Change designed to assist low-risk clients

Observer Business Writer

Friday, September 18, 2020

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Following amendments to the Proceeds of Crime Act (POCA) regulations in late 2019, several commercial banks have started to ease the account opening requirements.

This change is especially for newly designated low-risk bank accounts which previously excluded thousands of people from joining the formal banking system due to the inability to satisfy the Know Your Customer (KYC) requirements.

As a high-risk country, which was recently added to the European Union's blacklist for money laundering shortfalls and only having one major correspondent bank in the USA, local institutions were required to ask for several items from regular individuals who wanted to open a bank account with these banks.

However, these KYC requirements acted as a secondary deterrent to those members of the society who are part of the highly informal segment which don't have certain items such as formal addresses or a no consistent source of funds which would be deemed acceptable by the commercial bank.

Due to the need to satisfy local and international regulations, local banks couldn't facilitate these people who had a desire to join the formal system but lacked the full documentation.

These hurdles began to become more relaxed after regulations 5 and 7 of the POCA Act were updated to give financial institutions more space to use a risk-based approach and remain in compliance with the other laws related to the financial sector.

Although the banks discussed the creation of these new accounts, COVID-19 accelerated the need for more people to have bank accounts as the gaps in society became more apparent during the Government's We Care initiative and restrictive measures implemented in mid-April.

This led to lines stretching for blocks as more Jamaicans found it difficult to collect the We Care grant along with remittances from relatives overseas as social distance protocols limited the number of people inside physical spaces.

First Global Bank (FGB) became the first commercial bank to introduce a bank account specifically related to the We Care disbursement of funds which only required a TRN (Taxpayer Registration Number), a valid Government-issued identification (ID) and the reference number to open the account.

This was different from the regular bank account which would have required a proof of address and two-character references to open a normal account.

Scotiabank and JMMB Bank followed suit with the creation of their own low-risk bank accounts for the recipients of government grants and payments with a similar principle to FGB.

The latest banks to create low-risk accounts are National Commercial Bank, JN Bank and Sagicor Bank.

Unlike the other accounts which were specific to Government grants, these accounts were designated to the general public and are meant to increase financial inclusion with opening amounts as low as $100.

Despite there being several limitations on these accounts such as an account ceiling, they should facilitate the opening of more accounts by members of the informal economy.

Sagicor Bank's Chief Executive Officer Chorvelle Johnson-Cunningham has also indicated the bank's intention to on board more clients through a virtual KYC process and potential plans for the bank in the upcoming weeks.

“There are various methods that we're coming up with over the next couple weeks.

There will be dynamic things that we will offer to the market which we can't speak about just as yet.

“For E-advantage accounts, we'll be using just a Government-issued identification, a TRN and proof of source of funds that will be using to open accounts.

“It varies according to accounts and the things that you want to do. We're in the process of trying to make it easy, simple and more personal for our clients,” Johnson-Cunningham said.

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