"Bahamians should not be disrespected, disenfranchised or discriminated against based on who they are and what they do in their own country."
- Sebas Bastian, CEO, Island Luck
Last year, Parliament passed the Gaming Act ("the act"), which became effective in November, 2014. Among other things, the act legalized local web shop (gaming house) operations - previously referred to as "numbers houses" - which for decades were illegal, albeit largely accepted by most segments of the Bahamian society.
The act and related regulations provided that gaming houses that applied for licenses in the prescribed manner, subject to the payment of taxes (for the last six years and up to the date of responding to the Gaming Board's Request for Proposal in mid-February) along with the prescribed penalties as high as $750,000, would be allowed to continue in operation until the government decides which applicants would be licensed. It is expected that this will occur in May or June of this year. Nine gaming houses have applied, and to date the government has collected approximately $30 million in taxes and penalties from the gaming houses.
All gaming houses that applied for licences will be treated as if they are licensed during "the probity or regularization period" - that is, the period during which the Gaming Board reviews applications from gaming house operators.
Notwithstanding the government's valiant endeavors to regularize this industry, some Canadian commercial banks have indicated that they will not accept deposits from these now legal enterprises, based on their Canadian parents' policies not to accept such deposits. Therefore, this week, we would like to Consider this... What are the implications for this Bahamian-owned industry and the economy in general of those Canadian commercial banks' decision to refuse to accept deposits from gaming houses?
Canadian banks position on local gaming
Two Canadian commercial banks have publicly indicated that they will not conduct business with local gaming houses.
The managing director of CIBC First Caribbean, in a response to a newspaper reporter, recently stated: "As far as it stands right now, we, along with other major Canadian banks, have a decision that we will not be accepting those funds. It's actually a bank policy. Most Canadian banks have a policy in terms of online gaming, so it is just a prohibited policy from our parent companies."
A senior spokesman for RBC (Bahamas) Limited also stated that "regularization alone will not address the problem that stops the banks from being able to open accounts on behalf of web shops." RBC never qualified its extremely evasive and absolutely ambiguous statement to explain what the "problem" is.
While we understand, but disagree with the rationale proffered by the Canadian banks, Commonwealth Bank, wholly-owned by Bahamian shareholders, has adopted a similar policy regarding the gaming houses. It is extremely difficult to understand why Commonwealth has adopted such a policy.
Unlike its Canadian counterparts here, it cannot blame this position on directives from its foreign parents because it doesn't have any. So what is its issue? We believe that Commonwealth Bank owes an explanation to the Bahamian people regarding its stance on this issue. But more about that and the Association of Clearing Banks in a future article.
Disingenuous and discriminatory position of the Canadian banks
It is patently disingenuous that the Canadian banks are happy to accept deposits from the gaming industry in the guise of foreign-owned casino operators on Paradise Island, Nassau, Bimini and Freeport, while refusing to do so from domestic gaming houses. How can they justify or reconcile this discriminatory position?
The irony of this position is that if the Canadian banks are concerned about money laundering or terrorist financing from local gaming houses, there is a far greater risk of banks receiving "questionable" funds from the foreign patrons who gamble in our foreign-owned casinos than from the proceeds of local gaming houses.
In the first place, foreign-owned casinos are required by law to conduct their gaming transactions in United States dollars. Bahamian gaming houses, on the other hand, are legally required to conduct their transactions in Bahamian dollars. Most money laundering or terrorist financing experts will agree that such activities are more likely to be funded with U.S. dollars.
Furthermore, in this newly-regulated environment, it will be impossible for Bahamian gaming houses to accept large amounts of U.S. dollars and therefore the risk of domestic gaming houses engaging in money laundering is substantially eliminated. So where is the risk and what is the "problem" of which RBC speaks?
The hypocrisy of it all
We maintain that the position held by the Canadian banks smacks of discrimination. In their view, it is completely acceptable for the foreign casinos to deposit their funds in the Canadian banks, but Bahamian gaming entrepreneurs are not welcome.
We are reliably informed that one of the Canadian banks recently issued a bank draft in millions of dollars for a Bahamian gaming house to pay its taxes to the government. The draft from that same Canadian bank was imprinted with the name of the gaming house on the draft. It was one of the same banks that professed that it will not conduct business with Bahamian gaming houses. This is the height of hypocrisy.
Furthermore, how far are the Canadian banks prepared to go in order to perpetuate this prohibited "policy"? Does this policy mean that the Canadian banks that refuse to accept deposits from gaming houses will take the same position regarding persons and institutions that do business with the gaming houses?
Will that include refusing deposits from the contractors and workers who recently built the gaming houses on Village and Bernard Roads, for example? What about those established, "respectable" businesses that sell gaming houses food, toilet paper, bottled water and office supplies, etc. or the hundreds of landlords who rent their premises to gaming houses?
Will the Canadian banks refuse to deposit food store revenues or rental income paid to the landlords of the gaming houses, many of whom have active accounts and mortgages with some of the same Canadian banks?
Does this also mean that Canadian banks will not allow the employees and directors of gaming houses to deposit their salaries and directors' fees in their banks? And which banks will muster the intestinal fortitude to inform prominent board members of gaming houses that, if they bank with the Canadian banks, the directors' fees that are paid by the gaming houses for their services will not be accepted? Can we now appreciate the absolute absurdity of the Canadian banks' ill-conceived policies in this matter?
The law should trump corporate policy
In order to properly regulate the local gaming industry, the Gaming Act and regulations include specific provisions to ensure that gaming houses establish client acceptance protocols, know your customer rules, compliance procedures and policies and reporting requirements that mirror those that are imposed on commercial banking customers.
In addition, before the passage of the Gaming Act, the attorney general met with the Financial Action Task Force to inform that international body of the government's plans to regulate the domestic gaming industry. Based on the advice and counsel of international consultants and local gaming specialists, the government has enacted legislation that represents modern, best practices for the industry.
Therefore, the government and the Central Bank of The Bahamas should impress upon the Canadian banks that they are compelled to respect the laws of the country and that statute laws trump foreign corporate policies. The Canadian banks should be made to understand that they operate in The Bahamas and are governed by its constitution (including its anti-discriminatory provisions) and laws.
If the local commercial banks are not persuaded to cease and desist from these disingenuous and discriminatory practices, the local gaming industry should collectively consider contesting the banks' policies and practices in the Bahamian courts. We believe that it is critical for corporate citizens to appreciate that, if they intend to operate in this jurisdiction, they had better persuade their Canadian parents that their policies can never trump our laws.
Conclusion
Fortunately, Bank of The Bahamas has sensibly seized this opportunity to build its book of business by accepting deposits from local gaming houses, subject to that bank's compliance policies and procedures. The time has also come for more Bahamians to establish their own banks, free of the strictures and prohibitions that the Canadian banks regularly impose on our citizens, some of which they cannot get away with in Canada. This issue goes to the heart of our national sovereignty, which our leaders must not compromise.
Aptly observed by Island Luck CEO, Sebas Bastian: "[the] last time I checked, the country I live in is called the Commonwealth of The Bahamas, not the Commonwealth of Canada." The Canadian banks would do well to recognize this reality and act accordingly.
o Philip C. Galanis is the managing partner of HLB Galanis and Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to pgalanis@gmail.com.
Click here to read more at The Nassau Guardian
