THE Jamaica Bankers Association (JBA), the umbrella lobby group for commercial and merchant banks, has dismissed claims that its members have conspired to close the accounts held in their respective banks by alternative investment institutions.

Amid reports that several banks last week refused to honour cheques from the so-called "high-risk" schemes, the JBA published a statement yesterday rejecting claims that the banks acted with prejudice against what they viewed as a major competitor.

"There have been several recent reports and discussions in the media and among members of the public regarding investment schemes and the formal banking sector," said the JBA. "These have included allegations that there has been a conspiracy among members of the Jamaica Bankers Association (JBA) to close the accounts of these schemes."

According to the JBA, it meets to discuss all questions affecting banking in Jamaica and abroad, and has dialogue with the government on issues affecting the banking sector generally. The association said it does not decide how member institutions should address operational issues, such as the relationship between a member and its customers, whose accounts should be maintained and which accounts should be closed.

"We have never discussed or agreed to shut down anyone's business," the JBA declared.

Alternative investment schemes have become popular among Jamaican investors for the past two years, and have emerged as the banks' major competitor for customer deposits. Hundreds of thousands of Jamaicans have been lured into these schemes in the hope of making as much as 10 per cent returns per month, and it is said that some $150 billion worth of customer deposits are in the coffers of these institutions.

As at the end of June, there was some $282 billion worth of customer deposits in the nation's commercial banks.
Yesterday, the JBA was adamant that "competition" had nothing to do with its member institutions' decision to close the accounts of the schemes, and hinted that a lack of transparency among these schemes, in violation of banks' Know Your Customer (KYC) requirements, was a major factor.

"Some have suggested that banks have been closing the accounts of investment schemes to avoid competition. This is inconsistent with the manner in which banks in Jamaica have acted," said the JBA. "We have banked securities dealers, credit unions and building societies for many years and still do so... these institutions are among our valued customers and have remained so even at times when some of them were growing faster than banks.

"Banks have always operated on the basis that it was prudent to know their customers," the JBA continued. "Where sufficient KYC information is not provided when requested, the continuation of the banker-customer relationship can then be called into question."

The association added that commercial banks in Jamaica honoured cheques drawn on their accounts where there are cleared funds, and permitting cheques to be drawn where there are uncleared funds, or allowing an overdraft facility under which cheques can be drawn without sufficient funds - a special arrangement that has to be agreed between the customer and the bank.

"Banks in Jamaica and worldwide enter into arrangements for cheques to be drawn against uncleared funds or for accounts to be overdrawn only following appropriate checks," said the association. "Appropriate KYC information is necessary for the banks to consider whether they will have such arrangements with their customers."

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