IN 40 months, between 2021 and 2024, the police received reports of Jamaicans losing more than $300 million from their bank accounts, but the regulator, the Bank of Jamaica (BOJ), said that while it knows of the losses it is unaware of the full extent of the fraud.

In its written report to the Economy and Production Committee of Parliament, a copy of which was made available on Wednesday, the BOJ said it does not currently have information on all customers’ losses from fraud and the activities that led to them. The central bank also reported that currently it has no mechanism to ensure that all fraud-related losses to customers are captured.

Deputy commissioner of police (DCP) in charge of crime and security Fitz Bailey told the committee during its sitting on Wednesday that over the period the police received 601 reports of fraudulent activities amounting to $306 million in losses and that 127 people have been arrested in relation to those offences.

“I want to point out that that is what was reported to us, because there are instances when the customer goes directly to the banks and we do not get those reports,” he said.

Giving a further analysis of the statistics, DCP Bailey noted that in 2022 there were 179 reports in comparison to 189 in 2023, which represented a six per cent increase.

“The National Commercial Bank and Bank of Nova Scotia were most impacted, accounting for 85 per cent of the reports. Since January 2024, we have had 98 reports and the total amount of money lost is $53 million, and these were offences mostly committed through online transfers, automated teller machines, and point of sale as well as wire transfers,” he said.

Opposition member Fitz Jackson, who is the initiator of the discussions, having moved a private member’s motion regarding banking operations in December last year, insisted on Wednesday that the BOJ, in its broad mandate, has a responsibility not to just see to the stability of the banks and the banking system but to also ensure that the licensees of the BOJ
— commercial banks
— in their conduct also protect consumers.

“Banking law is essentially not just to protect banks but to protect the public whose monies they have in safe keeping. Section 36 of the Banking Services Act [has a] duty of care provision which imposes an obligation on the banks that once you receive someone’s monies, each licensee of the BOJ has an obligation to make sure that the money, once it comes into the bank, is kept safe,” Jackson argued.

He said it is the duty of the bank to employ all the various technologies, methodologies, personnel, etcetera, to fulfil that obligation of safe keeping. As such, it is unacceptable that when customers lose monies and inform the banks they fail to compensate them for the loss and they are told to report it to the police.

“In no civilised society should [that] be allowed to just go like that… There must be some recourse. Is it a limitation in laws? Is it the incapacity of the banks? But there must be a fix. Our duty and, by extension, your duty
— the BOJ that is
— as the regulator of the institutions that keep people’s money is to ensure that whatever ought to be done is done to protect the public at large, because the public doesn’t have anybody else to go to [to seek recourse],” Jackson insisted.

“I would think that, quite frankly, where the public at large is suffering, the BOJ, as the regulator of all these deposit-taking institutions, ought to play a piloting role, a leading role in ensuring that your licensees are sufficiently protecting the public’s money,” he said.

In his motion, Jackson said that a large and growing number of account holders at banks and other financial institutions have been experiencing substantial losses from their accounts and that many account holders are experiencing difficulties in recovering their losses.

In the regulator’s defence, deputy governor of the BOJ Dr Jide Lewis said that while the amounts that are being lost are “extremely regrettable” and that there should be no fraud losses in the system, “we have to appreciate that globally, if you compare fraud losses in Jamaica with fraud losses elsewhere, there is no jurisdiction that can boast that it has zero dollars of fraud losses”.

“It’s just a part of the operational risk that a commercial bank undertakes when it decides to go into this business. What we want to make sure that they do, however, is have in place a mechanism to investigate claims against them, ensure that having investigated those claims [they] come to a determination as to whether they are culpable, treat with the issue that led to the culpability, and refund the customer within 45 days,” said Lewis.

“In complaints that come to us, where we find the argument of the commercial bank or merchant bank or building society weak, we do push back and we do ask them to have another look and in the spirit of good customer relations. In many of those cases refunds are made, but we have to make sure that we understand the perimeter within which we are allowed to legally operate. And if there is a legal challenge against our action, we would have to then be able to defend that we were acting within the remit and the confines of our law,” he said.

In its written report, the BOJ said that Section 39(1)(b) of the Banking Service Act (BSA) requires licensees to report fraud to the bank immediately. However, given the design of the current supervisory framework, which focuses on the safety and soundness of deposit-taking institutions (DTIs), the reports developed to collect data on fraud only require licensees to submit the data necessary to measure the impact of fraud on their capital. That is, to ascertain whether losses from fraud pose a risk to the safety and soundness of DTIs and the overall financial system.

It said that under the code of conduct [promulgated under the BSA], each DTI must develop a complaints-handling mechanism. If a customer suspects that fraud has impacted the balance on his/her account, the customer should first make a complaint to their institution. If the customer is not satisfied with the investigation and resolution process, then the customer can file a complaint to the bank through the Office of Consumer Complaints (OCC).

“The bank then ensures that the DTIs take the appropriate measures to investigate and resolve the situation. As such, the bank has information on only those customers who made fraud-related complaints to the OCC. In the transition to the twin peaks model of supervision and regulation of financial institutions, issues related to the protection of financial consumers from fraud-related and other losses will be given focused attention in law and supervisory design,” the BOJ said.

Jackson said, however, that there needs to be more oversight by the BOJ, noting that the minister of finance and Government rely on regulators to keep them abreast of what is happening in the sector that they regulate, not just from an informational standpoint but by promulgating the necessary regulation, legislation, and amendments.