RBC (Bahamas) is the latest local bank to go on record as not being permitted to do business with web shops, whether they are regulated or unregulated, claiming that these establishments' entire business model ensures they fall into a "high risk" category regardless of legal regulatory status.
Signaling yet further issues for the government's plans to regularize and tax the web shops, a position paper created by the bank's compliance department reveals that opening accounts for companies that offer online gambling is "restricted under RBC policy" while the physical component of web shops' activities "is not the type of establishment RBC is interested in on-boarding, given all of the risks identified".
The paper highlights the fact that conducting business with web shops, even once formally regulated, would cause local banks to run afoul of their parent banks' global policies and U.S. federal law.
Referring to the fact that various aspects of online gambling transactions are prohibited under U.S. federal law, RBC (Bahamas) states that it "cannot put its U.S. dollar (USD) correspondent (banking) relationships at risk by on-boarding these businesses and conducting transactions in U.S. dollars for them".
"RBC has already had discussions with one of its major USD clearing banks whose position is they do not want to and will not clear USD transactions that involve online gambling businesses. It is up to RBC to ensure that it respects these prohibitions by not facilitating USD transactions for these businesses, or its USD correspondent relationships will be at risk of closure," said the report.
Obtained by Guardian Business, the position paper was quoted in Parliament by Free National Movement (FNM) Deputy Leader and MP for Long Island Loretta Butler-Turner on Monday and RBC (Bahamas) yesterday confirmed that the paper was generated by the bank.
One of the major motives of the government, with respect to the regularization of the web shops, is to ensure that they are able to deposit the money raised within the sector into the domestic banking system.
Speaking in Parliament earlier this year, Christie said: "We have to, as the Ministry of Finance and regulators, find the answer to monies that are in large amounts that are not in the bank, that are not being invested in treasury bills, that have not been allowed to be exported or open bank accounts abroad," Christie said of the web shop gaming industry.
"Therefore, that money is finding itself some purpose here in major developments. That is a major contradiction to the good order of our system, and one way or the other we have to do deal with."
However, the position paper suggests that much of what the government is seeking to achieve through regularizing the sector - including government tax revenues and the elimination of what is presently perceived as a risk, which some have charged could lead to The Bahamas being subject to another damaging financial black-listing by the G-20's Financial Action Task Force - may fail to come about.
'Restricted'
The report says that other Canadian banks with which RBC (Bahamas) conferred on the issue of dealing with web shops post-regularization took the same position as RBC.
Such banks could include First Caribbean International Bank (Bahamas) and Scotiabank.
The paper states: "As it currently stands, based on the policies outlined above, RBC is restricted from opening accounts associated with Internet gambling. It is not possible to separate the physical casino aspect of these businesses from the online aspect. Regardless, the physical component is not the type of casino and gambling establishment RBC is interested in on-boarding, given all the risks identified above.
"In all of the circumstances, and given the available information regarding web shops, RBC will continue to face challenges with these entities and the proceeds generated through same, whether they are regulated or not. Onboarding these businesses contravenes RBC Global Policy requirements and, regardless, the money laundering risks presented by them cannot be mitigated by the implementation of specific controls."
The position of RBC (Bahamas) on the matter echoes that of Bahamian-owned banks interviewed exclusively by Guardian Business last month. Commonwealth Bank President Ian Jennings was the first to go on record as stating that the Bahamian-owned bank would not be able to transact business with web shops once regularized.

'Online accounts'
Outlining the operation of the sector, the RBC (Bahamas) report states that web shops in The Bahamas are "Internet cafes that offer illegal bets on the side and operate in plain sight".
It continues: "These operations have mushroomed and become a nationwide phenomenon, evolving into a high-tech industry that employs hundreds of Bahamians and is frequented by thousands of Bahamians."
"These entities allow bets to be placed against numbers that coincide with American lottery winning number selections, such as the 'three ball and four ball games'. The web shops, in turn, place bets in the United States through individuals acting on their behalf. It is unclear how the funds (winnings) are moved from the United States to The Bahamas.
"The evolution of technology now permits persons to establish online accounts at local number houses and bet via the Internet. Once an individual wins a bet, winnings are credited to their online accounts and may be accessed via white label Automated Teller Machines which are on the inside of the web shop."
"Under RBC's international policy, an 'Internet/Online Gambling Entity' is defined as "any business involving placing, receiving or otherwise knowingly transmitting a bet or wager (i.e. for money) by any means, which involves the use, at least in part, of the Internet."
The position paper said that the methods of gambling and payouts employed in the sector "raises the very concerning issue about the source of the funds of the winnings".
The bank notes that in a 2014 U.S. State Department International Narcotics Control Strategy report, it was said that illegal gambling, along with drug trafficking and human smuggling, account for "major sources of laundered proceeds".
"This supports the proposition that proceeds from drug trafficking and human smuggling could be laundered through the web shops/numbers houses, both now and once legalized."

Banks should assist
In an interview with Guardian Business recently, Minister with Responsibility for Gambling Obie Wilchcombe expressed confidence in the government's plan, and said he has no doubt that web shops can meet the strict standards which will be required of them once legislation governing their operations is passed this year.
Commenting on concerns raised by bank executives such as Jennings about how his bank would continue to have difficulties doing business with web shops, Wilchcombe suggested that the banks must assist the government.
President of the Clearing Banks Association, which represents local retail banks, Marie Rodland-Allen, has told Guardian Business that it is hard to know what the international reaction would be to the government's regularization plan.
"In the modern financial environment, dominated by FATF member countries, the proposed regularization covers issues that are of key concern to FATF members. Without knowing the specifics of the proposed legislation, it is difficult to anticipate what may be the reaction from the FATF and, in particular, the United States. Greater scrutiny is also being placed on AML and KYC processes of correspondent banking relationships.
"The CBA members will continue to apply their AML/KYC due diligence standards to all customers to ensure they do not assist money laundering or financing or any other activity that may be harmful to the reputation of this jurisdiction," she said.

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