By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

RF Bank & Trust yesterday asserted that a dispute with its core software provider will “not in any way impact customer funds or overall operations” as it bids to resolve their differences.

The Bahamas-based institution, which is a key player in this nation’s capital markets with some $1.3bn in total assets under administration, hit back after it emerged that International Private Banking Systems (IPBS) has ceased providing support and maintenance for the software platform amid their escalating fight.

Documents seen by this newspaper, which it has verified as genuine, reveal that IPBS moved to terminate its licence agreement with RF Bank & Trust, and the later’s right to use the software, with effect from March 31, 2024, amid allegations that the bank had exceeded the number of persons permitted to use the system and thus under-paid licensing and maintenance fees.

Those fees are calculated on a per capita, or number of users/seats, basis. However, RF Bank & Trust, while not providing its official position other than signalling it disputes IPBS’ claims, is understood to have taken the stance that it has already fully paid to use the latter’s core banking software for around 90 years and thus the termination notice has no impact.

The bank is also arguing that IPBS and its principals have failed to identify which parts of the licensing agreement have been breached and, in any event, it will switch to another banking software platform - called Olympic - later this year. IPBS, though, has suspended all co-operation with RF Bank & Trust on the migration of data to the new Olympic platform as part of the two sides’ ongoing dispute.

The software provider has also informed RF Bank & Trust’s regulators of the situation, and is understood to claim it is owed a six-figure sum in unpaid licensing and maintenance fees. The bank, though, feels that the relationship with IPBS only started deteriorating when it revealed it planned to replace its product and informed the company it was not among the short-listed candidates.

And RF Bank & Trust, in response to Tribune Business questions, said it had made “substantial progress” in resolving what it described as “service delays and challenges” resulting from a $200m expansion in assets under management over a 15-month period and addition of more than 400 new clients accounts.

This came in response to this newspaper’s queries over documents suggesting there was a “processing backlog” in the back office and operations departments, which led to the formation of a “remediation team” to undertake an accounts reconciliation exercise to address the concerns.

Several RF Bank & Trust management executives have also departed in recent months, including Noorul-ain Khan, its interim chief financial officer; Cleora Farquharson, vice-president of pension services, and Jackie Cleare, assistant vice-president of operations.

There is nothing to suggest these departures were linked to the alleged “backlog”, and RF Bank & Trust yesterday confirmed that it has already moved to fill these vacancies by appointing Tanya Carey as chief financial officer subject to regulatory approval. It added that “the inevitable transition of personnel” was typical in companies enjoying strong growth, and it continues “to add top talent”.

Bruce Raine, IPBS’ Bahamian founder and president, declined to comment when contacted by Tribune Business other than confirming the dispute’s existence and voicing shock that documents relating to it had been leaked to the media and wider public.

Tribune Business understands that the respective attorneys for RF Bank & Trust and IPBS, which are Graham, Thompson & Company and Higgs & Johnson, are set to meet in an attempt to see if the two parties can resolve their dispute amicably and without resorting to litigation. However, documents seen by this newspaper set out the positions taken by both parties.

“Since late November 2023, RF has received a number of e-mails and letters alleging that RF does not have sufficient licences for the number of users on the system and that, as a result, sufficient maintenance fees have not been paid,” an internal RF Bank & Trust report to its executive committee states.

“RF believes that the number of licences purchased more than covers the number of users, and that maintenance fees paid are therefore adequate. RF has engaged legal counsel to review all licence and maintenance agreements and prepare a legal response to IPBS.”

Similarly, another document, referring to IPBS’ affiliate, Data Systems International, added: “Some executive committee members may be aware that there is currently an ongoing dispute over the terms of the IPBS licence, which has led to DSI issuing a termination notice of March 31, 2024. In one of their letters, DSI copied in all of the group’s regulators.

“While we remain hopeful of a sensible and amicable resolution, we have taken the decision not to raise any further service tickets with DSI until this issue is resolved. Further, we are keeping in contact with all of our regulators to keep them apprised of developments.”

However, a January 2024 note to RF Bank & Trust’s IT executive committee indicated the dispute with IPBS had complicated the transition, and data migration, to the bank’s new Olympic core software platform. It added: “Disagreements over IPBS licensing have introduced complexities to the migration workstream.

“In summary, IPBS have disengaged from the Olympic project subject to a satisfactory conclusion. Legacy issues with the system mean that RF needs IPBS to access the system every month to run certain routines and they continue to run these.”

RF Bank & Trust, responding to Tribune Business questions, declined to mention IPBS by name but said: “We are in the process of working to resolve a disagreement with one of RF’s service providers and, out of respect for that relationship, are not going to comment further at this time. However, let us underscore that this dispute does not in any way impact customer funds or RF’s overall operations.”

Talking up the Olympic system that will launch later in 2024, it added: “This new system will enhance the client experience, ensuring state-of-the-art security while also giving our clients an effective and efficient tool to easily access their critical financial information.

“The new system will introduce a number of innovative tools, including automated fee calculations to ensure accurate invoicing, a new banking website, and multi-jurisdictional compatibility that will reduce maintenance while supporting future expansion.” Besides The Bahamas, RF Bank & Trust also has operations in the Cayman Islands and Barbados.

“The strong foundation we have built over the years, as evidenced by our consistently solid investment returns and other beneficial services, will be enhanced even further through the new system, which is fully integrated and configurable to power seamless customer-oriented results and optimal business performance,” the bank added.

However, a January 30, 2024, letter sent by Mr Raine to Michael Anderson, RF Bank & Trust’s president and chief executive, suggested this was not the first occasion that IPBS had voiced concern that users of its software exceeded the number the institution was licensed for.

The latest letter includes a copy of one written almost exactly 20 years earlier, on January 27, 2004, when Mr Raine informed Mr Anderson of a “discrepancy” between the 15 client licences and 25 “installed clients” when RF was still then part of the larger Fidelity Group.

The subject also arose in 2010, when the investment bank was called RoyalFidelity Merchant Bank & Trust due to Royal Bank of Canada’s 50 percent ownership interest at the time. “The practice that has gone on heretofore with respect to unauthorised users being added to your systems by your personnel, as required, is at best unsatisfactory,” Mr Raine wrote then.

“You will have been enjoying the benefit of additional user capacity from whenever the user was added up to the point of discovery and then you expect us to turn a blind eye and pretend it never happened.... We are invariably supporting more users than we are being compensated for. This, too, is unacceptable.”

Fast forward almost 14 years, and Mr Raine, in his latest letter, disputed RF Bank & Trust’s position that “a licensed user in The Bahamas could also be, without additional cost, a licensed user in Barbados and Cayman”. IPBS is asserting that the bank’s software is licensed for 56 users but, across the three jurisdictions in which it operates, there are actually 156 users - almost three times’ the amount.

Meanwhile, RF Bank & Trust indicated that its recent growth may have temporarily outpaced its back office’s ability to keep pace. It pledged, in response to Tribune Business inquiries that it is continuing to “Improve our processes” after Jillian Nunes, head of its Barbados operations; Brett Hill, its Cayman chief; and Richard Johnson, chief risk officer, last year formed a team to oversee account reconciliations.

“I am pleased to advise that the team of Jillian Nunes, Richard Johnson and Brett Hill have made good progress in stabilising the finance and operations teams while significantly improving the situation with both bank reconciliations and backlog on operations processing,” an excerpt from a January 26, 2024, report states.

RF Bank & Trust, in response, said: “We continue to improve our processes, but as is the case with any company experiencing high growth, there is still work to be done. While both the growth and learning curve for new employees led to some service delays and challenges, these situations were temporary in nature and we have made substantial progress in resolving them.

“We are committed to a high standard regarding client excellence, and our team remains confident that the work underway in the areas of process improvement, department restructuring and consistency across different markets will bring us closer to the standard of excellence we strive for every day.”

As for the growth itself, it added: “RF has been a particularly active part of the dynamic financial services sector, and this has included new partnerships and acquisitions that have led us to expand into new markets.

“The result is that we now oversee a portfolio of more than $1.3bn and, over the last 15 months, have added $200m in assets under management while opening more than 400 new client accounts, which only accelerates our overall growth.

“To support this growth, our staff has grown from approximately 55 employees two years ago to now more than 80. While a natural part of this vibrant economic environment is the inevitable transition of personnel, we continue to add top talent to our team, as evidenced by multiple key hires since last year that include our chief risk officer and chief financial officer.”