NASSAU, BAHAMAS – The Securities Commission of The Bahamas (SCB) says it has found it necessary to enforce its legislative powers and impose proportionate financial penalties on licensees to deter repeated AML breaches, having identified over 200 such violations in consecutive fiscal years.
In its recently released 2023 annual report, the securities industry regulator reported 358 breaches during 39 routine examinations of registrants and licensees by its Examinations Department. Of these violations, 223 were related to AML/CFT/CPF, and 135 were related to other matters.
“During the period from fiscal year 2021 to fiscal year 2023, the Commission has completed an average of 34 on-site examinations ( 31 in 2021, 32 in 2022, and 39 in 2023), and has consistently noted and identified, in excess of 200 AML-related breaches, with 221 in 2022 and 223 in 2023,” the regulator stated.
It added: “Given the consistency in elevated AML-related breach statistics from year to year, and licensees’ failure to demonstrate improvement year over year, the Commission deems it necessary to enforce its powers under the respective legislation to impose proportionate financial penalties on licensees with a view to dissuading organizations from repeating AML offenses. Most of these breaches are predominantly related to ongoing obligations (i.e., filing requirements), ongoing client monitoring, client verification & KYC, client risk ratings & risk assessments, employee training, and policies and procedures.”
The regulator noted that 14 enforcement matters were carried forward from 2022. Two litigation matters and two criminal matters were opened in 2023. As of December 31, 2023, 18 enforcement matters remained open, including 12 involving litigation, three administrative, and three criminal matters.
Regarding penalties assessed, $125,600 were levied on SIA firms, and $134,150 on IFA funds and administrators.
In 2023, 98 individuals were approved under the Securities Industry Act (SIA). At the end of 2022, 48 registrations were either surrendered or not renewed. As of December 31, 2023, 455 individuals were registered under the SIA.
Two investment fund administrators surrendered their licenses in 2023, while one changed categories. As of December 31, 2023, there were 44 licensed investment fund administrators.
In 2023, 64 investment funds were approved and licensed; nine were approved by the Commission, and 55 were filed with the Commission by unrestricted investment fund administrators. During the same year, 87 funds entered liquidation or surrendered their licenses, resulting in 659 licensed investment funds by year-end. There were 494 investment funds with registered investment fund managers as of December 31, 2023. The total net asset value for all investment funds as of December 31, 2023, was $60.6 billion, up from $50.3 billion for the period ending December 31, 2022, marking an increase of 20.48 percent
Throughout the year, the DARE Unit continued to engage in pre-applicant meetings related to registration under the DARE Act. As of December 31, 2023, 18 firms were registered under the DARE Act. One examination of a DARE licensee was conducted in 2023.
The SCB reported that total income for the 2023 fiscal year increased by 26.2 percent, rising from $15.1 million in 2022 to $19.0 million in 2023. This increase was driven by a $3.3 million rise in subvention utilized and a $0.8 million increase in fees. The continued transition of licensees from the FCSPA 2000 to the FCSPA 2020 contributed to the increase in fee income. The Commission used subvention to support expenses for various training initiatives, regulatory meetings, and conferences. These included meetings hosted by the Commission in Nassau for various committees of the International Organisation of Securities Commissions, the D3 Bahamas Conference, and the sponsorship of a five-year licensing agreement between the University of Cambridge and the University of The Bahamas (UB) for a FinTech training course provided by UB. As a result, training and conference expenses increased by $3.6 million, rising from $0.7 million in 2022 to $4.3 million in 2023.
Expenditure related to updating the DARE Act, 2020, and the SIA was a major factor in the 48.5 percent increase in professional fees, from $0.9 million in 2022 to $1.4 million in 2023.
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