• Law firms’ joint account wait ‘beggars belief’

• Warns issue will undermine COVID revival

• Bahamas has ‘legion’ of lost opportunities

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An outspoken QC last night warned that “Know Your Customer (KYC) constipation” could undermine The Bahamas’ post-COVID revival, arguing that his law firm’s struggle to open a joint bank account “beggars belief”.

Fred Smith QC, the Callenders & Co attorney and partner, told Tribune Business that itself and fellow law firm, Graham, Thompson & Company, have unsuccessfully been trying to establish a joint bank account for two-and-a-half months so that the legal challenge to oil exploration can proceed - even though they already bank separately with the same financial institution (see other article on Page 1B).

Renewing his previous call for the government to pass a “KYC Once” Act, which would permit the issuance of a certificate confirming the holder is a legitimate client and has passed all required checks, as a means to slash the due diligence bureaucracy, he added that “the examples are legion” of how The Bahamas has either driven industries from its shores or missed out on new development opportunities.

“It beggars belief that law firms which have been doing business with banks for decades cannot open a joint account,” Mr Smith blasted. “I continue to lament the huge challenges faced by everybody in The Bahamas with respect to the over-enthusiastic and often unnecessary obsession with KYC documentation.

“I repeat my encouragement to the government to legislate a ‘KYC Once’ Act which will greatly facilitate ordinary people who are, as we all should be, innocent until proven guilty, and facilitate business. But, under the current regime, domestic and international, we must all squeeze the camel through the eye of the KYC needle, and business and personal affairs come to a grinding halt.

“I don’t know if it’s the same in other jurisdictions; I don’t hear that it is. Bermuda, Cayman, the Channel Islands and Panama.... many of the other financials services jurisdictions don’t seem to have the same KYC constipation as The Bahamas has. KYC is repeatedly constipated.”

Mr Smith had previously urged that the certificate issued under a “KYC Once” Act be accepted by all Bahamas-based financial institutions as validating the holder’s credentials, thus eliminating the need to “reinvent the wheel” and undergo the same scrutiny at every bank that a company or individual conducted business with.

He argued that this would eliminate “a huge unnecessary expense” that has plagued dealings with the Bahamian banking industry for the past two decades, thereby lowering costs and resulting in a much-needed improvement in the ease of doing business.

And Mr Smith has also urged that the threshold above which Bahamas-based banks apply anti-money laundering scrutiny to occasional transactions be increased to $50,000, and suggested that his proposal could make this nation a “Caribbean leader” when it came to the application of anti-financial crime rules.

The prominent QC last night said the ongoing difficulties Callender’s and Graham, Thompson & Company are enduring in establishing the joint account had resulted in his environmental activist clients offering to pay the latter law firm $100,000 directly just to ensure their legal action moves forward - something he described as “unheard of”.

“We’re trusting the defendant to hold our clients’ money,” Mr Smith said. “I hear many businesses, investors and many people in The Bahamas, including citizens of The Bahamas, who find it nearly impossible - particularly in Freeport - with a lot of the red tape that exists to get anything done.

“With the world on the precipice of reviving hyper economic activity in the aftermath of the COVID-19 chaos, The Bahamas can be an attractive jurisdiction for business, investment and stability, and is poised to capitalise on those opportunities. 

“But, as we have done with the timeshare industry, which fled The Bahamas in the early 1980s, as did with land investment with the Immovable Properties Act, as we did with captive insurance, as we did with alternative dispute resolution opportunities, the examples are legion of how The Bahamas has messed up existing business development opportunities and has prevented others from being capitalised on.”

Mr Smith argued that The Bahamas was creating “an unnecessary economic backwater” by denying Bahamians the ability to partner with foreigners on joint ventures, or to invest in global stock markets abroad.

Turning to his favourite subject, he added: “Likewise with Freeport, whose infrastructure is collapsing through lack of investment and maintenance, and the Government’s failure to repeal the Grand Bahama Investment Incentives Act and respect the Hawksbill Creek Agreement.

“We remain hostage to a xenophobic insecurity and are mired in red tape. These is despite our politicians appreciating the challenge and wanting to make a difference. We seem to be captive to an old insecure mentality, and also to bureaucrats and civil servants.

“It is appalling to me, as a professional in The Bahamas for 45 years, some 43 of them spent in Freeport, to see the sad, sad state of my community.”