Fearing debanking, gaming sector demands tougher oversight
Published:Tuesday | September 27, 2016 | 12:00 AMTameka Gordon
Macau Gaming Lounge and Bar has had its bank accounts closed in what is being seen as the continued fallout from de-risking by foreign banks, and regulators of the gaming sector are already warning they don't expect an immediate resolution.
Sector interests say operators other than Macau have been affected, based on anecdotal evidence.
Macau Managing Director Matthew Chinn and General Manager Francisco Mignott told the Financial Gleaner that Scotiabank Jamaica gave the company a month to find another banker, without a full explanation as to why their accounts were being shuttered.
"They didn't even give us a reason. They came by twice, said they wanted to know about our regulations; then in September of 2015, they sent a letter saying they are giving us a month's notice that they are going to close our accounts," Mignott said.
The Macau managers spoke to the Financial Gleaner about their experience on the margins of last week's Gaming Industry Summit held in Kingston. They went on the record following an in-conference address by Finance Minister Audley Shaw, who raised the de-risking issue in the context that the actions by the banks could end up pushing the gaming sector back underground.
In an interview on Monday, Brian George, the founding chairman of the nascent Jamaica Gaming Association, continued on the theme of his presentation at the conference by urging gaming operators to become fully compliant with regulations used to police them. And he is insisting that the Betting, Gaming and Lotteries Commission (BGLC) adopt a zero-tolerance approach to breaches.
George, who is also president of gaming and lottery company Supreme Ventures Limited, says that in order to push back against the debanking of gaming companies, the regulator must be seen as a strict enforcer and the operators as staunchly compliant.
He urged his peers to go well beyond the 'Know Your Customer' requirements mandated by anti-money laundering laws to "knowing your customer's customers" and how their source of funds impacts the business.
"I did not feel that everyone took the same level of urgency and understood the large implications to the industry of the issue of compliance," the JGA chairman said.
A compliant sector is the only way the Jamaican Government will be able to lobby effectively for the group in talks related to correspondent banking challenges with local and international banks, George reasoned.
Not strict enough
His comments built on his address to the gaming summit last week, where the JGA chairman was critical of the BGLC for not being strict enough with gaming companies.
"The regulator has not done a good job of having the level concrete discussion to make sure we know where we are heading and what the issues are," George told the conference.
"Gone are the days when the BGLC, because of their desire to facilitate the growth of the industry, can allow things to slip ... though their intentions are noble," he said.
Macau opened its doors in 2012 and had been banking with Scotiabank since inception, the managers said, and were not expecting to be turfed by the Canada-owned bank. Scotia Group Jamaica was reached but had not commented up to press time.
Macau has since found another banker but is decrying the wave of challenges affecting local lounges, which do heavy money transactions.
"We were basically advised that they weren't comfortable with us and our policies," Mignott said, while noting that Macau was in compliance with industry regulations overseen by the Betting, Gaming and Lotteries Commission.
Another gaming operator told the Financial Gleaner that their challenge rests with the limits on the amount of cash they can lodge to their bank account, saying their intake sometimes exceeds the regulatory cap.
BGLC director of legal services, Karla Small Dwyer, said the regulatory agency has received anecdotal reports of bank account closures within the gaming sector "and we know that this is going to be a continuing issue".
"We have been getting reports from the licensees - if their accounts haven't been closed, they are having other challenges," added acting executive director of the BGLC, Carole Martinez-Johnson.
Strengthen money-laundering policies
Gaming operators have reported challenges maintaining accounts "just to pay regular bills," Martinez-Johnson said.
The regulator is urging operators to ensure their anti-money laundering policies are robust and in effect, and vetted by the BGLC.
"They need to work earnestly because if they can demonstrate that they are putting in the right infrastructure, the pushback from the banks might be a little less," said Martinez-Johnson.
The BGLC previously set a September month-end deadline, today, for gaming lounges to be audited.
With banks themselves needing to ensure they are compliant with anti-money laundering policies, Martinez-Johnson noted the all-encompassing negative effect of de-risking, saying the banks themselves are losing customers.
The onus is therefore on everyone to be compliant for the benefit of the overall financial sector, she said.
"In the long run, it will actually work for them (the lounges). It's really a culture change for them, and policies they have to put in place will benefit their organisation in the end," added Dwyer, the legal director.
Jamaica has been experiencing fallout from de-risking from around 2011 when local banks began shedding relations with money-services businesses to allay concerns of their foreign correspondent banking partners worried about exposure to money laundering.
Jamaica and its Caricom neighbours are tackling the issue on their own and as a bloc.
There is little indication that their outreach is holding sway.
"I have suggested to those larger overseas institutions who are heading in an exuberant way to de-risk - and in some cases, in a blind way - that the real risk is that we could end up having our economy grow even more informal," Minister Shaw said at the summit.