The Banking Services Act and the anticipated impact on the financial services sector (Part 2)

THE Banking Services Act specifically allows deposit-taking institutions (banks, merchant banks and building societies), with the prior approval of the Supervisory Committee, to appoint a person to act as agent to offer banking services such as deposits and withdrawals, bill and loan payments/ repayments, account balance enquiries and collection of KYC and due diligence information. The intention here seems to be to encourage efficiency through authorised agency relationships.

Supervision of financial groups and financial holding companies

The Act reinforces the existing requirements for consolidated supervision. It also introduces provisions expanding the supervisory realm to incorporate conglomerate supervision.

The Act defines “consolidated supervision” in relation to a financial group as meaning: (a) the supervision of the financial group on a consolidated basis; (b) the effective supervision of every licensee within a financial group, and (c) where the financial group is a part of a mixed conglomerate, the comprehensive review of the activities within the financial group.

Under the Act, a financial holding company shall be established and consolidated supervision shall apply where:

a) two or more financial institutions operating in Jamaica are members of the financial group and one of them is a deposit-taking institution; and

b) a deposit-taking institution operating in Jamaica is a member of a financial group and has branches or subsidiaries or control of companies outside of Jamaica.

The Act then outlines structures that will afford the supervisor the ability to better regulate and supervise financial groups. It will also allow the supervisor to obtain a perspective of the financial condition of the wider group within which the deposit-taking institution exists, in order to assess the risk that may be present to the deposit-taking institution.

The Act also prohibits ownership structures of and within a financial group which, in the opinion of the supervisory committee, may impede consolidated supervision or effective supervision of a licensee. Notably, these ownership structures include structures that are established in jurisdictions with laws that hinder consolidated or effective supervision.

We have already begun to see entities within the financial services sector taking steps to restructure so as to facilitate effective supervision.

New offences

The Act creates and incorporates new offences making the legislation more relevant to the current market and international trends. These offences include fraudulently misrepresenting that an entity is licensed under the Act, undertaking dealings with shell banks and breaches of the financial holding company provisions.

Enhanced enforcement framework

The Act also provides for an enhanced enforcement framework under Part XXII, such as written warnings and mandatory measures where, for instance, there is a breach of the Proceeds of Crime Act or a licensee’s capital falls below the minimum prescribed level. The functions and investigative powers of the supervisor have also been enhanced under Part XIII.

There are many benefits to be gained from streamlining the laws governing our deposit-taking institutions. It is also clear that the Act contains provisions that more adequately address issues facing the financial services sector. However, time will tell whether the Act proves to be a thorn or a rose for the licensees under the Act.

Simone Bowie Jones is an associate at Myers, Fletcher & Gordon Attorneys-at-Law

and is a member of the firm’s Commercial Department. Simone may be contacted at simone.bowie@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal aid.

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The Banking Services Act and the anticipated
impact on the financial services sector (Part 2)

American Express to launch services in Cuba

Wednesday, January 28, 2015 | 4:15 PM    

WASHINGTON, United States (AFP) – American Express said Wednesday that it plans to launch services for its credit card users in Cuba, after Washington and Havana agreed to establish relations following a half-century freeze.

Moving in the steps of rival MasterCard, an American Express spokeswoman said the company had plans to begin business activities in Cuba, “consistent with the president’s announced policy change,” though no specific date for a launch is set.

US President Barack Obama’s historic move in December to open the doors to better political, social and business ties with the Caribbean island nation is expected to, at first, give a boost to travel to the country long under a US embargo.

Obama said US banks would be able to offer various services including use of their credit cards in Cuba.

MasterCard said last week that it would begin processing customer transactions from Cuba in March.

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American Express to launch services in Cuba

The Banking Services Act and the anticipated impact on the financial services sector (Part 1)

With SIMONE BOWIE JONES

Wednesday, January 21, 2015    

THE aim of the recently passed, but not yet in force, Banking Services Act (the “Act”) is to aid in the creation of a more efficient banking system by seeking to bring the legislative regime in accordance with international standards and by consolidating the different pieces of legislation that govern entities within the financial services sector. The Act repeals the Banking Act and the Financial Institutions Act and amends sections of the Building Societies Act and the Bank of Jamaica Act.

Members of the financial sector have for some time been waiting with wary anticipation for the passing of the Act, first known simply as the banking “omnibus legislation”. Highlighted in this article are some of the changes that will be introduced by the Act.

The Administration of the Act & Transparency

The Banking Services Act, like the previous pieces of legislation governing the financial services sector, is administered by the Bank of Jamaica (the “BOJ”) and the “Supervisor”, that is, the Supervisor of Banks and Specified Financial Institutions appointed under the Bank of Jamaica Act. The Act introduces the “Supervisory Committee”, which is to advise and make recommendations to the Supervisor on matters such as the grant and revocation of licences; the determination as to whether a person is fit and proper; applications regarding corporate and group restructuring, new products and services; development and enforcement of the Code of Conduct; and change in the ownership of licences.

The constitution and procedures of the Supervisory Committee are set out in the Second Schedule to the Act. Notably, two of the five members of the Supervisory Committee must be persons not employed by the BOJ and have experience and knowledge in banking business, commercial law, administration, finance or the regulation of financial services. Public officers, members of the House of Representatives or the Senate and persons with a proprietary interest in a licensee are not eligible for appointment. Measures such as this clearly evidence an intention to improve governance and transparency.

Boards & Management Committees

The Act requires all licensees to establish appropriate board and management committees to oversee key aspects of the operations, and establish due diligence processes (including background checks) for directors, officers and key employees. It also maintains the requirement that the officers advise the Supervisor on a proactive basis of any facts evidencing potential or actual challenges to the ability of a licensee to meet its obligations.

Every licensee must have a board of directors consisting of not less than five members, and not less than one-third of the board membership must be made up of independent directors.

The Act also stipulates that the board of directors is to be comprised of suitably qualified and competent directors that possess the knowledge and expertise required to have oversight of the operations, effective leadership and can ensure that the licensee operates in a prudent manner.

The Act specifically prohibits the chairman of the board from being an employee of the licensee. Further, the same person cannot be both chairman of the board and chief executive officer of a licensee at the same time. However, these restrictions do not, however, apply where the chairman of the board or board of management is established in relation to the branch operations in Jamaica of a foreign bank.

Every licensee is to ensure that:

* the policies of the licensee are updated at regular intervals;

* policies and procedures (including rules and procedures governing due diligence and promoting ethical and professional standards) are established and meet the standards required by applicable laws;

* appropriate and adequate record keeping systems are in place;

* a person does not undertake activities or hold dual or multiple roles within a financial group that may create an actual or potential conflict of interest except where approved by the Supervisor; and

* any transaction between a licensee and a connected person is at commercial arms length pricing and terms.

These provisions should result in better accountability and governance and allow the public to have a greater level of confidence that the institutions in which they deposit their hard-earned money, are being operated by qualified persons with a greater level of transparency.

Additional Reporting Requirements

The Act now incorporates an express obligation for licensees to immediately report to the Supervisor matters that could materially affect the financial viability or reputation of the licensee, as well as fraud or criminal activity committed by or against the licensee. The licensee is also to advise the Supervisor of any emerging factors that may render a director, officer, substantial shareholder or key employee unfit to hold office or no longer fit and proper, as well as of the resignation or dismissal of any such person and the reason for same.

Licensees must also give prior notice to the Supervisor of transactions involving the sale or purchase of loans for a price exceeding (individually or in aggregate) 5 per cent of its capital base. They must also give notice of intent to appoint an external auditor and any major changes to existing operations.

Simone Bowie Jones is an Associate at Myers, Fletcher and Gordon

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The Banking Services Act and the anticipated impact on the financial services sector (Part 1)

Jamaica Mortgage Bank to offer services to the diaspora

Jamaicans living abroad will soon be able to access the services of the Jamaica Mortgage Bank (JMB) when investing in housing here.

According to JMB General Manager Courtney Wynter, the bank will be launching a new service that is expected to focus on the technical aspect of construction financing.

Speaking at a JIS Think Tank on December 9, Wynter explained that the bank has, over the years, amassed significant knowledge and expertise in mortgage and construction financing, which would be useful in providing project management services to people living abroad. This would include close monitoring of construction projects by the bank to ensure optimal output.

“Many retired people want to build a house in Jamaica. We see where they have had various issues and what we want to offer is project management services to ensure that when they return home, all is in place,” Wynter said.

He explained that by entering the project management market, the JMB would be tapping into one of the strengths of the organisation, which it has developed in its over 43 years of existence in the housing financing market.

He added that the JMB would also be offering the service to other institutions that provide financing, but which are not as strong on the monitoring and technical side.

Meanwhile, director of business operations at JMB, Hecton Hemans, outlined some of the critical success factors of the institution and how the entity believes that it can assist people in this area.

“The bank carries out a rigorous project risk analysis and technical evaluation exercise during the application and decision process for mortgage and construction financing,” he said. “When projects are approved, there is continuous monitoring and risk mitigation, and control mechanisms are put in place.”

He added that these will measure the critical elements, functions and milestones in the project implementation process.

Hemans said that the bank also provides technical and financial oversight of loan origination and housing development, not currently employed elsewhere in the wider construction financing market.

“We are promoting our technical services and a partnership-type arrangement with all clients to achieve a higher project implementation success rate, engender trust, customer retention and repeat business,” he said.

– JIS

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Jamaica Mortgage Bank to offer services to the diaspora

GraceKennedy Payment Services receives approval for mobile money service

GraceKennedy Payment Services has received approval from the Bank of Jamaica to proceed with the pilot introduction of a mobile money service.    
Delivery of the service will commence next year through the GraceKennedy Money Services network.     
Participants in the service will, among other things, be able to make electronic payments, bill payments, as well as mobile top-up. This will be done using mobile phones, thereby minimising the cost of doing business.

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GraceKennedy Payment Services receives approval for mobile money service

GraceKennedy Payment Services receives approval for mobile money service

GraceKennedy Payment Services has received approval from the Bank of Jamaica to proceed with the pilot introduction of a mobile money service.    
Delivery of the service will commence next year through the GraceKennedy Money Services network.     
Participants in the service will, among other things, be able to make electronic payments, bill payments, as well as mobile top-up. This will be done using mobile phones, thereby minimising the cost of doing business.

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GraceKennedy Payment Services receives approval for mobile money service

Court grants injunction in favour of Access Financial Services CEO

The court has granted Marcus James, CEO of Access Financial Services, an injunction barring his chairman Brian Goldson and directors, Chris Berry and Gary Peart from directly or indirectly acquiring any more shares in the company.

The injunction prevents them from usurping Marcus James, who owns 46% of Access Financial, as the majority shareholder, at least until a judgement is made in a dispute between Mr James and members of the board.

The dispute stems from what the board members charge in a lawsuit is an unjust enrichment of Mr. James from renovation works done on the company’s headquarters.

The injunction also prevents the board from taking any action to reduce Mr James’ salary as CEO, or varying his powers in any way.

The injunction was granted Friday. No date has been set for the matter to be heard by the court.

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Court grants injunction in favour of Access Financial Services CEO

Digicel blocks unlicensed VOIP services

Effective immediately, Digicel has blocked unlicensed Voice Over Internet Protocol (VOIP) services from its network.

In an advisory, Digicel said unlicensed VOIP operators like Viber and Nimbuzz use telecom networks to deliver their services, but do not pay the requisite fee.

The company has described the action as illegal bypass activity.

 Digicel says it has been forced to take action as the unauthorized services have been putting enormous pressure on bandwidth and impacting negatively on customers’ data usage experience.

 The company says it hopes the action will be temporary as discussions are ongoing with the unlicensed VOIP providers.

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Digicel blocks unlicensed VOIP services

Correctional services worried about attempted suicides

BY ALICIA DUNKLEY Senior staff reporter dunkleya@jamaicaobserver.com

Wednesday, January 22, 2014    

THE Department of Corrections has admitted that it is challenged by incidents of attempted suicide in both adult and juvenile institutions under its watch.

According to a report presented to a meeting of the Internal and External Affairs Committee of Parliament yesterday, the department said that in recent months three adults (two females and one male) and 14 wards (three females and 11 males) attempted suicide.

The department, whose team was headed by Major General Stewart Saunders, permanent secretary in the Ministry of National Security, said it, however, “recognises the need to build capacity to manage the psycho-social needs of inmates and wards”.

It said suicide or self-harm was included in the training programme for the last two intakes of correctional officers, and also reported that presently mental health services are provided by three sessional psychiatrists and psychological services by one sessional and two full- time psychologists.

The issue of suicide behind bars took front and centre for weeks following the November 21, 2012 suicide of teenager Vanessa Wint at the Horizon Adult Remand Centre in Kingston. Also in January of last year, some four underage girls from the same institution were hospitalised after overdosing on antidepressant tablets.

In the meantime, the department has admitted that although it tries to meet the needs of mentally ill inmates it does not have adequately trained staff, appropriate infrastructure and an environment conducive to effectively treat and rehabilitate them. It said those who are “unfit to plea are particularly vulnerable”.

The department said since there is no determinate sentence they must remain until they are deemed fit and brought back before the court.

There are some 264 mentally ill inmates of the total inmate population of 3,281 as at January 10 this year. Some 80 are unfit to plea.

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Correctional services worried about attempted suicides

Snowden link as email services close

9 August 2013 Last updated at 10:42 Edward Snowden is believed to have been using the Lavabit service after fleeing the US Two encrypted email services have closed down for reasons linked to US intelligence leaker Edward Snowden.

Texas-based Lavabit service has shut down but said legal reasons prevented it explaining why.

Correspondents say Lavabit appears to have been in a legal battle to stop US officials accessing customer details.

In addition, secure communications firm Silent Circle has shut its email service because messages cannot be kept wholly secret.

Web watchers

Mr Snowden, a former contractor to the American National Security Agency (NSA), has admitted leaking information about widespread US surveillance on electronic communications to the media.

He fled the US – where he now faces espionage charges – and has been granted temporary asylum in Russia.

Lavabit came under scrutiny following reports that Mr Snowden was using the service while holed-up in Moscow airport.

“I have been forced to make a difficult decision: to become complicit in crimes against the American people, or walk away from nearly 10 years of hard work by shutting down Lavabit,” Mr Levison wrote in a letter posted on the Lavabit website.

He said he had decided to “suspend operations” but was barred from discussing the events over the past six weeks that led to his decision.

“This experience has taught me one very important lesson: without congressional action or a strong judicial precedent, I would strongly recommend against anyone trusting their private data to a company with physical ties to the United States,” he wrote.

Silent Circle said it shut down its email service for both technical and political reasons.

Protests have followed revelations about the scale of NSA surveillance

“Email as we know it… cannot be secure,” wrote Jon Callas, co-founder and head of technology officer at Silent Circle, in a blogpost. “Email that uses standard Internet protocols cannot have the same security guarantees that real-time communications has.”

By contrast, he said, the firm was keeping its secure voice and text services going because it had control over the infrastructure supporting them and could guarantee that messages were not intercepted or tampered with en route.

In addition, said Mr Callas, it was anticipation of future government calls to hand over customer details that prompted the Silent Mail shutdown.

“We see the writing (on) the wall, and we have decided that it is best for us to shut down Silent Mail now,” he said. “We have not received subpoenas, warrants, security letters, or anything else by any government, and this is why we are acting now.

“We wanted to be proactive because we knew USG would come after us,” Silent Circle boss Michael Janke told the TechCrunch website in an interview.

The US Department of Justice has so far not commented on the Lavabit closure.

Jennifer Granick, director of civil liberties at the Stanford Law School’s Center for Internet and Society, said America’s widespread surveillance could have far-reaching consequences for its technology industry.

“…the US government, in its rush to spy on everybody, may end up killing our most productive industry,” she wrote in a blogpost. “Lavabit may just be the canary in the coal mine.”

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Snowden link as email services close