Central Bank notes most fraud attempts were for small sums
NASSAU, BAHAMAS — Domestic banks reported a fourfold increase in fraud attempts 2020, although there was a 64 percent decrease in actual fraud occurrences, the Central Bank has reported.
In its recently released summary of its analysis of the AML Data Returns submitted by banks and trust companies, co-operative credit unions and money transmission businesses, the regulator noted: “The domestic banks reported a number of instances of fraud.
“There was a fourfold increase in the number of frauds attempted during 2020, but a 64 percent reduction in actual fraud occurrences, when compared to the previous year.
“The Central Bank intends to review industry practice to ensure that these actual and attempted fraud occurrences, which are typically for small sums, are reported as suspicious transactions.”
According to the Central Bank, domestic banks reported filing just over 500 suspicious transactions reports last year, which was twice the previous year’s filings.
“One bank, for which there is no reason to believe would have a higher risk customer base, filed roughly 70 percent of these in both reporting periods,” the regulator noted.
“This is an instance of inconsistent industry practice, where the Central Bank intends to follow up as a supervisory matter.
“Compared to the 566 unusual transaction reports received internally by bank MLROs for 2020, this represents a conversion rate of 89 percent for the domestic banking sector.”
Dormant accounts
The Central Bank noted that as of December 31, 2020, domestic banks reported having approximately 495,000 customers and 580,000 accounts, which represents a contraction of nine percent and an expansion of two percent respectively when compared to 2019.
The balances associated with these customers of December 2020 were: deposits of $8.9 billion, loans of $6.2 billion and off-balance sheet/fiduciary assets of $447 million.
“A total of 2,365 accounts reportedly became dormant in 2020, which represented a 43 percent decrease when compared to 2019,” the Central Bank noted.
“On the other hand, there was a 10 percent increase in the number of inactive accounts over the same period. Approximately 11 percent of the total number of accounts were considered to be inactive, while less than half of one percent of accounts were considered to be dormant.
“One bank reported a disproportionate share of inactive and dormant accounts. The Central Bank is working with this bank to better understand their position.”
The regulator added: “All of the domestic banks reported zero positive sanctions hits for both 2019 and 2020. The Central Bank is only aware of one Bahamian citizen and one Bahamian company on two of the recognized international sanctions lists.”
According to the Central Bank, credit unions reported 17,299 inactive accounts, amounting to $15 million, and 5,616 dormant accounts of $1.9 million in 2020.
“The number of inactive and dormant accounts increased by 73 percent and 78 percent respectively,” the Central Bank noted.
“Of note is that approximately 22 percent of accounts were categorized as inactive. These large increases are likely due to more attention by the credit union sector to accurate reporting, rather than an increase in actual dormant or inactive accounts.”
The regulator pointed out that although credit unions are not subject to the Central Bank’s dormant accounts regime, they are required to declare dormant any account where there has been no activity for five years.
The balance remaining at the time is to be remitted to the Bahamas Co-operative League towards the statutory reserve funds of the credit union. After a period of five years, the funds should be forwarded to the Central Bank of The Bahamas.
“In 2020, the credit union sector reported filing a total of three suspicious transaction reports (STR), with the FIU amounting to $81,000,” the Central bank noted.
“In 2019, six STRs amounting to $721,000 were reported. The reasons given for these STRs being filed included negative news, structuring transactions to avoid reporting requirements and unusual or suspicious transaction involving cash.”
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