Financial analyst Dennis Chung has responded to the central bank’s letter to the editor last week in which it explained the rationale for amending the Bank of Jamaica Act (BOJA).

Deputy Governor Natalie Haynes, in responding to Chung’s column published in the Sunday Observer on October 18, 2020, had explained that the idea for amending the Act was not to “impose fines and penalties on remittance companies and cambios for breaches”, as argued by Chung.

According to Haynes, the proposed amendment to the Act is designed to protect the industry, in keeping with international best practice by better targeting and sanctioning the fraudulently illegal practice of unlicensed money service providers.

However, Chung has posed a few questions about the proposed legislation and said the matter needs discussion to arrive at a win-win situation for the protection of the industry.

Following is the full text of Chung’s response.

“I read the response from the BOJ and was pleasantly surprised that they responded, as I was merely making reference to the document as an example and didn’t expect extended discourse. However, the response by the BOJ is welcome as it shows their willingness to discuss issues under their portfolio.

I am hopeful that further discussion on the consultation paper will take place at the level of organisations like the Private Sector Organisation of Jamaica (PSOJ) and the Cambio Association, which both would have a more direct interest than I would and, I would think, are moved to represent the affected member parties through their advocacy.

Let me address, though, what I think may be a misunderstanding by the BOJ of what I read, and maybe I might get clarification that it is my misunderstanding. My reading as an unaffected party, however, has not interpreted it in the same way outlined by Deputy Governor Haynes, and maybe it means that there needs to be further clarity in communication from the BOJ, or it could well be that the persons in the industry understand what is being communicated and it is not meant for persons outside.

Firstly, she refers to ‘…the rationale for amending the BOJA is NOT to impose fines and penalties on remittance companies and cambios for breaches, but in fact to protect the industry…’

I am having difficulty seeing this reasoning, as the document says, inter alia, under section 5, ‘In relation to the deficiency — that monetary sanctions for operating in breach of Part IVB of the BOJA are low and are not dissuasive, this issue can be addressed by strengthening the applicable penalties under governing legislation as follows…’

The schedule with the fines go on to include failure to display rates at which foreign currency is being purchased or sold; failure to remit foreign currency to the bank in accordance with directions, and so on for other offences. When one reads these offences it doesn’t seem as if they would be committed by persons unlicensed or not under the regulation of the BOJ, and therefore these increased penalties seem to apply to the licensed remittance companies and cambios and would therefore contradict the statement in the letter that ‘…the rationale for amending the BOJA is NOT to impose fines and penalties on remittance companies and cambios for breaches, but in fact to protect the industry…’

My point would therefore seem to be applicable that these fines seem excessive on their own and should really be a part of a defined process, whereby if the offence is committed then there is a warning first and these types of fines would be the end of a process. For example, if the cleaners came in and took down the display of the foreign currency at the time the BOJ inspector walks in, does the $5 million proposed fine apply?

In addition, the letter states that, ‘The matter of financial crimes is an exceedingly serious one and we believe fines for breaches should reflect the gravity of the offence’ and ‘We are quite aware that in most instances these financial crimes are committed by persons who can easily afford the fines.’ While I agree that the current fines are low, I do not think that fines should be imposed based on someone’s ability to pay, but rather based on the gravity of the offence. Such a statement would suggest that someone who earns more money than another should pay a higher amount for the same crime, and I can imagine how legislation would look if that was the case.

Secondly, how does someone not displaying foreign exchange rates or failure to keep proper accounts amount to a financial crime by itself? It could be an honest error. Doesn’t a crime also have to have intent and not just an act interpreted without evidence of the intent? This is one of the reasons that the document should outline a process to get to a crime and penalties.

The letter also states that, ‘We have great difficulty comprehending how such a hands-off and transparent process can equate to BOJ taking on powers without independent checks or not having an equitable process.’ It also states that “the proposals do not include any changes to the existing process which involves referring identified breaches of the Act to the director of public prosecutions for a ruling…”

The document states under section 3 ‘…these can be addressed by strengthening the legislation to give the BOJ power to itself or through an agent, obtain a search warrant to enter the premises of a person whom the BOJ has reasonable grounds for suspecting is committing or has committed an offence under the BOJA…’

I assume that if it says strengthen the legislation and give the BOJ power, then that suggests it did not exist before and therefore suggests a change to the existing process. This is especially so as it states that the BOJ itself, or through its agent, on the BOJ’s suspicion, can obtain a search warrant. This, we should understand, will be in legislation and therefore processes must be outlined in any proposed changes. I assume also that the BOJ is not referring to the director of public prosecutions as its agent.

Bear in mind also that one of the offences which attract a fine of $7.5 million is failure to allow examination of accounts, which means the BOJ could determine a search warrant is needed, and if opposed, impose the $7.5 million fine and then, without any process identified, fine another $7.5 million for failure to keep proper accounts, just on the basis, as they say, that these persons can afford to pay.

I would hope that from here the PSOJ and Cambio Association will continue this discourse with the BOJ and come to an agreeable solution as the argument from the BOJ does have its merits and just needs discussion to arrive at a win-win situation for the protection of the industry, as I was merely borrowing the paper as a reference for a wider point I was making, and more importantly, my interpretation as someone outside the industry may be wrong.”