention.

(2) A document appearing to have been issued by the Central Bank, certifying the

day on which the subject-matter of any proceedings became known to the

Central Bank, is admissible in evidence without proof of the signature or official

character of the person appearing to have signed it and is, in the absence of

evidence to the contrary, proof of the matter asserted in it.

24H. Remission

(1) The Central Bank may remit all or part of any penalty imposed under section

24B of this Act, or any regulation made under this Act, including any interest on

that penalty.

(2) A remission may be conditional or unconditional.‖


Section 26 of the principal Act is amended in subsection (1) by the insertion immediately after

paragraph (c) of the following —

―(d) serving a notice of objection under section 6B(1).

(e) serving a decision notice under sections 18F(4) or 18G(5).

(f) serving a notice in respect of a serious contravention or a very serious contravention

under section 24E.‖

23

26. Repeal of the First Schedule

The First Schedule is repealed and replaced by the following:

―FIRST SCHEDULE (Section 17)

RULES FOR INSPECTION AND SUPERVISION OF BANKS AND TRUST COMPANIES

The Inspector shall -

(a) regularly evaluate the condition, solvency and liquidity of all licensees;

(b) establish appropriate and prudent standards for conducting safe and sound banking and trust

business;

(c) set prudent and appropriate capital adequacy requirements for banks not less than those

established in the Basel Capital Accord and its Amendments;

(d) evaluate banks’ policies, practices and procedures related to the granting of loans and making

of investments and the on-going management of the loan and investment portfolios;

(e) ensure that banks and trust companies have management information systems that enable

management to identify portfolio concentration in line with established limits;

(f) ensure that banks and trust companies have in place and use systems that accurately measure,

monitor and adequately control market and other risks;

(g) ensure that banks establish and adhere to adequate policies, practices and procedures for

evaluating the quality of assets and the adequacy of loan-loss provisions and loan-loss

reserves;

(h) ensure that banks and trust companies have in place internal controls adequate to the nature

and scale of their operations, and adequate policies, practices and procedures, including strict

know-your-customer rules that promote high ethical and professional standards, and so

prevent the use of the bank for criminal purposes;

(i) co-operate with inspectors and supervisors in other jurisdictions to the extent necessary for

the purposes of cross-border supervision consistent with the policy established by the Basel

Committee for cross-border supervision.

2. In this Part -

―Basel Capital Accord‖ or ―Basel Committee‖ means the committee of banking

supervisory authorities established by central-bank Governors of the Group of Ten

countries in 1975 and its report.‖

24

OBJECTS AND REASONS

The purpose of the amendment is to expand and enhance the regulatory powers of the Central Bank.

Clause 1 of the Bill empowers the Minister to appoint a commencement date for its enforcement.

Clause 2 amends section 2 of the principal Act to define certain words.

Clause 3 amends section 3 of the principal Act to clarify the requirement that only a company may

be issued with a licence by the Central Bank to carry on any banking business from within The

Bahamas.

Clause 4 of the Bill amends section 3C by deleting references to sections 5 and 10a.

Clause 5 of the Bill inserts new sections 3D and 3E into the principal Act to allow a group of

persons in certain circumstances to apply to the Bank for pre-approval of the proposed business,

directs the Bank to consider the fitness of persons to hold particular positions, provides criteria for

use by the Bank in determining such fitness and empowers the Bank to refuse a licence or its

approval where it believes a business would not be carried on by fit and proper persons.

Clause 6 amends section 4(2) of the principal Act to update and enhance the factors to be taken into

account by the Bank in its consideration of applications for a licence.

Clause 7 inserts new sections 6A, 6B, 6C and 6D into the principal Act to provide the criteria for

use by the Bank when determining whether to approve an application for the acquisition of shares

by an existing or proposed controller of a licensee, sets out the procedure for the Bank to follow

where it objects to an existing or proposed controller of a licensee, authorizes the Bank to make

directions with regard to the controllers of a licensee, and provides for offences, penalties and

defences in connection with obligations of controllers.

Clause 8 inserts two new subsections into the principal Act to require licensees to submit their

annual audited financial statements to the Bank and to authorise the Bank to extend the time for

submission and publication of these statements.

Clause 9 repeals and replaces section 9 of the principal Act to require any person that is subject to

the supervision of the Central Bank to furnish the Bank with such information (including returns) as

the Bank may require.

Clause 10 repeals section 10.

Clause 11 amends section 11 of the principal Act to require licensees to immediately inform the

Bank where the licensee is or is likely to become insolvent or unable to meet its obligations.

Clause 12 amends section 12 of the principal Act by repealing and replacing subsection (4) to set

out the timeframe within which an auditor or former auditor of a licensee must provide the

Inspector with written notice of a fact or matter of which he has or had become aware and which is

of material significance to the discharge of the Inspector’s functions in relation to the licensee.

Clause 13 amends section 13 of the principal Act in subsection (3)(d) and (e) and repeals

subsections (7) and (8).

25

Clause 14 amends section 13A of the principal Act by substituting the words ―Central Bank‖ for the

word ―Governor‖.

Clause 15 inserts a new section 13B in the principal Act to require directors of a licensee to

immediately notify the Inspector of any developments that pose a material risk to the licensee.

Clause 16 amends section 18 of the principal Act to expand the circumstances in which the Bank

may revoke the licence of a licensee.

Clause 17 amends section 18C of the principal Act to extend its application to sections 18A, 18F,

18G and 24B.

Clause 18 amends section 18D of the principal Act to extend its application to section 18F.

Clause 19 inserts new sections 18E, 18F and 18G into the principal Act, respectively, to empower

the Bank to issue prohibition orders, provide for the procedure to be followed by the Bank in

issuing such orders and for the application by affected persons to the Bank, and thereafter to the

Supreme Court, to have such orders varied or revoked.

Clause 20 amends section 19 of the principal Act by deleting and replacing the reference to

―Governor‖ with a reference to ―Central Bank‖.

Clause 21 amends section 24 of the principal Act be deleting paragraph (b).

Clause 22 amends section 24A of the principal Act to expand the instances where the Central Bank

may issue an order for the payment of a penalty, in subsection (3) deletes and replaces references to

―fine‖ with references to ―penalty‖, deletes references to ―licensee‖ and re-letters section 24A as

section 24B.

Clause 23 inserts a new section 24A into the principal Act to empower the Governor to make

regulations to designate and classify certain non-compliance as contraventions of the Act and to fix

penalties in respect of such contraventions, provide maximum penalties for specific classifications

of contraventions and for contraventions committed by specific persons, and provides for the factors

to be taken into account in determining the amount of a penalty.

Clause 24 inserts new sections 24C, 24D, 24E, 24F, 24G and 24H into the principal Act to provide

that the Bank may proceed with a non-compliance either as a contravention or an offence, but not

both, publish a statement of the contravention or offence, give notice of its intention to impose a

penalty, determine whether on a balance of probabilities a person committed a contravention or

offence and if so the amount of the penalty payable in respect of the contravention or offence,

prescribes the time limit for imposing a penalty, empowers the Bank to remit part or all of a penalty

with or without conditions.

Clause 25 amends section 26(1) of the principal Act to extend the right of appeal to the Supreme

Court to include the case where the Bank serves a notice of objection under section 6B(1), serves a

decision notice under sections 18F(4) or 18G(5) or serves a notice in respect of a serious

contravention or very serious contravention under section 24E.

Clause 26 repeals and replaces the First Schedule to specifically include references to trust

companies in paragraphs (b), (e), (f) and (h).

26

DRAFT

ANNEX 2

BANKS AND TRUST COMPANIES (ADMINISTRATIVE MONETARY PENALTIES)

REGULATIONS, 2013

(SECTION 24A)

The Governor of the Central Bank of The Bahamas, in exercise of the powers conferred by section

24A of the Banks and Trust Companies Regulation Act, makes the following regulations ---

1. Citation

These Regulations may be cited as the Banks and Trust Companies (Administrative Monetary

Penalties) Regulations, 2013.

2. Interpretation

In these Regulations —

“licensee” means any person holding a licence under the provisions of the Banks and Trust

Companies Regulation Act, (Ch, 316) and, for the purposes of these Regulations ―licensee‖

includes the branches or subsidiaries of a licensee operating outside of The Bahamas;

“person” means a natural person or a company;

―the Act‖ means the Banks and Trust Companies Regulation Act, (Ch, 316).

3. Designation of contraventions

(1) Pursuant to section 24A of the Act, the breach by a person, of the Act or a regulation as

described and set out in the second and third columns respectively of the Schedule are

designated contraventions of the Act.

(2) Pursuant to section 24A of the Act, the non-compliance of a person with any direction

issued or order made or any conditions and limitations imposed, under the Act or under a

regulation, as described and set out in the second and third columns respectively of the

Schedule are designated contraventions of the Act.

(3) A contravention set out in the Schedule may be proceeded with under section 24B of the

Act.

27

4. Classification

A contravention shall be classified as a minor, serious or very serious contravention, as indicated

in the fourth column of the Schedule.

5. Penalties for Late or Erroneous Filings

(1) Subject to paragraph (2), the penalty in respect of a contravention that is classified as minor

under any of items 3, 14, 15, 16, 17, 34, 35, 56, 63, 69, 84, 89 and 90 of the Schedule shall

be two hundred and fifty dollars.

(2) If a minor contravention referred to in paragraph (1), is continued on more than one day, the

penalty in respect of each of the separate contraventions that, because of section 24A(3) of

the Act, result from that continuation, shall be two hundred and fifty dollars for each day or

part of a day during which the contravention continues up to a maximum of ten thousand

dollars.

28

SCHEDULE

(Regulations 3 to 4)

Administrative Monetary Penalties

No. Description of Contravention Act or Regulation Classification

BANKS AND TRUST COMPANIES REGULATIONS ACT, 2000

1. Carrying on a business without being

licensed, approved or registered by the

Central Bank

Sections 3(1),(2) and (3),

3A(a) and (b) of the Act. Very Serious

2. Failure of a specified person or class of

persons to comply with the terms and

conditions of an exemption granted by

the Central Bank.

Sections 3(4) and 6(1) of

the Act. Very Serious

3. Failure by a licensee to forthwith notify

the Central Bank in writing of any change

in the licensee’s principal office in The

Bahamas.

Section 4(5)(a) of the Act Minor

4.

Failure by a licensee to notify the

Central Bank in writing of any change in

the officers designated by the licensee

pursuant to paragraph (a)(ii) or (iii) of

subsection 4(4) of the Act.

Section 4(5)(b) of the Act Very Serious

5. Failure by a licensee to comply with the

terms and conditions of its license.

Sections 4(6) and 18(1)(c)

of the Act. Very Serious

6. Failure by a licensee to obtain approval

of the Central Bank to establish outside

of The Bahamas a subsidiary, branch,

agency or representative office.

Section 5 of the Act. Very Serious

7. Failure by a company which is a licensee

under the Act to obtain the prior approval

of the Central Bank to issue/transfer or

dispose of its shares, or any other

securities of such licensee.

Section 6(1) of the Act. Very Serious

8. Failure by a person referred to in section

6A(1) (a) or (b) to obtain the approval of

the Central Bank before acquiring shares

or other securities in a licensee.

Section 6A(1)(a) or (b) of

the Act. Very Serious


6A(1) or (b) to comply with any

condition imposed by the Central Bank.

Section 6A(2) of the Act. Very Serious


6A(1) or (b) to comply with any notice of

objection issued by the Central Bank.

Section 6B(1) of the Act. Very Serious


6A(1) or (b) to comply with any direction

issued by the Central Bank.

Section 6C(1) and (2) of

the Act. Very serious

12. Failure by a person to obtain the Central

Bank’s approval to use or continue to use

a ―prohibited word‖ in contravention of

Section 7(1)(a) and or (b)

of the Act. Serious

29


section 7(1)(a) and or (b) of the Act.

13. Failure to obtain the Central Bank’s

approval to solicit or receive deposits

from the public

Section 7(1)(c) of the Act. Very Serious

14.

Failure by a licensee to publish a true and

full yearly statement of its accounts on

time.

Section 8(1) of the Act. Minor

15. Failure by a licensee to provide a copy of

its annual audited financial statements to

the Central Bank on time.


16. Failure to furnish the Central Bank with

information at the time or in the form

specified.

Section 9 Minor, if the

contravention

relates to

information

required as part of

periodic reports.

Serious, in any

other case.

17. Failure by a licensee to notify the Central

Bank of an auditor’s appointment at all or

within the timeframe specified in the Act

on time.


18. Failure by a licensee to replace an auditor

on the request of the Central Bank.

Section 12(2) of the Act. Serious

19. Failure by a licensee to provide an

auditor of the licensee with requested

information.

Section 12(3) of the Act Very Serious

20. Failure of an auditor or former auditor to

give notice to the Inspector pursuant to

section 12(3)(b) and or 12(4) of the Act.

Section 12(3)(b) and 12(4)

of the Act Very Serious

21. Failure by a licensee to provide the

Inspector with access to its books,

records, vouchers documents, cash and or

securities.

Section 13(3)(a) ) of the

Act. Very Serious

22. Failure by a manager or any officer

designated by the manager of any

licensee to provide the Inspector with

such information or explanation, within

the timeframe required by the Inspector,

as the Inspector may reasonably require

for the purpose of enabling him to

perform his functions under the Act.

Section 13(3)(b) of the

Act. Serious

23. Failure by an auditor of a licensee to

provide the Inspector with such auditor’s

reports, working papers, information or

explanation within the timeframe

required by the Inspector, as the Inspector

may reasonably require for the purpose of

Section 13(3)(c) of the

Act.

Serious

30


enabling him to perform his functions

under the Act.

24. The making of untrue statements by an

auditor in an audit report or the omission

of essential facts in such report or the

failure of such auditor to request

pertinent information from a licensee

which is being or has been audited by the

auditor or failure by such auditor to

report his findings to the Inspector.

Section 13(3)(d), 13(3)(e)

of the Act Very Serious

25. Failure by the directors of a licensee to

notify the Inspector of any developments

that pose material risks to the licensee.

Section 13B Very serious

26. Failure by a licensee to permit a foreign

Supervisory Authority approved by the

Inspector to conduct an inspection.


27. Unauthorised disclosures of confidential

reports of examination and breach of

conditions related to disclosure of Report

of Examination.

Section 16(1) and (2) of

the Act. Serious

28. Failure by a licensee to comply with a

direction of the Central Bank pursuant to

section 18(1)(h) of the Act.

Section 18(1)(h) of the Act Very Serious

29. Failure by an individual against whom a

prohibition order has been issued

pursuant to section 18E(1) of the Act, to

comply with the order

Section 18E(3) of the Act Serious

30. Disclosure of information relating to

(a) the identity, assets, liabilities,

transactions or accounts of a customer

of a licensee; or

(b) any application by any person under

the provisions of the Act

where such disclosure is made in

contravention of section 19(1) of the Act.

Section 19(1) of the Act Very Serious

31. Failure by a licensee to transfer dormant

account balances to the Central Bank.


32. Failure by a licensee to keep all signature

cards, signing authorities and records

relating to dormant account balances

transferred to the Central Bank.


33. Failure by licensee to expressly and

specifically agree charges with

customers.

Section 21 of the Act. Serious

BANKS AND TRUST COMPANIES (FOREIGN CURRENCY POSITION) REGULATIONS,

2005

34. Failure by a Licensee to maintain the

larger of the sum of net short or long

positions in all foreign currencies

Regulation 3 of the Banks

and Trust Companies

(Foreign Currency

Minor

31


including all outstanding spot and

forward foreign exchange contracts and

all on and off balance sheet assets and

liabilities of the licensee at the

appropriate spot exchange rates at ten

percent or less of its capital base.

Positions)

Regulations

35. Failure by a licensee to immediately

notify the Inspector of a contravention of

regulation 3 and provide such particulars

of the contravention in such form as the

Inspector shall determine.


and Trust Companies

(Foreign Currency

Positions)

Regulations

Minor

36. Failure by a Licensee to take any

remedial action required to be taken by

the Inspector to ensure compliance with

regulation 3.


and Trust Companies

(Foreign Currency

Positions)

Regulations

Serious

BANKS AND TRUST COMPANIES (EQUITY INVESTMENTS) REGULATIONS, 2005

37. Failure by a licensee to obtain the prior

approval of the Bank to acquire or hold

the shares, securities or other interests in

a related party or to acquire, either

directly or indirectly, more than five

percent of the shares, securities, or any

other interests in any other person.


and Trust Companies

(Equity Investments)

Regulations, 2005

Serious

BANKS AND TRUST COMPANIES (PAYMENT OF DIVIDENDS) REGULATIONS, 2005

38. Failure by a Licensee to obtain the prior

written approval of the Central Bank to

declare or pay out dividends on its shares

in contravention of regulation 3.


and Trust Companies

(Payment of Dividends)

Regulations

Very Serious

39. Failure by a Licensee to comply with

restrictions imposed by the Inspector on

the payment of dividends.


and Trust Companies

(Payment of Dividends)

Regulations

Very Serious

BANKS AND TRUST COMPANIES (NEW APPOINTMENTS) REGULATIONS

2005

40. Failure by a Licensee to obtain the prior

approval of the Central Bank for the

appointment or replacement of a director

or executive officer or to provide the

specified information in relation thereto.

Regulations 3 and 4 of the

Banks and Trust

Companies (New

Appointments)

Regulations

Serious

BANKS AND TRUST COMPANIES (LARGE EXPOSURES) REGULATIONS, 2006

41. Incurring exposures on an aggregate basis

to any individual counter-party or group

of connected parties which exceeds

twenty-five percent of the licensee’s

capital base.

Regulation 3(1) of the

Banks and Trust

Companies (Large

Exposures)

Regulations

Serious

42. Holding non-capital investments in

securities of a single issuer which exceed

ten percent of the licensee’s capital base.


Banks and Trust

Companies (Large

Serious

32


Exposures)

Regulations

43. Incurring exposures to related parties

which in aggregate exceed fifteen percent

of the licensee’s capital base.


Banks and Trust

Companies (Large

Exposures)

Regulations

Serious

44. Incurring large exposures which in

aggregate exceed eight hundred percent

of the licensee’s capital base.


and Trust Companies

(Large Exposures)

Regulations

Very Serious

45. Failure to implement and maintain

internal policies and internal limits and or

to review internal policies.

Regulations 9 and 10 of

the Banks and Trust

Companies (Large

Exposures)

Regulations

Serious

46. Failure by a Licensee to report all large

exposures to the Inspector when required

by the Central Bank and in the manner

required by the Inspector.

regulation 11 of the Banks

and Trust Companies

(Large Exposures)

Regulations

Very Serious

47. Failure by a licensee to notify the

Inspector of any breach of regulations 3,

4 or 6 pursuant to regulation 12.

Regulation 12 of the

Banks and Trust

Companies (Large

Exposures)

Regulations

Very Serious


Inspector with particulars of any breach

of regulations 3, 4 or 6 in the manner

determined by the Inspector, within two

(2) working days after breaching the

regulations.


Banks and Trust

Companies (Large

Exposures)

Regulations

Very Serious

49. Failure by a licensee to take immediate

action to bring the exposure, which

results in a breach of regulations 3, 4 or

6, within established limits, within ten

working days of the breach.


Banks and Trust

Companies (Large

Exposures)

Regulations

Very Serious

50. Failure by a Licensee to take any

remedial action required by the Inspector

to ensure compliance with regulations 3,

4, or 6.


Banks and Trust

Companies (Large

Exposures)

Regulations

Very Serious

BANKS AND TRUST COMPANIES (PRIVATE TRUST COMPANIES)REGULATIONS,

2007

51. Failure by a Registered Representative to

certify that a trust company for which it

provides services qualifies for an

exemption under paragraph (1) of

regulation 3 of the Banks and Trust

Companies (Private Trust Companies)


Banks and Trust

Companies (Private Trust

Companies)

Regulations.

Serious

33


Regulations, 2007.


notify the Inspector if a private trust

company ceases to meet requirements of

paragraph (1) of regulation 3.


Banks and Trust


Companies)

Regulations

Serious

53. Failure by a private trust company to

have a Registered Representative in The

Bahamas.

Regulation 4(1)(a) of the

Banks and Trust


Companies)

Regulations

Very Serious

54. Failure by private trust company to have

at least one Special Director where an

officer of a licensee is not its Registered

Representative.

regulation 4(1)(b) of the

Banks and Trust


Companies)

Regulations

Serious


maintain at the offices of the Registered

Representative a copy of the Designating

Instrument pertaining to the private trust

company.

Regulation 4(1)(c) of the

Banks and Trust


Companies)

Regulations

Serious


notify the Inspector of any change in its

principal address and or that it has ceased

to act as a Registered Representative, on

time.


Banks and Trust


Companies)

Regulations

Minor


maintain a paid up share capital of not

less than $5,000 or be limited by

guarantee in the sum of not less than

$5,000.


Banks and Trust


Companies)

Regulations

Serious


provide its Registered Representative

with requested information within a

specified time.


Banks and Trust


Companies)

Regulations

Serious

59. Amendment by a private trust company

of its Memorandum or Articles of

Association in a manner inconsistent with

the definition of private trust company as

set out in the Act.

Regulation 4(5)(a) Minor

34


60. Acting as a Registered Representative to

a private trust company without first

having obtained either-

(a) a valid bank and or trust

company license; or

(b) a financial and corporate service

provider’s license and the

approval of the Central Bank to

act as a Registered representative.

Regulation 6(1)(a) and (b)

of the Banks and Trust


Companies)

Regulations

Very Serious

61. Failure of an approved Registered

Representative, to restrict its business to

the provision of Registered

Representative services only.


Banks and Trust


Companies)

Regulations

Very Serious


maintain a minimum paid up share

capital of $50,000.


and Trust Companies

(Private Trust Companies)

Regulations

Very Serious


advise changes in particulars provided in

its application on time.


Banks and Trust


Companies)

Regulations

Minor


display its approval to act as a Registered

Representative on its premises.


Banks and Trust


Companies)

Regulations

Minor

65. Failure of a Registered Representative to

obtain possession of a Designating

Instrument identifying the Designated

Person or Designated Persons in respect

of the private trust company for which it

acts.

Regulation 12(a) of the

Banks and Trust


Companies)

Regulations

Serious


reasonably satisfy itself that the private

trust company has been established for

lawful purposes.

Regulation 12(b) of the

Banks and Trust


Companies)

Regulations

Very Serious


reasonably satisfy itself that the private

trust company operates as a private trust

company as defined in section 2 of the

Act.

Regulation 12(c) of the

Banks and Trust


Companies)

Regulations

Serious


at all times maintain in The Bahamas

copies of the documents specified in

regulation 13(1)(a) –(d) & (f).


Banks and Trust


Companies)

Regulations

Very Serious

35



obtain from the directors of the private

trust company a duly completed

Compliance Certificate on time.


Banks and Trust


Companies)

Regulations

Minor

70. Failure by a Registered Representative

that act as a Bahamas Agent of a private

trust company to enter into a service

agreement with the private trust company

to provide administrative services.


Banks and Trust


Companies)

Regulations

Minor


(i) verify the identities of persons listed

in regulation 13(4)(a)(i) – (iv) of the

Banks and Trust Companies (Private

Trust Company) Regulations and or

(ii) make a suspicious transaction report

to the Financial Intelligence Unit.

Regulations 13(4)(a) and

(b) of the Banks and Trust


Companies)

Regulations

Very Serious

BANKS AND TRUST COMPANIES (MONEY TRANSMISSION BUSINESS)

REGULATIONS, 2008

72. Failure by a Money Transmission Service

Provider to have and maintain a

minimum capital of $50,000 or such

other sum as the Central Bank may

require.


Banks and Trust

Companies (Money

Transmission Business)

Regulations

Very Serious


Provider to have and maintain insurance

coverage in such amount as the Central

Bank may require.


Banks and Trust


Companies)

Regulations

Serious


Provider to have the accounts of its

business audited annually or at such other

times as the Central Bank may require.

regulation 5(3) of the

Banks and Trust

Companies (Money


Regulations

Very Serious


Provider to submit its audited accounts to

the Inspector at all or within the specified

time.


Banks and Trust

Companies (Money


Regulations

Very Serious

76. Failure by a Money Transmission Agent

to comply with the terms, and conditions

of its registration.


Banks and Trust

Companies (Money


Regulations

Very Serious


Provider and Money Transmission Agent

to comply with the provisions of the

Financial Transactions Reporting Act

and Financial Transactions Reporting

Regulation 8(a) and (b) of

the Banks and Trust

Companies (Money


Regulations

Very Serious

36


Regulations.


Provider and Money Transmission Agent

to maintain its head office or registered

office in The Bahamas or to obtain the

Central Bank’s approval to establish its

head office or registered office outside

The Bahamas.

Regulation 8(d) of the

Banks and Trust

Companies (Money


Regulations

Serious

79.

Failure by a Money Transmission Service

Provider to keep and preserve books,

accounts and other records specified in

regulation 9(1) of the Banks and Trust

Companies (Money Transmission

Business) Regulations, 2008 for a period

of five years.


Banks and Trust

Companies (Money


Regulations

Serious


Provider to keep and preserve books,

accounts and other records in the form

and manner specified in regulation 9(2)

of the Banks and Trust Companies

(Money Transmission Business)

Regulations, 2009.


Banks and Trust

Companies (Money


Regulations

Serious

BANKS AND TRUST COMPANIES (TEMPORARY BUSINESS CONTINUITY

OPERATIONS) REGULATIONS, 2009

81. Failure by a person to apply for

registration as an exempt person within

the time prescribed in regulation 4(1) of

the Banks and Trust Companies

(Temporary Business Continuity)

Regulations, or at all


Banks and Trust

Companies (Temporary

Business Continuity)

Regulations

Serious


Inspector of matters specified in

regulation 5(1).


Banks and Trust



Regulations

Serious

83. An exempt person

(i) establishing a permanent place of

business in The Bahamas;

(i) carrying on any banking or trust

business in or from The Bahamas

other than the exempted activities;

(i) holding itself out as carrying on

any banking or trust business

other than the exempted activities.

Regulation 5(2)(a),(b) and

(c) of the Banks and Trust



Regulations

Very Serious

84. Failure by an exempt person to notify the

Inspector of changes in the name, address

and occupation of any required person on

time.


Banks and Trust



Regulations

Minor

37


85. Failure to comply with any conditions of

an extension or series of extensions of the

time in which exempted activity may be

carried out.

Regulation 8(d) of the

Banks and Trust



Regulations

Minor

Banks and Trust Companies (Liquidity Risk Management) Regulations, 2012

86. Failure by a licensee to

establish and maintain, a liquidity risk

management strategy appropriate to the

nature, scale and complexity of its

activities.


and Trust Companies

(Liquidity Management)

Regulations.

Serious

87. Failure by a licensee to implement its

liquidity risk management strategy

and or to review the strategy on a

regular basis, and at a minimum

annually.

Regulations 4(a) and 4(b)

of the Banks and Trust

Companies (Liquidity

Management) Regulations.

Serious


Inspector with a copy of its liquidity risk

management strategy.


Banks and Trust



Minor


Inspector of any change to its risk

management strategy, on time and to

provide the Inspector with a copy of the

revised risk management strategy.


Banks and Trust



Minor

90. Failure by a licensee to maintain a

liquidity ratio of not less than twenty per

centum


Banks and Trust



Minor


Inspector with such particulars of its

liquidity position, in such manner,

frequency and form as may be specified

by the Inspector.

Regulation 9(a) of the

Banks and Trust



Very Serious

92. Failure by a licensee to immediately

inform the Inspector of any concerns it

has about its current or future liquidity

position as well as plans to address such

concerns.

Regulation 9(b) of the

Banks and Trust



Very Serious

93. Failure by a licensee to take such

remedial action as the Inspector directs to

ensure compliance with paragraph (1) of

regulation 6.


Banks and Trust



Very Serious

Made this day of ,2013

Governor of the Central Bank of The Bahamas

38

DRAFT

ANNEX 3

SUPERVISORY AND REGULATORY GUIDELINES: PUxxxxxxx

Administrative Monetary Penalties Guidelines

Issued: , 2013

GUIDELINES FOR THE ADMINISTRATION OF MONETARY PENALTIES

1. INTRODUCTION

1.1 The Central Bank of The Bahamas (―the Central Bank‖) is responsible for the

supervision of banks, trust companies, Registered Representatives, non-bank money

transmission businesses and money transmission agents (―supervised financial

institutions‖ or ―SIFs‖) operating in and from within The Bahamas pursuant to the

Banks and Trust Companies Regulation Act, 2000 (―BTCRA‖) as amended, and the

Central Bank of The Bahamas Act, 2000 as amended. Additionally, the Central Bank

has the duty, in collaboration with its Licensees, to promote and maintain high standards

of conduct and management in the provision of banking and trust services.

1.2 All SFIs are expected to adhere to the Central Bank’s licensing or registration and

prudential requirements and ongoing supervisory programmes, including periodic onsite

examinations, and required regulatory reporting. SFIs are also expected to conduct their

affairs in conformity with all other relevant Bahamian legal requirements.

2. PURPOSE

2.1 The BTCRA and the Banks and Trust Companies (Administrative Monetary Penalties)

Regulations, 2013 (―the AMP Regulations) provide the Central Bank with a wide range

of discretionary enforcement powers to address situations that give the Central Bank

cause for concern, including the power to impose administrative monetary penalties

(―penalties‖) against any person in respect of their contravention of any provision of the

BTCRA, any Regulations made under that Act, any direction or order issued by the

Central Bank or any condition and or limitation imposed by the Central Bank.

Administrative monetary penalties are monetary sanctions imposed by the Central Bank

under statutory authority in respect of the matters indicated above, without the Central

Bank having to go to court.

2.2 Penalties are imposed primarily to promote high standards of regulatory conduct by

deterring persons from committing contraventions and encouraging those who have

committed contraventions to take appropriate remedial action. The imposition of

penalties is also designed to prevent, or at least reduce, recourse to more costly and time

consuming enforcement action such as criminal prosecution. This tool supports and

enhances the Central Bank’s efforts to ensure compliant behaviour by providing the

Bank with greater flexibility and responsiveness and enabling it to achieve prompt,

effective, measured, proportionate and equitable resolution of particular contraventions

in order to meet its regulatory objectives.

2.3 The Administrative Monetary Penalties Guidelines (―the Guidelines‖) set out the

procedures that the Central Bank will generally follow when the Bank has cause

for concern regarding the operations of a SFI or in the event of non-compliance

by any person or entity with applicable legislation, regulations, orders, directives,

conditions or limitations of the Central Bank.

2.4 The objective of these Guidelines is to promote awareness and enhance transparency of

the penalties regime for SFIs and other relevant parties. The Guidelines summarize the

circumstances under which the imposition of a penalty may be expected. The

circumstances under which the Central Bank would undertake other intervention and

enforcement measures are set out in the Guide to the Central Bank’s Ladder of

Supervisory Intervention.

3. APPLICABILITY

3.1 These Guidelines are applicable to all SFIs, to the controllers, directors, managing

directors and senior executive officers of such SFIs (―approved persons‖), and to any

other relevant person.

4. PROCEEDINGS AND DETERMINATION OF RESPONSIBILITY

4.1. The Central Bank is empowered to impose penalties in respect of the following matters,

where it is satisfied that a person:

(i) has committed an offence against –

(a) Regulation 8 of the Financial Intelligence (Transactions Reporting)

Regulations, 2000 (as amended); or

(b) The Financial Transactions (Wire Transfers) Regulations, 2009; or

(ii) has contravened –

(a) any provision of the BTCRA;

(b) any regulations made under the BTCRA;

(c) any direction issued by the Bank pursuant to section 6C(1) or section 18(1)(h)

of the BTCRA;

(d) any condition or limitation imposed by the Central Bank; or

(e) any order made by the Central Bank under the BTCRA or under a regulation

made pursuant to the BTCRA.

4.2. The Central Bank’s decision to impose a penalty is taken by an Administrative

Monetary Penalties Decisions Committee (―AMPDC‖) comprising of not less than three

(3) senior Central Bank officers (which may include the Inspector and the Manager of

the Bank Supervision Department). The composition and size of the AMPDC may vary

depending on the nature and complexity of the particular matter under consideration.

The AMPDC is not a standing committee but is convened on a ―case by case‖ basis as

required.

4.3. Whenever the Central Bank considers it appropriate to impose a penalty against a

person in respect of a contravention outlined in paragraph 4.1 above, it may, before

taking such action, issue to the person concerned a Notice of Contravention (―Notice‖),

which must be in writing and must contain:

(i) the name of the person believed to have committed a contravention or an offence;

(ii) the nature of the contravention or offence;

(iii) the penalty that the Central Bank intends to impose;

(iv) the right of the person, within 30 days after the Notice is served or within a longer

period that the Central Bank specifies, to pay the penalty or to make representations

to the Central Bank with respect to the contravention or offence and the proposed

penalty, and the manner for so doing; and

(v) the fact that, if the person does not pay the penalty or make representations in

accordance with the Notice, the person will be deemed to have committed the

contravention or offence, as the case may be, and the Central Bank may issue an

order imposing a penalty in respect of it.

4.4. It is important to note, however, that no prior warning is required to be given to SFIs

before the Bank issues a Notice with respect to contraventions involving the late and/or

erroneous filing of routine returns that SFIs are required to submit to the Central Bank

pursuant to section 9 of the BTCRA or other applicable legislation (see section 6 below

for details on late or erroneous filings.)

4.5. The person on whom a Notice is served may choose to pay the penalty proposed in the

Notice without dispute. In such a case, the Central Bank would regard the person as

having committed the contravention or offence notified and the proceedings in respect

of the contravention or offence are ended.

4.6. The recipient of a Notice may request an extension of the time allowed for making

representations. Such a request should be made within 14 days of the Notice being

given. If such a request is made, the Chairman of the AMPDC will decide whether to

allow an extension, and, if so, how much additional time is to be allowed for making

representations.

4.7. Where representations are made, the Central Bank will normally respond in writing

within thirty (30) days. Representations are considered by at least two (2) senior Central

Bank officers (―the decision makers‖) who would not have participated in the initial

decision to impose the penalty which is the subject of the representations. Such officers

will include the Bank’s Governor and Legal Counsel. In deciding whether the penalty

should be imposed, the decision makers will consider, on a balance of probabilities,

whether the person committed the contravention or offence alleged.

4.8. Where representations are made, the decision makers will assess the appropriateness of

imposing the penalty contemplated in the light of the representations and any new

information they receive relating to the matter under consideration. If the decision

makers determine that the person has committed the contravention or offence, the

Central Bank will issue an Order setting out the penalty imposed in respect of the

contravention or offence. Such penalty may be in the amount indicated in the original

Notice or it may be of a lesser amount, having regard to the representations made.

4.9. The decision makers may also decide, in light of the representations made, that it is not

appropriate to impose the penalty. If such a decision is taken, the penalty is withdrawn

and the concerned person will be advised in writing. No Order is issued.

5. CONTRAVENTIONS AND PENALTIES

5.1. The BTCRA and AMP Regulations classify contraventions as ―minor‖, ―serious‖ or

―very serious‖. Penalties may be imposed on a lump sum basis up to the specified

maximum set out below, against individuals and/or corporate entities in the case of a

serious or very serious contravention, or a minor contravention that is not a late or

erroneous filing of returns. The filing of a late or erroneous return attracts a penalty at

the prescribed per diem rate of $250. Penalties for late or erroneous filings may only be

imposed against companies. See the table below.

CLASS

INDIVIDUAL

COMPANY

COMPANY

Lump sum Lump sum Per diem

Minor

Non-

LEF1

$2,500

$10,000

N/A

LEF2

N/A3

N/A

$250 (up to a

maximum of

$10,000)

Serious

$5,000

$50,000

N/A

Very serious

$10,000

$100,000

N/A

1 Minor contravention that is not a late or erroneous filing of returns.

2 Minor contravention that is a late or erroneous filing of returns.

3 Not applicable.

5.2 As there will be very few cases of a particular contravention in which all the

circumstances will be essentially the same, the Central Bank’s ability to impose a range

of penalties for a particular contravention provides the Bank with much needed

flexibility to assess each case on its own merits and to impose a penalty that is

proportionate in all the circumstances of the case being considered.

5.3 As mentioned above, the Central Bank may impose a penalty for late or erroneous filing of

returns that SFIs are required to submit to the Bank but the Bank has no discretion as to the

amount of such penalties as these are prescribed by the AMP Regulations (see section 6

below for details).

5.4 A listing of the various contraventions in respect of which the Central Bank may impose

penalties and the classifications of each such contravention is set out in the Schedule to the

AMP Regulations.

Action against approved persons

5.5 The primary responsibility for ensuring compliance with a SFIs obligations rests with

the SFIs board and senior management. As such, the Central Bank may take

disciplinary action, including imposing a penalty, against an approved person where

there is evidence of culpability on the part of that approved person. Personal culpability

arises where the behaviour was deliberate or where the approved person’s standard of

behaviour was below that which would be reasonable in all the circumstances at the

time of the conduct concerned.

5.6 In some cases it may not be appropriate to take disciplinary measures against a SFI for

the actions of an approved person (an example might be where the SFI can show that it

took all reasonable steps to prevent the contravention.) In other cases it may be

appropriate to take action against both the SFI and the approved person. For example, a

SFI may have breached the rule requiring it to take reasonable care to establish and

maintain such systems and controls as are appropriate to its business and the approved

person may have taken advantage of those deficiencies to misappropriate assets.

5.7 The Central Bank will not impose a penalty against an approved person simply because

a regulatory contravention has occurred in an area for which he is responsible. Such

action will only be taken if the approved person’s conduct was below the standard

which would be reasonable in all the circumstances at the time of the contravention

concerned.

5.8 An approved person who has exercised due and reasonable care when assessing

information, has reached a reasonable conclusion and has acted on it will not have

committed a contravention. In addition, where a penalty is imposed against an approved

person, the onus will be on the Central Bank to show that the approved person has been

guilty of the contravention.

6. LATE OR ERRONEOUS FILING OF RETURNS

6.1. Licensees of the Central Bank are required to file a variety of financial and corporate

information and related documents (―returns‖) specifically mandated by the BTCRA or

that the Inspector deems necessary to carry out his legislative functions. Much of this

information is required in accordance with a pre-determined schedule and is subjected to

review for accuracy and completeness when received by the Central Bank. Where the

Inspector requests non-routine information, the Central Bank and the licensee will, where

practicable, agree a timeframe for providing the information.

6.2. Returns must be made in the form and manner prescribed by the Central Bank, must be

complete and must be error-free. If a return fails to meet any of these requirements it is

deemed to be in contravention of requirements and, as provided under section 24A(3) of the

BTCRA and regulation 5 of the AMP Regulations, is subject to a penalty for each day the

contravention continues. The returns required in accordance with a pre-determined schedule

and that are subject to the imposition of a penalty and the related due dates are set out in the

Appendix hereto.

6.3. The table below outlines the penalty structure for a minor contravention that is a late or

erroneous filing of returns. The penalties are per diem charges that are assessed against

SFIs in respect of individual returns that are late or erroneous, up to the specified

maximum.

Class Per Diem Maximum

Minor

$250

$10,000

6.4. Erroneous returns are not in and of themselves subject to a penalty. Penalties are incurred

when returns are received by the Central Bank after their applicable due dates, whether

they contain errors or not. In the case of the former, i.e., returns containing errors, the

Central Bank calculates penalties based on the number of days after the due date until the

Central Bank receives an error-free return. The penalty is unaffected by the fact that a

licensee may have submitted a return prior to the due date (assuming the return contained

errors). As such, there is no ―doubling up‖ of penalties for returns that are both late and

determined to be erroneous when they are received they are assessed a single per diem

penalty until such time as the Central Bank receives an error-free version.

6.5. In general, the due date for determining whether a return is late is the due date as prescribed

in the Appendix, and there is no grace period. For example, a complete, error-free return that

is in the prescribed form that is received before the end of the first day following the due date

is considered one day late. The following guidelines apply for the purpose of calculating the

number of days a return is late:

(i) where the prescribed due date for any return falls on a holiday or on a Saturday or

Sunday, the due date (for penalty purposes) is the first business day following the

holiday, Saturday or Sunday;

(ii) in the case of any return that is not received by the end of the day on which it is due,

holidays, Saturdays and Sundays are included in the number of days the return is late;

(iii) the date the return is received is the date recorded by the Central Bank’s systems in the

case of returns that must be filed electronically;

(iv) the date the return is received is the Central Bank’s date stamp in the case of returns

that must be filed in hard copy or diskette; all returns must be received directly by the

Bank on or before the due date, to be considered filed on time;

(v) a day ends at midnight in the case of returns that must be filed electronically, or at the

close of business in the case of returns that must be filed in hard copy or on diskette;

(vi) an incomplete return, where completeness is determined in relation to the requirements

of the relevant instructions or validation rules, is considered ―not filed‖ until the Central

Bank receives all necessary elements of the return; and

(vii) if a diskette is received at the Central Bank but data cannot be loaded onto the Central

Bank’s systems due to improper file name, header record, file format, etc., the

applicable return(s) is (are) considered ―not filed‖.

6.6. If a return cannot be filed on time because the Central Bank is not able to receive it due to

an event outside of its control, or if the Central Bank makes an error that affects the correct

recording of the filing date, any penalty assessed will either not be imposed or corrected

accordingly.

6.7 Penalties are imposed for returns (original and any subsequent submissions) that are not in

the prescribed form, are incomplete or contain errors. Although the focus is on financial

returns (primarily because errors may be more readily identified in financial information

than in corporate information), the Central Bank reviews certain corporate returns to

identify and resolve errors in their completion.

6.8 Financial returns are subjected to a variety of validation rules when they are received by the

Central Bank. Most of the Central Bank’s validation rules are mathematical rules that test

the data for internal consistency, with very narrow tolerance levels.

6.9 The validation process may identify errors in a single return, or in two or more returns, and

these errors would result in contraventions in respect of all the returns affected. However,

these errors should be avoidable because they are the result of failure to comply with the

validation rules. In addition, every licensee has the ability to run the Central Bank’s

validation rules against the information reported in its financial returns to identify such

errors.

6.10 The following guidelines apply to erroneous financial returns for the purpose of applying

the penalties:

(i) An erroneous return filed after the due date is assessed a per diem penalty, regardless

of the number of errors in the return;

(ii) the Central Bank notifies (by telephone or e-mail) licensees of errors as they are

identified;

(iii) a per diem penalty for error is calculated from the due date to the date of resolution

(in the case of an erroneous return that is filed on or before the due date). Returns

uncorrected by the due date will attract a per diem penalty at the prescribed rate until

such time as the Central Bank receives an error-free corrected return;

(iv) the Central Bank acknowledges that its validation process cannot identify all errors

and does not want to discourage licensees from correcting errors that the validation

process does not detect. A licensee may file corrections to previously submitted

returns (that had passed validation rules) without penalty;

(v) a revision containing an error (i.e. fails a validation rule) continues to attract a per

diem penalty at the prescribed rate until such time as the Central Bank receives an

error-free corrected return;

(vi) a return filed on an out-of-date or incorrect form is considered to be erroneous;

(vii) in the case of cross-return errors (a validation between two returns fails), only the

return that identifies the error (in general, the first one to be filed of the returns

affected) is subject to penalty, regardless of the number of returns affected. As such,

any penalty will be calculated based on the number of days a corrected version of

the return in question is received after the due date.

6.11 The following guidelines apply to erroneous corporate returns for the purpose of applying

penalties:

(i) a return filed on an out-of-date or incorrect form is considered erroneous;

(ii) corporate returns contain features designed to reduce the possibility of entering

information that is contrary to regulatory requirements.

6.12 As indicated above, the Central Bank has no discretion as to the amount of a penalty

imposed for late or erroneous filing of returns once the penalty is incurred. The Bank may

exercise discretion as to whether a penalty should be imposed. However, the Central

Bank exercises this discretion judiciously so as not to undermine the integrity of the

administrative penalties framework. The discretion is exercised when licensees are either

generally or individually affected by something over which they have little or no control,

such as an act of nature or a major power outage, or a similar situation or business

interruption that prevented the licensee from producing or delivering the return to the

Central Bank on time and error free. As such, few penalties are dealt with in this manner.

6.13 Examples of situations that will not be considered by the Central Bank as compelling

include: the failure of the postal system or a courier to deliver materials if they are otherwise

available and operating; breakdowns in a licensee’s internal controls, staff shortages, work

pressures and vacations; the licensee’s previous filing record and similar situations within

the control of the licensee.

6.14 Licensees in liquidation continue to be responsible for filing all returns until such time as

they cease to be licensees.

7 ELECTION (CONTRAVENTION OR CRIMINAL OFFENCE) AND TIME LIMIT

WITHIN WHICH PROCEEDINGS MAY BE BROUGHT

7.1 One of the primary advantages of having administrative monetary penalties in the

Central Bank’s regulatory enforcement toolkit is that procedural and legal requirements

are greatly reduced since the Central Bank can impose penalties without recourse to the

Courts. It is also an effective enforcement alternative to criminal prosecution which,

being a more costly and time-consuming process, can be reserved for the most severe

cases of regulatory non-compliance and misconduct.

7.2 Section 24C of the BTCRA requires the Central Bank to choose whether to proceed

with an act of regulatory non-compliance as a contravention in respect of which a

penalty may be imposed, or whether to proceed by way of a criminal prosecution. Once

the election is made, the Central Bank is precluded from proceeding in the alternative

manner.

7.3 Proceedings relating to a minor contravention must be brought no later than six months

from the date on which the contravention came to the knowledge of the Central Bank.

Proceedings relating to a serious or very serious contravention must be brought no later

than two years from the date on which the contravention came to the knowledge of the

Central Bank (BTCRA Section 24G(1)).

7.4 A document that appears to have been issued by the Central Bank which certifies the

day on which a contravention came to the knowledge of the Central Bank may be

accepted as evidence in court proceedings as proof of that date. There is no need to

prove the signature or official character of the letter’s apparent signatory, unless there is

evidence to the contrary (for example, that the signature on the document is not the

signature of a Central Bank official or that the signatory was not authorised to sign the

letter.)

8 DETERMINING THE AMOUNT OF THE PENALTY

8.1 The Central Bank will consider all the relevant circumstances of a case when it

determines the amount of a penalty that is appropriate and in proportion to the

contravention under consideration. In this regard, the Central Bank’s main objectives

are to ensure transparency and proportionality with respect to the matters being

regulated; having regard to the seriousness of the contravention, its effects on

maintaining the Central Bank’s regulatory programme and the public interest that is

sought to be protected.

8.2 Section 24A(4) of the BTCRA stipulates the factors that the Central Bank must consider

when determining the amount of any penalty it proposes to impose. The list of factors

are not exhaustive: not all of them may be relevant to a particular case, and there may be

other factors not included that are relevant. Below are the factors that the Central Bank

will consider in determining the amount of a penalty:

(a) the degree of intention or negligence on the part of the person who committed the

contravention;

(b) the harm done by the contravention;

(c) the history of the person who committed the contravention with respect to any prior

contravention or conviction under the BTCRA within the five-year period

immediately before the contravention;

(d) whether the contravention or non-compliance was brought to the attention of the

Central Bank by the person concerned;

(e) the seriousness of the contravention or non-compliance;

(f) whether or not the contravention or non-compliance was inadvertent;

(g) what efforts, if any, have been made to rectify the contravention or non-compliance

and to prevent a recurrence;

(h) the potential financial consequences to the licensee or person concerned and to third

parties, including customers and creditors of the licensee, of imposing a fine;

(i) the penalties imposed by the Central Bank in other cases; and

(j) any other criteria that may be prescribed by regulation.

8.3 The Central Bank assesses ―harm‖ in relation to the degree to which the contravention

jeopardizes the interests of depositors, the beneficiaries of any trust, or other creditors,

the financial system of The Bahamas or the Central Bank’s regulatory programme.

9 PAYMENT OF PENALTY

9.1 The Central Bank’s Notice of Contravention and its Order which is issued after

representations are made with respect to a Notice, would both contain details of the

amount of the penalty imposed and the period within which the penalty is required to be

paid.

9.2 All penalties must be made payable to the Central Bank within the period specified by

the Central Bank in its Notice or Order. Penalties may be subject to the accruement of

interest for late payment.

10 APPEALS

10.1 The Central Bank’s decision to impose a penalty for a serious or very serious

contravention may be appealed to the Supreme Court of The Bahamas in accordance

with section 26 of the BTCRA.

11 REMISSION

11.1 The Central Bank may remit all or part of any penalty imposed, including any interest

that has accrued on the penalty. Such remission may be made subject to conditions or be

unconditional.

12 PUBLICATION

12.1 The Central Bank may make public a statement of the contravention or offence in

respect of which it imposes a penalty. Publication will be made in respect of serious and

very serious contraventions on the Central Bank’s website and such publication would

include, inter alia, the name of the person that committed the contravention, the nature

of the contravention, and the amount of the penalty imposed.

A P P E N D I X

Statutory/Regulatory Filing Requirements

The late filing of any of the following returns will attract an fixed penalty of $250 per day up to a maximum of $10,000.

# Name of Document # of Days to File/Due Date

1. Copy of Treasury Fee Receipt December 31st

2. Copy of the Registrar General’s Fee Receipt December 31st

3. Audited Financial Statements Within 120 days after the financial year end

4. Copy of the Published Audited Financial

Statements

Within 120 days after the financial year end

5. Copy of Group Organizational Chart December 31st

6 Corporate Governance Certification Within 120 days after the calendar year end

7. Annual Statement as filed with the Registrar

General (if locally incorporated)

Must be submitted within 10 days following

the statutory deadline for filing with the

Registrar General’s Office

8. Management Letter from the External

Auditors

Within 45 days after the expiration of the

deadline for submission of the audited

financial statements

9. Monthly unaudited financial statements Within 15 business days after the month end

10. Quarterly unaudited financial statements Within 15 business days after the quarter end

11. Auditors’ Certification Within 120 days after the calendar year end

12. Directors’ Certification Within 120 days after the calendar year end

13. Verification of Existing Clients Report Within 21 days after the quarter end

14. Restructured Loans Report Within 15 days after the month end

15. Debt Service Ratio Report Within 21 days after the month end

16. Dormant Account Report December 31st for accounts where 7 years has

elapsed since the last customer initiated

activity took place

Documents

CONSULTATION PAPER on the Draft Banks and Trust Companies