JAMAICANS willl have greater ease to access the financial system in 2024 as the financial regulators have removed the mandatory requirement for two references to open and maintain a financial account.

This development is applicable to all institutions regulated by the Bank of Jamaica (BOJ) and Financial Services Commission (FSC) which were previously required to request the contact information of two individuals before an account could be opened. As a result, Jamaicans will only need their TRN (Tax Registration Number), a valid government-issued or work ID, proof of address and proof/source of income/earnings to approach a financial institution.

“The requirement for references is no longer mandatory. This decision was made in response to industry feedback and international best practice regarding a risk-based approach to AML/CFT measures. This is in line with BOJ’s commitment to maintaining a balanced and efficient supervisory environment, while still upholding the highest standards of financial integrity and security,” the BOJ responded in an email to the Jamaica Observer.

The specific know your customer (KYC) requirement was an impediment to the ability of many Jamaicans to open a bank or investment account, especially as societal norms have changed, and people no longer know certain members of society. Not everyone might know the contact details of their pastor or member of parliament, much less know a judge, deputy superintendent of police, attorney-at-law, or justice of the peace (JP).

With Section 118 of the BOJ Guidance Notes and Paragraph 183 (h) of the FSC’s Guidelines on the Prevention of Money Laundering no longer mandatory, one commercial bank since December has stopped requesting information from two references. It has also gone a step further in the alignment of adopting a risk-based approach by no longer requesting a tax compliance certificate (TCC) at onboarding, except for high-risk clients.

Although the requirement for references is no longer mandatory, some financial institutions could still maintain the requirement for references based on their risk policies. References have been seen by many regular Jamaicans as unnecessary and burdensome, especially when one considers that this doesn’t exist elsewhere in the Caribbean or even the United States of America.

When Sunday Finance asked about the source of the references requirement, the BOJ responded, “With the passage of the Proceeds of Crime Act (POCA) in 2007, Bank of Jamaica, in support of the country’s implementation of an AML/CFT framework to combat financial crime, mandated two references as part of the Know Your Customer (KYC) requirements. With the shift to a risk-based approach, as recommended by the FATF, which allows simplified due diligence for lower risk customers, BOJ has removed this requirement which is expected to encourage financial inclusion.”

There were several amendments to POCA in late 2019 which gave rise to this risk-based regime which is currently taking shape in the financial sector. These changes were fully manifested in 2020 when the COVID-19 pandemic forced commercial banks to adapt and improve financial inclusion. As such, all the commercial banks except for Citibank N.A. created low-risk bank accounts which required a TRN and valid ID for it to be opened. This assisted in facilitating the processing of We Care disbursements from the Ministry of Finance.

The BOJ is currently revising its guidance notes on the prevention of money laundering with the last version dated June 2018.

“With the amendments to the Proceeds of Crime (Money Laundering Prevention) Regulations in 2019, banks are able to utilise their customer risk ratings to apply a tiered KYC approach that guides in determining the appropriate level of due diligence required, further supporting financial inclusion and reducing the burden of requirements on lower risk customers. In its role as supervisor, Bank of Jamaica is continuously researching and reviewing global best practices which can be adopted for the Jamaican environment. Where necessary, recommendations for legislative amendments are proposed,” the BOJ added, regarding any prospective changes to allow for greater harmonisation of the Jamaican financial system.

Jamaica seeking to

Nearly four years after being added to the Financial Action Task Force’s (FATF) jurisdictions under increased monitoring (grey list), Finance Minister Dr Nigel Clarke is hopeful that Jamaica will get a thumbs up by the intergovernmental body at its plenary session February 19-23 in Paris, France.

Dr Clarke provided an update to Parliament last month where he revealed that Jamaica was compliant or largely compliant with 37 out of 40 FATF recommendations. This came following four upgrades regarding lawyers conducting customer due diligence and reporting suspicious transactions and improving the transparency and beneficial ownership of legal persons.

Jamaica is currently working on becoming compliant with the remaining three recommendations which cover the registration of all non-profit organisations mandatory, governing the virtual assets and virtual asset providers and updating regulations regarding sanctions.

The impact of the FATF regulations has seen the regulation of the microcredit sector which now has 33 licensed firms under BOJ supervision, strengthening of oversight for DNFBP (designated non-financial businesses and professions) sectors and tightening certain regulations. Even the Real Estate Board of Jamaica is no longer accepting bank statements as proof of earnings by realtors interacting with prospective tenants.

If Jamaica is deemed as having completed its action plan, the FATF would send a team to do an on-site assessment to verify the implementation of AML/CFT reforms. Once verified, Jamaica would be removed from the grey list and be subject to less scrutiny by international businesses. The Cayman Islands had its on-site examination recently with Barbados, Gibraltar, Uganda, the United Arab Emirates, Syria and Yemen to receive their visits shortly.

“Given the work being undertaken by the Companies Office of Jamaica, and its parent ministry, we are optimistic that Jamaica will clear the final hurdle by February 2024, when the FATF will determine if Jamaica has effectively implemented its framework for the Transparency and Beneficial Ownership of Legal Persons, thus signalling the substantial completion of the agreed action plan. Completion of the action plan is a prerequisite for Jamaica to apply to exit FATF’s increased monitoring, which process includes an onsite visit by FATF’s Joint Group to confirm the sustainability of the measures taken under the action plan to enhance Jamaica’s AML/CFT regime,” Dr Clarke closed.