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News Article
Banks warn over web shop 'regularization' plan

Local banking executives have thrown into question government's plans to "regularize" the web shops, suggesting that even once this occurs it may be difficult or impossible for banks to do business with them without the country facing a damaging potential 'blacklisting'.
Without banks being able to handle web shop proceeds, this would have a knock-on negative impact on government's intention to reap millions in taxes from the web shop sector, some have warned.
In an exclusive interview with Guardian Business, Ian Jennings, president of Commonwealth Bank, said with reference to the government's plans with respect to illegal web shops this year: "It's not as simply as just passing an act to regularize them; they also have to be seen within an international framework of FATF (the Financial Action Taskforce) and various other money laundering issues.
"It goes back to a reputational issue for the jurisdictions, and I think a lot of people don't appreciate that and what may be the issues that fall out of that. Just by regularizing the web shops is not going to get rid of the problem as far as the banking sector is concerned."
Jennings noted that the relationship of banks operating in The Bahamas with their "correspondent" financial institutions in the U.S. and elsewhere, which provide services on their behalf, is crucial and these foreign banks are under great pressure from their regulators to ensure that the Caribbean banks they do business with are operating to international standards.
In his Budget Communication late last month, Prime Minister Perry Christie said it is intended that with the regularization and licensing of web shops under an impending Gaming Bill, he expects such establishments to be operated in a way that upholds "laws and international obligations in accordance with best practices".
However, Jennings suggested that he has doubts that web shops would be able to meet these obligations and told Guardian Business that doing business with web shops that may be under a legislatory framework that legalizes them in the Bahamian context, but which may not be meeting international standards set out by agencies such as the FATF, could cause local banks to be called into question in this regard by their correspondent banks and international agencies.
"Internationally now the major economies continue to crack down on anything that's seen as tax avoidance, tax evasion or just offshore financial sector. We've seen developments with Switzerland; the U.S. has indicated they'll put a greater scrutiny on what's happening in the Caribbean and, certainly, for Bahamian banks who do not have any correspondent or any parents outside the country, the relationships with correspondent banks in the U.S. is extremely important because all of our transactions and trade is with the U.S. and they are coming under increasing scrutiny from their regulators to make sure that their Caribbean correspondents are performing to the highest levels.
"That's a relationship that no Bahamian bank can afford to give up so we have to make sure that we maintain our reputational position. These are all things that we are waiting to see how they develop coming out of the budget presentation and the legislation that goes behind it," said Jennings, in an interview with Guardian Business.
He called the matter one of "concern" for international agencies with respect to the reputation of the Bahamian financial system.
Jennings' comments were strongly supported by another senior banking executive locally, who spoke on condition of anonymity.
Money 'will not be accepted'
"(Jennings) is absolutely right. The government seems unaware that many banking institutions, as a matter of policy, will not deal with the gaming industry whether it is legitimate or not. At the extreme, simply because the government 'legalizes' the gaming industry in The Bahamas does not mean that their money will be accepted in the system.
"This is not simply a 'Bahamian issue' - it involves international banks who also provide correspondent banking facilities to Bahamian based institutions, and unless there is evidence of strong know your customer (KYC) procedures and anti-money laundering (AML) standards in place (and the gaming industry would need to demonstrate that), the international and local banks may be forced to distance themselves from the gaming industry."
Without local banks being able to offer banking services to the web shops, this in turn could hurt the government proceeds of taxation from the sector.
"Government's proceeds of taxation will also be impacted as the proceeds may not be accepted unless KYC and AML procedures are in place, and the industry is rid of persons who have run afoul of the law. The best solution for The Bahamas is for it to have a national lottery. Otherwise we will have a blossoming 'shadow banking system' that will be making loans, transmitting money, taking deposits etc. completely unchecked and unregulated. That can't be good for the economy," added the executive.
In his recent budget communication, Christie suggested that the government "conservatively" anticipates collecting around $12 million from the sector annually once the Gaming Bill is passed following the budget debate that is currently underway.
Revenue collection potential is clearly one of the major benefits of regularizing the web shop sector, which has flourished in recent years. The anonymous banking source said it may be the case that the government is "focused simply on the revenue aspect of the legalization and seem unaware of the wider implications of their actions".
However, as Guardian Business exclusively reported in October last year, how the unregulated sector could factor into external reviews this country and its financial sector faces from entities such as the Caribbean Financial Action Taskforce, has also been recognized by officials as an impetus to regulate.
Before elected officials had suggested that legislation might be passed to make web shop gaming legal, the country's top anti-money laundering official, Stephen Thompson, coordinator for the National Anti-Money Laundering Taskforce, called the regulation of the web shops "the only responsible thing to do" in light of external pressures.
Thompson said in an interview that while he did not expect a "blacklisting" as a result of a lack of regulation, he did admit that "dire consequences" for the financial sector and economy could result from a perception among international agencies monitoring issues of money-laundering and terrorist financing that The Bahamas is being "lax" in its handling of web shops.

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News Article
Rollins questions projected web shop revenue

The government's projected revenue forecast of $12 million from taxing web shops only plays into the narrative that it is paying back web shop bosses, Fort Charlotte MP Dr. Andre Rollins said yesterday.
During his contribution to the budget debate, Rollins, chairman of the Gaming Board, asked if the projected $12 million is "the best we can do".
"A low tax rate and yield from web shops will only strengthen the public's view that a national lottery will be far more beneficial to the state's coffers and national development than the $12 million worth of revenue forecast in this budget," Rollins said.
"This will play into the opposition's existing narrative that we are motivated by some form of political payback as opposed to reducing the country's annual budget deficit, or funding worthy causes such as public education, healthcare, sports, cultural and infrastructural development.
"Failure of web shop tax revenue to meet the public's heightened expectations will inevitably increase public demand for a national lottery, and such an outcome will most certainly be seized upon by the opposition in the run-up to the next general election as an initiative they intend to deliver."
In his recent budget communication, Prime Minister Perry Christie said web shops will be taxed and regulated as of July 1, 2014.
Christie said the Gaming Bill will be debated following the budget debate.
Minister of Tourism Obie Wilchcombe recently suggested to The Guardian that the government will explore introducing a national lottery for the development of sports and education in The Bahamas sometime after it has regulated the web shop industry.
Minister of State for Finance Michael Halkitis said yesterday that the $12 million projected tax revenue from web shops was a conservative estimate as the government has not yet decided what rate to tax the industry.
He was responding to Montagu MP Richard Lightbourn.
Tax revenue
Rollins said since 2010 it has been stated, under successive administrations, that the yield from the taxation of web shops would range anywhere from $20 million to $40 million.
"If securing a new source of tax revenue is the motivation behind regulating and taxing web shops as indicated by the prime minister, the fundamental question we must all ask for the sake of our country and our government's depleted coffers is this: Is $12 million the best we can do?"
Rollins said while he believes the government should reap much more from the regulation and taxation of the web shop industry, he applauded the government's resolve to at long last apply law and order to it.
He added that web shops should be taxed at a higher rate than hotel-based casinos.
Minister of Financial Services Ryan Pinder has said that it is estimated the government could take in between $20 million and $100 million annually in taxes from a regulated "electronic gaming industry".
The Gaming Bill was tabled in the House of Assembly last October, but the current bill does not provide for the taxation of web shops.
Christie said the government will amend the bill to improve casino gaming and allow for the regularization and licensing of the web shop industry.
Rollins previously called on the government to regulate and tax web shops.

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News Article
Web shops penalty for illegal earnings

Attorney General Allyson Maynard-Gibson said yesterday the government intends to impose a penalty on web shops for revenue generated prior to regularization.
However, she did not specify what the penalty will be.
Also addressing the issue yesterday, Tourism Minister Obie Wilchcombe, who has ministerial responsibility for gaming, said, "There will be a penalty for illegal operation, when it was illegal. So we have to penalize them for about six years. And all of that is a part of what we're doing."
Wilchcombe said the government is also determining a period of closure for web shops.
He recommended that web shops be made to close before the regularization period begins. However, he said he has faced some opposition to that.
"The web shop consultants are suggesting that it's not necessary," he said. "We're weighing it right now."
Meanwhile, Maynard-Gibson, in a separate interview, expressed confidence that web shops will be able to conduct business with banking institutions in The Bahamas once the government regulates the industry.
The Gaming Bill has not yet been debated in the House of Assembly, but web shop regularization will be retroactive to July 1.
At least two banks in recent weeks voiced strong concern about web shops meeting international standards even in a post-regulated environment.
"I didn't read what they said in that way," said Maynard-Gibson outside the Senate.
"I'll say that I am aware, as we all are aware, that in Canada gaming is conducted; gaming that is regularized is conducted.
"People who work in those institutions that are regularized in Canada receive money from those gaming institutions.
"They put their salaries etc. into banks in Canada, so I have every confidence that once gaming, including web shops, is fully regularized in The Bahamas that the Bahamians who work in those institutions, just like in Canada, will put their money in banks in The Bahamas."
When asked how web shops' proceeds prior to regularization would be handled in the event banks decide to do business with them, Maynard-Gibson said, "That is something, as the prime minister has indicated, we are benchmarking other jurisdictions.
"This is not the first time what is called an underground economy has been regularized and so we are studying what has happened in other jurisdictions.
"I think it is fair to say that there will be some type of penalty that must be paid because what we are seeing so far is that's what happens so far when these institutions are regularized."
In a position paper, RBC (Bahamas) said conducting business with web shops, even once regulated, would cause local banks to run afoul of their parent banks' global policies and U.S. federal law.
Two weeks ago, Commonwealth Bank President Ian Jennings expressed doubt that web shops would be able to meet international standards set out by agencies such as the Financial Action Task Force (FATF).
"It's not as simple as just passing an act to regularize them," Jennings said.
"They (web shops) also have to be seen within an international framework of FATF and various other money laundering issues.
"It goes back to a reputational issue for the jurisdictions, and I think a lot of people don't appreciate that and what may be issues that fall out of that.
"Just by regularizing the web shops is not going to get rid of the problem as far as the banking sector is concerned."
Maynard-Gibson said she believes Jennings was alluding to the importance of the government ensuring that its legislative framework is able to withstand scrutiny from international agencies.
During his contribution to the budget debate in the House of Assembly last week, Prime Minister Perry Christie said he expects web shops, under the Gaming Bill and accompanying regulations, to operate in conformity with "international best practices"
"Consultation led by the attorney general is taking place and will take place with the Financial Action Task Force to ensure that the provisions of the proposed legislation and procedures will be in compliance with FATF guidelines, so as to ensure acceptance by banks of proceeds from legalized and regulated casinos and web shop operators," he said.
"In this regard, consultation will continue with clearing banks operating in The Bahamas."
As it relates to the Gaming Bill, Maynard-Gibson said her team has been working assiduously to finalize the document so that Cabinet can review it.
Asked when the draft legislation would be sent to Cabinet, Maynard-Gibson said, "I really don't want to tie the hands of my team that is working really assiduously.
"And of course, we also, as the prime minister indicated, want to consult with the relevant authorities that are concerned with governing anti-money laundering and counter-financing of terrorism matters.
"I think that everybody would like to see the exercise be carried out as thoroughly as possible while pursuing expedition, and that is what we are doing."

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News Article
AG tried to block web shop operations, affidavit alleges

The Office of the Attorney General sought to block the continued operations of web shops despite an order from Senior Supreme Court Justice Jon Isaacs in January to prevent a shutdown of the businesses, alleges an affidavit filed recently.
The affidavit filed by attorney Claude Hanna of Munroe & Associates said a group of web shop bosses faced significant delays in trying to get business licenses renewed and some owners have still not yet received licenses.
Hanna said the government, through the Business Licence and Evaluation Section of the Ministry of Finance has sought to adversely affect the business of the web shop owners by delaying licenses.
He said this was an attempt to circumvent the conservatory order issued by Justice Isaacs for the businesses to remain in operation pending the outcome of a substantive court challenge.
The owners filed court action after a majority of people who voted in a referendum voted against the regularization and taxation of web shops and the establishment of a national lottery. They contend that their businesses are operating legally.
Justice Isaacs granted the order the morning after Prime Minister Perry Christie ordered an end to web shop gaming.
Hanna said that in the past, the process of issuing licenses involved submitting an application, paying the required fees and the Business Licence Unit would issue the license in a matter of days.
The longest period of delay in the past has been a week, according to the affidavit.
The affidavit said that this year the web shop owners and or their agents were informed by "servants of the Business Licence Unit" that the Office of the Attorney General (the defendant) has advised the Ministry of Finance to put a halt to licenses being issued to web cafes.
According to Hanna, the matter had to be addressed by Chief Finance and Revenue Officer Joseph Mullings, who circulated a minute paper on March 15, 2013 to all staff about the issuance and renewal of business licenses to web shops.
A copy of the minute paper was filed in court.
It said, "Effective immediately, you can issue new and renewal business licenses to web shops. The only license description will be Internet cafe and Internet related services."
According to the affidavit, the process of getting licenses has been "riddled with hurdles".
The affidavit said Pete Deveaux of Percy Web Cafe reported that after submitting the business license application, paying fees in full and satisfying all other requirements, his company was told by Mullings that he could not issue the license because they were awaiting written confirmation from the Office of the Attorney General.
"It was only after insistent calling that [Deveaux] received the business license on March 27," the affidavit said, adding that some of the other plaintiffs also received licenses last week.
"This has represented a delay that in most cases has been at least three to four times the usual delay in the process."
The affidavit said Whatfall and Asue Draw were still awaiting licenses.
It said, "The plaintiffs (web shop owners) have a history of being fully compliant with all laws and regulations governing their businesses."


The affidavit also said that during the general election campaign and during the referendum campaign members of the Free National Movement (FNM) and their bloggers suggested the web shop owners supported only the Progressive Liberal Party (PLP).
"I am advised by the plaintiffs that it was thereby being suggested that this was done because the PLP had committed to support the plaintiffs," the affidavit said.
"Indeed, much was made during the referendum campaign that the PLP government had a horse in the referendum race."
But the web shop owners have advised that this perception is incorrect, according to the affidavit.
"I am advised that the plaintiffs supported both the PLP and FNM as they always have done," Hanna said.
"If this is disputed they are able to disclose the persons and events together with the amounts that they supported."
The affidavit said the web shop owners met with the government after the general election but are unwilling to disclose the exact contents of these meetings unless it is deemed necessary to do so.
Hanna also said in the affidavit that the need to terminate staff would cause a loss to the plaintiffs "far beyond the financial costs associated with their terminations".
"I am advised by the plaintiffs that they care about the welfare of their employees to the point that they are mentally affected by the prospect of having to terminate persons with whom they have worked closely over the years."
The web shop owners and their attorneys have made an application to have the conservatory order issued by Justice Isaacs extended.
The attorney general is seeking to have that order discharged.
Chief Justice Sir Michael Barnett will today hear arguments from both sides.
Wayne Munroe represents Percy Web Cafe, Island Luck, FML Group of Companies, Asue Draw, Whatfall and Chances.
Former Attorney General Alfred Sears and Jeff Lloyd represent Paradise Games.

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News Article
RBC (Bahamas) throws web shop plan into question

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.
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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News Article
Pastor: govt needs to keep its word on web shops

A pastor who worked on the Vote No campaign ahead of the gambling referendum on January 28, 2013 said the government needs to live up to its word and close web shops before attempting to start a new dialogue with the church on the controversial issue.
Pastor Mario Moxey, of Bahamas Harvest Church, said many religious leaders are offended by the government's attitude nearly a year after the referendum.
He was contacted by The Nassau Guardian after Minister of Tourism Obie Wilchcombe told reporters that he wanted to have fresh talks with the church about finding an "acceptable" plan to regulate the underground sector.
"I think the government of The Bahamas needs to seriously consider enforcing the law of the land," Moxey said on Tuesday. "Words like 'can't shut down an illegal establishment' [are] very disheartening and concerning to a lot of Bahamians.
"We are approaching the one year anniversary of the referendum and to this day, even though the Bahamian public voted to shut down the web shops they are still open, still very defiant and they are resolved in their attitude towards the government."
Moxey said the government needs to fulfill the pledge it made to abide by the results of the referendum.
"They need to keep their end of the bargain, they had made certain promises to the people as well as to the church that they would shut the web shops down. They need to carry that out, they need to show that they have the political fortitude to carry out their own mandate."
However Bishop Simeon Hall, of New Covenant Baptist Church, who supported regulating the sector, said he thinks its time for the church to sit down with the government and have frank talks on the matter.
"I think we should have a sensible dialogue on this issue rather than demonizing one another who have opposing views," Hall said on Tuesday.
He believes that more pastors would be open to regulating web shops now than they were before the referendum.
"I still stand by my position that web shops should be regulated. Maybe if we got some money from the web shops, we wouldn't have to have such a high percentage on VAT (value-added tax).
"Some pastors who once supported the no vote are now saying they prefer to tax the web shops rather than pay all that money on VAT."
The government intends to introduce VAT at a rate of 15 percent on July 1.
On January 28, 2013 voters were asked if they supported the regulation and taxation of web shops and the creation of a national lottery.
Most voters said no to both questions, however, only about 45 percent of registered voters turned up at the polls. Many religious leaders and the Bahamas Christian Council opposed both questions on moral grounds and urged Christians to vote against them.
On Monday Wilchcombe said the government could bring legislation to Parliament to regulate the sector, but did not want to insult those who voted in the referendum.
Still, he said a decision has to be made.
"I think the church has to come to terms with the complexity of the issue and understand that we have to govern... The church might be able to advance some ideas on how it can be done," Wilchcombe said.
"I can't ignore the fact that there are thousands of people participating every single day and millions of dollars being made from that business every single day. Shouldn't some of that money, if it's going to happen, remain in the country?
"Shouldn't some of that be utilized for sports development, cultural development, educational development - should we not find ways to do it?"
Web shop operators are engaged in a legal battle with the government to keep their businesses open.
When contacted by The Nassau Guardian, President of the Bahamas Christian Council Rev. Dr. Ranford Patterson said he was not prepared to comment.

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News Article
Web shops 'getting ready' for regulated market, despite concerns

While some web shop owners are "not happy" with some aspects of the 2014 Gaming Bill and the accompanying regulations, attorney Wayne Munroe said they are already engaged in the process of readying their businesses for regulation.
Among the sections of the bill that web shop bosses do not support are the ones that deal with the discriminatory elements and the disproportionate tax rates between web shops and casinos.
Munroe, who represents a group of web shop owners, said his clients are also questioning the section in the bill that requires them to pay back taxes for six years.
According to Section 85 of the Gaming Bill, web shops will be required to pay business license fees, in addition to gaming taxes for that period in lieu of taxes which would have been payable had the businesses been licensed under the act.
"The Business License Act permits for the recovery of underpayment of business license back three years on an audit," Munroe noted.
"It doesn't permit back pay of six years...They doubled the period of time that one can go back. We are not pleased with that. In that [vein], our representation was that it should be limited to the statutory period, which is three years. The government was not persuaded by that."
Munroe said that was one of many points that his clients petitioned for, which the government ignored.
As it relates to the discriminatory elements, Munroe said web shop owners lobbied for the government to end discrimination.
"We had, during the period of consultation, lobbied particularly hard and made representations with supporting material for there not to be a distinction," he said. "Clearly the government [was] not persuaded by our representation."
As stated previously, the bill maintains the discriminatory elements that prohibit Bahamians from gambling in casinos and foreigners from gambling in web shops.
However, the bill also contains a provision that would allow the minister with responsibility for gaming to override the discriminatory elements.
Tourism Minister Obie Wilchcombe said that decision was made to ensure the sustainability of both the casino and web shop industries.
But Munroe said the government might be overly cautious.
"What I read into the minister having the ability later to remove it, is that they may still be preoccupied with economic concerns and wanting to see how things play out before they take that position."
Munroe said he hopes the government would soon decide to open both industries to everyone.
In reference to taxes, Munroe said he repeatedly levied for an equitable rate.
However, the regulations reveal that web shops will be taxed at a rate of 11 percent while casinos are taxed at a rate of around five percent.
"While my clients don't like that, while they are not pleased...they have to deal with it," Munroe said.
"...They are not happy. But they are trusting from a long-term outlook, it can be beneficial. We have been told that, if the tax structure is detrimental to the industry, that government can revisit it."
Asked if his clients would attempt to challenge the government on any aspects of the bill, Munroe said no.
"My clients aren't adopting that kind of attitude," he said.
"...Right now, my clients are concerned with taking the steps to align their businesses to be able to comply with a regulated environment."
In doing so, he said his clients are "drawing up the necessary job descriptions, starting to work out the budgeting...all manner of things that have to be addressed in a regulated environment."
Only those web shops that receive an invitation from the government can apply to be regulated, according to the bill.

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News Article
Strong support for web shops

Almost one year after the January 28 gambling referendum, a new scientific poll shows strong support for the legalization of web shops in The Bahamas.
The survey, conducted by Public Domain, a local market research and public opinion polling company, comes as the government and the church continue to lock horns over the prickly issue of regulating the numbers industry.
Respondents were asked whether they support the legalization of web shops.
Thirty-seven percent said they "strongly support" and 18 percent said they "somewhat support".
Thirty-two percent said they "strongly oppose" and another eight percent said they "somewhat oppose".
Five percent of respondents did not know or did not answer.
Asked to expand on the results of the survey, M'wale Rahming, president of Public Domain, said the "real story" is in the silent majority.
"You're going to have people who feel strong about an issue, and no matter what you do they're not going to change," he told The Nassau Guardian.
"The story then becomes what about the people who don't have any skin in the game...As you can see, we have twice as many people who support rather than oppose in that category."
Rahming was referring to respondents who did not have a strong feeling either way.
These non-polarized people include the 18 percent who said they "somewhat support" and the eight percent who said they "somewhat oppose".
"So the category of the silent majority is really saying 'yes, we want this'," Rahming said.
Public Domain conducted a similar survey in November 2012, a few weeks before the referendum. Respondents were asked whether they support the legalization of web shops and whether they would vote yes or no.
The results showed that 53.4 percent said they would vote no, and 43.3 percent said they would vote yes. Another 3.3 percent said they did not know or did not answer.
Rahming said the previous survey did not allow the silent majority a place to speak.
The survey was commissioned by Philip Galanis, the former parliamentarian who served as the co-ordinator for the Vote Yes campaign, which was unsuccessful in convincing a majority of the electorate to vote in favor of regulating and taxing web shops.
Asked to comment on the results, Galanis said, "We are very pleased to observe that today the majority of Bahamians still support the legalization of web shops, slightly higher than they did just a year ago.
"The fact is that although the majority of Bahamians voted against such legalization in last year's referendum is neither persuasive nor conclusive. We maintain that the referendum results do not represent the national sentiment on this issue, particularly in light of the low voter turnout."
Galanis noted that the total number of votes cast against the legalization of web shops was 51,146 or 62 percent of the votes cast versus 31,657 or 38 percent of the votes cast in favor of legalization. The voter referendum turnout of 48 percent of the 2012 registered voters was extremely low compared to the 156,000 votes cast in the 2012 general election, a 91 percent turnout, Galanis noted.
"Hence, it would be erroneous to conclude that a majority of Bahamians are opposed to legalizing web shops," he said.
In the year since the gambling referendum, web shops have continued to operate in the open as a court challenge remains outstanding.
Last week, the Bahamas Christian Council and the Save Our Bahamas Committee questioned if the government was seeking to "overturn" the results of last year's gambling referendum by allowing the status quo on web shops to remain unchanged.
The groups have stressed that the results of the referendum must stand.
In its recent survey, Public Domain also asked respondents, 'Do you agree or disagree that the government needs to increase revenue?'
Sixty-six percent of respondents strongly agreed; 20 percent somewhat agreed; four percent somewhat disagreed; seven percent strongly disagreed and three percent said they did not know or did not answer.
"Bahamians have overwhelmingly indicated that the government needs to increase revenue, notwithstanding the perceived sentiment that they are uncertain that value-added tax (VAT) is the best means for doing so," Galanis said.
"The $20 million to $30 million annual tax windfall that would have resulted from a 'yes' vote would have significantly strengthened the public coffers. The 'no' vote has deprived the country of that significant revenue injection.
"Armed with the recent polling data, we hope that the government will do the right thing by legalizing and regulating the web shops so that this significant economic activity can be brought into the real economy with the consequential benefits that will inevitably inure to the country by so doing.
"The time is long overdue for the government to demonstrate bold, decisive leadership in this regard."
Rahming also commented on the strong acknowledgement on the revenue question.
"The government has been saying that it needs to raise revenue and we wanted to find out if the public agreed with them on this matter. And what's interesting here is I've never really seen support that comes out at nearly 90 percent," he said.
Public Domain polled 575 people in its survey.
Rahming said this sample size is considered "respectable".
"If you look at America, America does a survey of 1,500 people to represent 300 million. So we're actually being more specific here than we would in the United States," he said.
"But 575 in our population is a very respectable sample size. We generally suggest a minimum of 400 with a maximum of 1,000 and generally around 600 is what we tend to aim for. So a very respectable sample size. It is also randomly selected."
The survey was conducted between January 2 and January 6.

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News Article
The web shop problem

We are moving toward what the government is calling the "regularization" of web shop gaming. Web shops offer Internet-based gambling. Gambling is illegal in The Bahamas for Bahamians and legal residents. Those who have facilitated gambling for Bahamians and legal residents have engaged in illegal activity. The money they have received from this would be the proceeds of crime.
Attorney General Allyson Maynard-Gibson said yesterday in an interview that web shops will be penalized for revenue generated prior to regularization. In a separate interview, Minister of Tourism Obie Wilchcombe, who has ministerial responsibility for gaming, said, "There will be a penalty for illegal operation, when it was illegal. So we have to penalize them for about six years. And all of that is a part of what we're doing."
We seem to finally be at a place where all are accepting that wrongdoing occurred. Now the issue regards whether financial institutions will be able to accept money from the men who run these businesses the day after gambling is made legal. The answer to that question appears to be "no", as the money that established these businesses came from crime. It is illegal for financial institutions to knowingly accept the proceeds of crime.
In a position paper, RBC (Bahamas) said conducting business with web shops, even once regulated, would cause local banks to run afoul of their parent banks' global policies and U.S. federal law.
Two weeks ago, Commonwealth Bank President Ian Jennings expressed doubt that web shops would be able to meet international standards set out by agencies such as the Financial Action Task Force (FATF).
"It's not as simple as just passing an act to regularize them," Jennings said.
"They (web shops) also have to be seen within an international framework of FATF and various other money laundering issues.
"It goes back to a reputational issue for the jurisdictions, and I think a lot of people don't appreciate that and what may be issues that fall out of that.
"Just regularizing the web shops is not going to get rid of the problem as far as the banking sector is concerned."
Maynard-Gibson, however, expressed confidence that web shops will be able to conduct business with financial institutions in The Bahamas once the government regulates the industry.
The Gaming Bill has not been debated in the House of Assembly, but web shop regularization will be retroactive to July 1. Wilchcombe said the proposed law will be tabled in Parliament next week.
We think the government is being naive and hopeful on this issue. Nothing it has said explains how a responsible and law-abiding financial institution could allow a web shop boss or his company to deposit millions of dollars into that institution without jeopardizing that company's standing.
The government has a problem. It wants to start a legal sector by giving licenses to people rich with the proceeds of crime. Bahamian financial institutions have laws and standards they have to follow. They cannot go along with this and accept the money if they are to maintain their reputations.

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News Article
Halkitis explains low web shop tax projection

Even though data collected by the previous administration indicated that the government could collect as much as $40 million in taxes from web shops, an audit was never done to verify that projection, Minister of State for Finance Michael Halkitis said yesterday.
In 2012, Prime Minister Perry Christie indicated that the Ingraham administration had done research on the revenue that could be derived from web shops.
Christie later told Parliament that it was more likely that the government could get $15 million to $20 million in annual taxes from web shops if the sector is properly regulated.
The government now estimates that it will collect about $12 million from web shop taxes.
Halkitis said yesterday the projection is "conservative" to avoid recording a deficit. However, he added preliminary information suggests a lower revenue yield than earlier estimates.
"Around 2010 when the government was exploring legalization, it asked the web shops what their turnover was," Halkitis said. "[Web shop operators] said about $400 million per year.
"The government never did any audit or verification. So the discussion was that if you tax them at a rate of ten percent then the government would get $40 million in taxes.
"We have put in place a requirement that the shops verify their turnover by way of an audit to get an accurate picture of their turnover.
"We put a low estimate in the budget to be conservative just in case the audit shows a much lower turnover."
Several members of Parliament recently questioned the government on the projected revenue yield from web shops.
East Grand Bahama Member of Parliament K. Peter Turnquest noted that the estimates fall far below what was initially expected.
"How is it calculated and will there be a license fee in addition to this tax?" he asked in the House of Assembly during debate on the 2014/2015 budget.
Gaming Board Chairman Dr. Andre Rollins also questioned the projected revenue.
"A low tax rate and yield from web shops will only strengthen the public's view that a national lottery will be far more beneficial to the state's coffers and national development than the $12 million worth of revenue forecast in this budget," Rollins said.
"...The failure of web shop tax revenue to meet the public's heightened expectations will inevitably increase public demand for a national lottery, and such an outcome will most certainly be seized upon by the opposition in the run-up to the next general election as an initiative they intend to deliver," he added.
The Gaming Bill is expected to be tabled on Wednesday. However, Christie yesterday hinted at a possible delay in government tabling the amended bill.
The government has not indicated the rate that web shops will be taxed.

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