The Central Bank has moved to crack down on a growing trend where persons and companies deemed resident in The Bahamas are asking that payments be made in foreign currency.

The banking regulator, in a statement, asserted that all bank payments involving transactions between resident companies and individuals must be settled in Bahamian dollars under this nation’s exchange control regulations. It reiterated that Bahamian commercial banks must first obtain the Central Bank’s approval to make such payments in foreign currency.

“The Central Bank of The Bahamas has observed an increase in attempted transactions between resident individuals and resident companies involving requests for payments to be made in foreign currency into local accounts that have been authorised to be maintained in foreign currency,” the regulator said. “Unless exceptionally approved by the Central Bank, such transactions are not permitted under exchange control regulations.

“Resident-operated foreign currency accounts are only authorised to receive deposits of revenue or approved loan proceeds denominated in foreign currency, and may only be used to finance obligations outside The Bahamas which are denominated in foreign currency.” Residents are Bahamian citizens or permanent residents with no work restrictions, while resident companies are those businesses owned by these two classes of persons or designated as such by the Central Bank.

Explaining the rationale for its action, the Central Bank said: “As indicated in the exchange control regulations, foreign currency accounts maintained by Bahamian residents outside The Bahamas require the specific prior approval of the Central Bank.

“Foreign currency accounts maintained in The Bahamas may be approved directly by the Central Bank, or by authorised dealers - commercial banks - under delegated authority from the Central Bank, in the case of business trade-related accounts that operate with balances of up to the equivalent of $100,000.

“While US dollars circulate and are commonly used in local transactions, residents who receive foreign currency revenue - whether through the banking system or otherwise - are ordinarily required to deposit such proceeds with their commercial bank for conversion into Bahamian dollars. Only where residents have been permitted to maintain foreign currency accounts can such proceeds be deposited and retained in foreign currency.”

The Central Bank added: “All bank payments between resident individuals and/or resident companies, including for salaries, must be made in Bahamian dollars and credited to the recipient’s Bahamian dollar account. Commercial banks are not permitted to settle such domestic payments in foreign currency, except with the prior approval of the Central Bank.

“The delegated authority granted to commercial banks to process invoiced payments on behalf of residents applies only to invoices issued by foreign entities in respect of bona fide external transactions where payment is to be made outside of The Bahamas. All conversions of Bahamian dollars for the purpose of making payments to local foreign currency accounts require the prior approval of the Central Bank. Commercial banks are required to ensure strict adherence to these requirements.”