The Central Bank of The Bahamas

The Central Bank of The Bahamas CONSULTATION PAPER on the Draft Banks and Trust Companies Regulation (Amendment) (No. 1) Bill, 2013 and the Draft Banks and Trust Companies (Administrative Monetary Penalties), 2013 March, 2013

TABLE OF CONTENTS I. Introduction II. Key Proposed Amendments to the Banks and Trust Companies Regulation Act, 2000 III. Introduction of Banks and Trust Companies (Administrative Monetary Penalties), 2013 IV. Consultation Period Annex 1: Draft Banks and Trust Companies Regulation (Amendment) (No.1) Bill 2013 Annex 2: Annex 3: Draft Banks and Trust Companies (Administrative Monetary Penalties) Regulation 2013 Draft Central Bank Guidelines on the Administration of Monetary Penalties 1

I. INTRODUCTION 1. As the regulator with responsibility for the supervision of banks, trust companies, Registered Representatives, non-bank money transmission businesses and money transmission agents operating in and from within The Bahamas, the Central Bank of The Bahamas (the Central Bank or the Bank) keeps under review the effectiveness of the various regulatory tools at its disposal, including the legislative instruments which set out the parameters of the Central Bank s authority. The Central Bank has undertaken a review of the Banks and Trust Companies Regulation Act, 2000 (the principal Act) and has identified certain areas that require legislative amendments and the introduction of related subsidiary legislation and supervisory guidelines. The Bank believes that its proposals will strengthen the regulatory framework for its licensees and will give the Central Bank more flexibility and wider powers to address supervisory issues. The Bank also seeks, through the proposed amendments, to facilitate better understanding of its regulatory requirements by clarifying certain provisions of the principal Act. 2. This Consultation Paper invites comments on the Bank s proposals which are set out in the following draft Bill, regulations and guidelines: (i) the Banks and Trust Companies Regulation (Amendment) (No. 1) Bill, 2013 (the Bill); (ii) the Banks and Trust Companies (Administrative Monetary Penalties), 2013 (the ); and (iii) the Central Bank s Guidelines for the Administration of Monetary Penalties (the Guidelines). II. KEY PROVISIONS OF THE PROPOSED BANKS AND TRUST COMPANIES REGULATION (AMENDMENT) (NO.1) BILL, 2013 3. The draft Banks and Trust Companies Regulation (Amendment) (No. 1) Bill, 2013 is set out at Annex 1. 4. The Key provisions of the Bill relate to the following matters. (a) Enhancement of fit and proper requirements for controllers, directors and officers of licensees 5. In carrying out its duty of promoting and maintaining high standards in regulated institutions, The Central Bank is charged with the responsibility of assessing the fitness and propriety of persons nominated to perform regulated functions, as such, ensuring the probity and competence of directors, executive and senior officers and significant shareholders, is critical to the Central Bank s achievement of this supervisory objective. 6. The proposed insertion of section 3E into the principle Act is intended to expand and clarify the general criteria to be used by the Bank in assessing the fitness and probity of individuals to perform regulated functions or to acquire an interest in a regulated institution. The proposed new sections, 6A, 6B, 6C and 6D, which relate to shareholders who exercise significant influence over the management of a licensee (controllers of licensees), provides the Central Bank with enhanced powers to object to an existing or proposed controller of a licensee, to 2

make directions with regard to the controllers of a licensee, and provides for offences, penalties and defences in connection with obligations of controllers. (b) Introduction of reporting requirement for directors 7. The proposed insertion of section 13B into the principal Act seeks to strengthen the Central Bank s ability to obtain timely, accurate and relevant information on the quality of a licensee s operations and financial condition. The new section imposes a positive obligation on the licensees directors to report any developments that pose material risks to the safety and soundness or reputation of licensees. (c) Introduction of powers for the Central Bank to impose prohibition orders 8. The Bill proposes the insertion into the principal Act of sections 18E, 18F and 18G to empower the Central Bank to issue prohibition orders against any person if the Bank is satisfied that the person is not or has ceased to be a fit and proper person to perform a regulated function for or in a licensee (i.e., acting as director, officer or auditor of a licensee or serving or acting in any other capacity in or for a licensee which requires approval, supervision or monitoring by the Central Bank). This is an administrative power, the effect of which is to exclude unfit individuals from being employed within Central Bank regulated institutions, or to limit the scope of their duties within or in respect of a licensee. The power is exercised for the protection of the public and the country s financial services industry. Criminal sanctions are also proposed in respect of persons who act in contravention of a prohibition order issued by the Central Bank. A person against whom a prohibition order is issued will have the right to apply to the Central Bank to have the order varied or revoked. A decision of the Bank to issue a prohibition order may be referred to the Supreme Court. (d) Enhancement of the Central Bank s powers to impose administrative monetary penalties 9. The proposed amendments to sections 24 and 24A of the principal Act, the proposed insertion of sections 24B, 24C, 24D, 24E, 24F, 24G and 24H into the principal Act and the introduction of the are intended to consolidate, strengthen and clarify the Central Bank s enforcement regime. These amendments and new provisions will empower the Central Bank to impose administrative monetary penalties on any person if the Bank is satisfied that that person has contravened any provision of the Act or regulations made under the Act, has failed to comply with any order or direction issued by the Central Bank or breached any condition and/or limitation imposed by the Central Bank. It is hoped that a more comprehensive and transparent administrative monetary penalties regime will encourage persons to comply with the provisions of the principal Act and regulations made under it and their regulatory obligations. III. INTRODUCTION OF BANKS AND TRUST COMPANIES (ADMINISTRATIVE MONETARY PENALTIES) REGULATIONS, 2013 10. The draft Banks and Trust Companies (Administrative Monetary Penalties), 2013 is set out at Annex 2. 11. The key provisions of the relate to the following matters. The will: (a) designate the following as a contravention in respect of which an administrative 3

monetary penalty may be imposed against any person by the Central Bank: (i) a breach of the provisions of the Act or any regulation listed in the Schedule to the ; (ii) non-compliance with any direction and/or order issued by the Central Bank; and (iii) non-compliance with any condition and/or limitation imposed by the Central Bank; (b) classify each contravention as minor, serious or very serious, and (c) provide for the imposition of a fixed daily penalty up to a prescribed maximum for the late or erroneous filing of returns. 12. The Central Bank s draft Guidelines for the Administration of Monetary Penalties are set out at Annex 3. The primary purpose of the draft Guidelines is to assist supervised financial institutions in understanding the Central Bank s administrative monetary enforcement regime by explaining the Central Bank s approach to the assessment and imposition of administrative monetary penalties and providing information on the process that the Bank will follow in arriving at a decision as to whether or not an administrative monetary penalty should be imposed. IV. CONSULTATION PERIOD 13. The Bank invites your comments on the proposed changes by the 22 nd April, 2013. Your comments and questions regarding the proposed changes should be directed to: The Policy Unit Bank Supervision Department Central Bank of The Bahamas Frederick & Market Streets P.O. Box N 4868 Nassau, Bahamas Tel (242) 302-2615 Fax (242) 356-3909 Email: Policy@centralbankbahamas.com March, 2013 4

DRAFT ANNEX 1 BANKS AND TRUST COMPANIES REGULATION (AMENDMENT) (NO. 1) BILL, 2013 1. Short title and commencement. (1) This Act which amends the Banks and Trust Companies Regulation Act may be cited as the Banks and Trust Companies Regulation (Amendment) (No. 1) Act, 2013. (2) This Act shall come into force on such date as the Minister may appoint by Notice in the Gazette. 2. Amendment of section 2 of the principal Act. Section 2 of the principal Act is amended by (a) the insertion in its appropriate alphabetical position of the following administrative monetary penalty or penalty means a monetary sanction imposed by the Central Bank and includes a fine payable pursuant to section 24B of this Act;. Bank has the same meaning as in section 2 of the Central Bank of The Bahamas Act, Ch 321 controller means a person (a) in accordance with whose directions, instructions or wishes the directors or officers of a licensee, or of another company of which the licensee is a subsidiary, are accustomed or are under an obligation, whether formal or informal, to act; (b) who is able to exercise a significant influence over the management of a licensee or another company of which it is a subsidiary by virtue of (i) a holding of shares or other securities in; or (ii) an entitlement to exercise, or control the exercise of, the voting power at any general meeting of, the licensee, or as the case may be, the other company concerned. (c) who is in a position to determine the policy of the licensee, but does not include any person-- 5

(i) who is a director or officer of the licensee whose appointment has been approved by the Central Bank; or (ii) in accordance with whose directions, instructions or wishes the directors of the licensee are accustomed to act by reason only that they act on advice given by him in his professional capacity. (b) The deletion of the word Governor in the definition of Registered Representative and the substitution of the words Central Bank. 3. Amendment of section 3 of the principal Act. Section 3 of the principal Act is amended (a) by the deletion of subsection (1) and the substitution of the following (1) No banking business shall be carried on from within The Bahamas, whether or not such business is carried on in The Bahamas, except by a company in possession of a valid licence granted by the Central Bank authorising it to carry on such business. (b) in subsection (6) by the deletion of the word and letter and (g) and the substitution of the following: (g), (h) and (i). 4. Amendment of section 3C of the principal Act. Section 3C of the principal Act is amended by the deletion of the reference to the numbers and symbols 5, and 10(a). 5. Insertion of section 3D and 3E into the principal Act. The principal Act is amended by the insertion immediately after section 3C of the following new sections 3D. Application in case of a proposed company. (1) A group of persons may, where the group proposes to form a company for the purpose of carrying on a business referred to in subsections (1) and (2) of section 3 or in paragraph (a) of section 3A, make application to the Central Bank for an intimation as to whether or not the company will be authorised to carry on such business upon its incorporation. (2) Except in the case of an application made to carry on a business referred to in section 3A, the provisions of section 4 shall apply to an application made under subsection (1). 3E. Criteria to determine if person is fit and proper. 6

(1) The Central Bank shall, in determining for the purposes of this Act, or of any regulation made under this Act, whether a person is a fit and proper person, have regard to all the circumstances, including such person's (a) previous disciplinary record, general compliance history and whether the Central Bank, or any other domestic regulatory authority or a Supervisory Authority, has previously imposed a disciplinary sanction on the person; (b) honesty, integrity and reputation; (c) character and competence; (d) business record and experience; (e) capability and soundness of judgement; and (f) financial soundness. (2) The Central Bank shall, where an application is made (a) pursuant to section 3A; (b) pursuant to subsection (1) of section 4; or (c) by a licensed Financial and Corporate Service Provider for approval to carry on the business of a Registered Representative, consider whether the applicant, and in such cases as the Bank deems fit, any person who is or is to be a controller, director, or officer of the business to which the application relates, is a fit and proper person to be a controller, director or officer. (3) The Central Bank shall refuse to grant a licence or an approval, or to register any person, as the case may be, where the Bank is of the opinion that the business to which the application relates would not be carried on by persons who are fit and proper persons to be controllers, directors or officers, as the case may be. 6. Amendment of section 4 of the principal Act. Section 4 of the principal Act is amended (a) in subsection (1) by the deletion of the word person and the substitution of the word company ; (b) by the deletion of subsection (2) and the substitution of the following (2) An application made pursuant to subsection (1) shall be in writing and contain such information and particulars, accompanied by such references, as may be prescribed and the Central Bank (a) shall, in considering the application, have regard to the following 7

(i) (ii) the incorporation and ownership structure of the company; the nature and sufficiency of the financial resources of the applicant to provide continuing financial support for the bank or trust company, as the case may be; (c) in subsection (7) (iii) the soundness and feasibility of the business plan; and (iv) the best interests of the financial system in The Bahamas; (b) may, if satisfied with respect to the matters set out in subparagraphs (i) to (iv) of paragraph (a) and in subsection (2) of section 3E, grant a licence to the applicant subject to such terms and conditions, if any, as the Bank may deem necessary; and (c) shall, in every case in which application is made pursuant to subsection (1), advise the Minister of the Bank's decision to either grant or refuse the grant of a licence to the applicant. (i) by the insertion of the following words in the proviso immediately after the words Registered Representative : or other relevant person. (ii) by the deletion of the word Governor and the substitution therefore of the words Central Bank ; (c) in subsection (8) (i) by the deletion of the word Governor and the substitution therefore of the words Central Bank ; and (ii) by the deletion of the word he and the substitution therefore of the words the Bank ; 7. Insertion of new sections 6A, 6B, 6C and 6D in the principal Act. The principal Act is amended by the insertion immediately after section 6 of the following new sections: 6A. Approval of Applications by Controllers (1) The Central Bank may approve an application made by a person under subsection (1), of section 6 in any case where, 8

(a) the acquisition of the shares or other securities of a licensee, would result in the person, becoming a controller of the licensee; or (b) the person is an existing controller of a licensee and the acquisition of the shares or other securities of the licensee, would result in the increase of that person s influence over the licensee, if the Bank is satisfied that (i) the person is a fit and proper person; (ii) having regard to the likely influence of the person, the licensee will or will continue to conduct its business prudently and to comply with the provisions of this Act; and (iii) it is in the best interests of the financial system of The Bahamas to do so. (2) In respect of an approval granted under this section, the Central Bank may at any time make the approval subject to such conditions as the Bank may determine, including but not limited to any condition (a) restricting the person s disposal or further acquisition of shares or other securities or voting power in the licensee; or (b) restricting the person s exercise of voting power in the licensee. (3) The Central Bank may at any time add to, vary or revoke any condition imposed under subsection (2). (4) Any condition imposed under subsection (2) shall have effect notwithstanding any provision of the Companies Act, any other law, or anything contained in the memorandum or articles of association of the licensee. 6B. Objection to an existing controller of a licensee (1) The Central Bank may serve a written notice of objection on any person referred to in subsection (1) (a) or (b) of section 6A, to whom approval has been granted to acquire shares or other securities in a licensee, if satisfied that (a) the person has ceased to be a fit and proper person; (b) having regard to the likely influence of the person, the licensee is no longer likely to conduct or is no longer conducting its business prudently or to comply with or is no longer complying with the provisions of this Act; (c) any condition of approval imposed on the person under subsection (2) of section 6A has not been complied with; 9

(d) the person has furnished any false or misleading information or document in connection with an application made pursuant to section 6A(1); (e) the Bank would not have granted approval under section 6A(1) had it been aware, at the time, of circumstances relevant to the person s application for such approval; or (f) it is no longer in the best interest of the financial system for the person to continue to be a controller of a licensee. (2) The Central Bank shall, in any written notice of objection, specify a reasonable period within which the person to be served the written notice of objection shall (a) take such steps as are necessary to ensure that he ceases to be a controller or an indirect controller, as the case may be; or (b) comply with such direction or directions as the Central Bank may make under section 6C. (3) Any person served with a written notice of objection under this section shall comply with the notice. 6C Power to make directions (1) Without prejudice to section 6D, if the Central Bank is satisfied that any person has failed to comply with any condition imposed under section 6A(2) or if the Central Bank has served a written notice of objection under section 6B,the Central Bank may, by notice in writing (a) direct the transfer or disposal of all or any of the shares or securities in the licensee held by the person or any of his associates (referred to in this section as the specified shares) within such time or subject to such conditions as the Central Bank considers appropriate; (b) restrict the transfer or disposal of the specified shares; or (c) make such other direction as the Central Bank considers appropriate. (2) Any person to whom a notice is given under subsection (1) shall comply with such direction or directions as may be specified in the notice. (3) In the case of any direction made under subsection (1) (a) or (b), until a transfer or disposal is effected in accordance with the direction or until the restriction on the transfer or disposal is removed, as the case may be, notwithstanding any of the provisions of the Companies Act, any other law or anything contained in the memorandum or articles of association of the licensee (a) no voting rights shall be exercisable in respect of the specified shares unless the Central Bank expressly permits such rights to be exercised; 10

(b) no shares of the licensee shall be issued or offered (whether by way of rights, bonus or otherwise) in respect of the specified shares unless the Central Bank expressly permits such issue or offer; and (c) except in a liquidation of the licensee, no payment shall be made by the licensee of any amount (whether by way of dividends or otherwise) in respect of the specified shares unless the Central Bank expressly authorises such payment. (4) In this section, a person, A, is an associate of another person, B, if (i) (ii) A is the spouse or a parent, remoter lineal ancestor or step-parent or a son, daughter, remoter issue, step-son or step-daughter or a brother or sister, of B; A is a company whose directors are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of B, or where B is a company, of the directors of B; (iii) B is a company whose directors are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of A, or where A is a company, of the directors of A; (iv) A is a person who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of B; (v) B is a person who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of A; (vi) A is a related company of B; (vii) A is a company in which B, alone or together with other associates of B as described in paragraphs (ii) to (vi), is in a position to control not less than 20% of the voting power in A; (viii) B is a company in which A, alone or together with other associates of A as described in paragraphs (ii) to (vi), is in a position to control not less than 20% of the voting power in B; or (ix) A is a person with whom B has an agreement or arrangement, whether oral or in writing and whether express or implied, to act together with respect to the acquisition, holding or disposal of shares or other interests in, or with respect to the exercise of their voting power in relation to, the licensee. 11

6D. Offences, penalties and defences (1) Any person who contravenes section 6(1), 6B(3) or 6C(2) shall be guilty of an offence and shall be liable on summary conviction (a) in the case of an individual, to a fine not exceeding $50,000 and, in the case of a continuing offence, to a further fine not exceeding $500 for every day or part thereof during which the offence continues; or (b) in the case of a company, to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine not exceeding $1,000 for every day or part thereof during which the offence continues. (2) Any person who fails to comply with any condition imposed under section 6A(2), shall be guilty of an offence and shall be liable on summary conviction (a) in the case of an individual, to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 3 years or to both and, in the case of a continuing offence, to a further fine not exceeding $500 for every day or part thereof during which the offence continues; or (b) in the case of a company, to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine not exceeding $1,000 for every day or part thereof during which the offence continues. (3) Where a person is charged with an offence in respect of a contravention of section 6(1) it shall be a defence for the person to prove that (a) he was not aware that he had contravened section 6(1) and (b) he has, within 14 days of becoming aware that he had contravened section 6(1), notified the Central Bank of the contravention and, within such time as determined by the Central Bank, taken such actions in relation to his shareholding or control of the voting power in the licensee as the Central Bank may direct. 8. Amendment of section 8 of the principal Act Section 8 of the principal Act is amended by the insertion of the following new subsection immediately after subsection (3): (4) Every licensee shall within four months of the end of its financial year provide a copy of its annual financial statement to the Central Bank, unless prior written approval for an extension of time has been granted by the Bank. (5) The Central Bank may, for such further period not exceeding sixty days it deems expedient, extend the time periods referred to in subsections (1) and (4). 9. Repeal and replacement of section 9 of the principal Act 12

Section 9 of the principal Act is repealed and replaced by the following: 9. Information to be furnished to the Central Bank. (1) Every person that is subject to the supervision of the Central Bank pursuant to this Act, shall furnish the Central Bank with such information (including returns) at such times and in such form as the Bank may reasonably require for the proper discharge of its functions under this Act or any regulations made under this Act.\ (2) Any person who fails without reasonable excuse to furnish any information required by the Bank under this section shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding fifty thousand dollars and, in the case of a continuing offence, to a further fine of one thousand dollars for every day during which the offence continues after conviction. 10. Repeal of section 10 of the principal Act Section 10 of the principal Act is repealed. 11. Amendment of section 11 of the principal Act. The principal Act is amended by the repeal of section 11 and its replacement with the following: 11. Information on insolvency. (1) Any licensee which is or is likely to become insolvent, or which is or is likely to become unable to meet its obligations, or which has suspended or is about to suspend payments, shall immediately inform the Central Bank of that fact. (2) The Central Bank, in relation to a licensee which is or appears to become unable to meet its obligation or which in the opinion of the Central Bank is carrying on business in a manner detrimental to the public s interest or to the interest of its depositors or the beneficiaries of any trust, or other creditors, may by instrument in writing require the manager or authorised agent of such licensee to supply within such reasonable time as may be specified in the instrument (a) the financial statement of that licensee as of a date determined by the Central Bank audited by an auditor who shall be a chartered accountant or a certified public accountant approved of by the Bank; and (b) such other information relating to the licensee as may be so specified, and any person who contravenes the requirements of such an instrument or who in response to such an instrument knowingly or wilfully supplies false information to the Central Bank shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding one hundred thousand dollars or to imprisonment for a term not exceeding two years or to both such fine and imprisonment. 13

12. Amendment of section 12 of the principal Act. Section 12 of the principal Act is amended by the repeal and replacement of subsection (4) with the following: (4)(a) An auditor or former auditor of a licensee shall give written notice to the Inspector of any fact or matter of which he has or had become aware and which is likely to be of material significance for the discharge, in relation to the licensee, of the functions of the Inspector under this Act. (b) Notice required to be given pursuant to paragraph (a) shall be given (i) in the case of an auditor, immediately after he becomes aware of the matters in respect of which notice is to be given to the Inspector pursuant to paragraph (a); and (ii) in the case of a former auditor, as soon as reasonably practicable following the commencement of this provision. 13. Amendment of section 13 of the principal Act. Section 13 of the principal Act is amended: (a) in paragraphs (d) and (e) of subsection (3) by deleting the word bank and substituting the word licensee ; (b) in paragraph (e) of subsection (3) by adding the words and symbol or the beneficiaries of any trust, immediately after the word shareholder. (c) by the repeal of subsections (7) and (8). 14. Amendment of section 13A of the principal Act. Section 13A of the principal Act is amended in subsection (3) by the deletion of the word Governor, immediately following the words while discharging his functions in good faith and the and the substitution therefore of the words Central Bank. 15. Insertion of New section 13B in the principal Act The principal Act is amended by the insertion of the following new section 13B immediately after section 13A: 13B. Duties of Directors (1) The directors of a licensee shall, immediately notify the Inspector of any developments that pose material risks to the safety and soundness or reputation of the licensee. (2) A director who contravenes subsection (1) commits an offence and is liable on summary conviction to a fine of one hundred thousand dollars. 14

16. Amendment of section 18 of the principal Act. Section 18 of the principal Act is amended (a) in paragraph (a) of subsection (1) as follows (i) by the insertion in sub-paragraph (i), immediately after the word depositors, of the words, or the beneficiaries of any trust, ; (ii) by the insertion immediately after sub-paragraph (iii) of the following (iv) if a licensee is or appears likely to become unable to meet its obligations as they fall due; (v) if a licensee has failed to comply with a direction of the Central Bank made pursuant to section 18(1)(h); (vi) if it appears to the Central Bank that the licensee has furnished information or documents to the Bank in connection with its application for a licence which is or are false or misleading in a material particular or has failed to inform the Central Bank where there has been a material change in respect of the information so supplied. (b) in sub-paragraph (i) of subsection (1)(g), by the insertion immediately after the word creditors of the words or the beneficiaries of any trust ; (c) In subsection (7) by the insertion of the words without delay immediately following the words the petitioner shall. (d) In subsection (8) by the insertion of the words without delay immediately following the words Central Bank. 17. Amendment of section 18C. Section 18C of the principal Act is amended: (a) by the deletion of the word and and the substitution of a comma immediately following the reference to section 18A ; (b) by the insertion, immediately following the reference to section 18B of a comma and the following: 18F(6), 18G(6) and 24B. 18. Amendment of section 18D. Section 18D of the principal Act is amended (a) by the deletion immediately after the words of section 18 of the words or under and the substitution of a comma; and (b) by the insertion immediately after the words under section 18A of the words or under section 18F. 15

19. Insertion of sections 18E, 18F and 18G into the principal Act. The principal Act is amended by the insertion immediately after section 18D of the following new sections 18E. Prohibition orders. (1) The Central Bank may, if it appears to the Bank that an individual is not or is no longer a fit and proper person to perform a regulated function, make an order prohibiting such individual from performing a regulated function. (2) For the purposes of this section, regulated function includes (i) (ii) serving as a director of a licensee; serving as an officer of a licensee; (iii) acting as the auditor of a licensee; and (iv) serving or acting in any other capacity in or for a licensee which requires approval, supervision or monitoring by the Central Bank. (3) An individual who performs or agrees to perform a regulated function in breach of a prohibition order commits an offence and shall be liable on summary conviction (a) (b) to a fine not exceeding fifty thousand dollars; and in the case of a continuing breach, to a fine not exceeding five hundred dollars for each day, or part of a day, during which the offence continues. (4) In proceedings for an offence under subsection (3) it shall be a defence for the accused to show that he took all reasonable precautions and exercised all due diligence to avoid committing the offence. (5) The Central Bank may, on the application of the individual named in the prohibition order, vary or revoke it. 18F. Bank to issue warning, decision notices. (1) The Central Bank shall, where it proposes to make a prohibition order, issue a warning notice to all interested parties including (a) the individual affected by the decision; and (b) if the Bank deems fit, the relevant licensee. (2) A warning notice issued under subsection (1) shall 16

(a) set out the terms of the prohibition and the grounds on which the Bank proposes to act; and (b) afford the individual named in the notice within such time as is specified in the notice, an opportunity to submit to the Bank a written statement of objection to the proposed order. (3) The Bank shall, following the issuance of a warning notice under subsection (2), advise the individual named in the notice of its decision. (4) The Bank shall, where it decides to make a prohibition order, issue to the individual named in the warning notice, a written decision notice. (5) A decision notice issued under subsection (4) shall (a) name the individual to whom the prohibition order applies; (b) set out the terms of the order; (c) state the date on which the Bank's decision is to take effect; (d) be delivered to the individual named in the order; and (e) if the Bank deems fit, be delivered to the relevant licensee. (6) An individual against whom a decision to make a prohibition order is made may refer the matter to the Supreme Court. 18G. Variation, revocation of prohibition order and referral to the Supreme Court. (1) A person against whom a prohibition order has been made may apply to the Central Bank to have the order varied or revoked. (2) The Central Bank shall (a) (b) where the Bank decides to grant an application for variation or revocation of a prohibition order, give the applicant and if the Bank deems fit, the relevant licensee, written notice of its decision; and where the Bank proposes to refuse such application, issue to the applicant and if the Bank deems fit, the relevant licensee, a written warning notice. (3) A warning notice issued under paragraph (b) of subsection (2) shall (a) (b) set out the reasons for the Bank's proposed refusal to vary or revoke the prohibition order; contain a statement that the individual named in the warning notice may, within such time as is specified in the notice, submit to the Bank a written statement of objection to such proposed refusal. 17

(4) The Bank shall, following the issuance of a warning notice under subsection (3), advise the individual named in the notice of its decision. (5) The Bank shall, where it decides to refuse the application for variation or revocation, issue to the applicant a written decision notice which shall comply with the requirements of subsection (5) of section 18F. (6) An applicant issued a decision notice under subsection (5) may refer the matter to the Supreme Court. 20. Amendment of section 19 of the principal Act. Section 19 of the principal Act is amended in subsection (5) by the deletion of the word Governor and the substitution thereof of the words Central Bank. 21. Amendment of section 24 of the principal Act. Section 24 of the principal Act is amended by the deletion of paragraph (b) and the re-lettering of paragraphs (c) and (d) as paragraphs (b) and (c) respectively. 22. Amendment of section 24A of the principal Act. Section 24A of the principal Act is amended: (a) in subsection (1) by: (i) the deletion of the words or licensee wherever they appear; (ii) by the deletion of paragraph (b) and replacement with the following: (b) the Financial Transactions Reporting (Wire Transfers), 2009. (b) by the deletion of subsection (2). (c) in subsection (3): (i) in the chapeau by (a) the deletion of the word fine and replacement with the word penalty ; and (b) the deletion of the words or licensee. (ii) by the deletion of the word or at the end of paragraph (b); (iii) by the insertion immediately following paragraph (b) of the following: (c) any condition and or limitation imposed by the Central Bank; (d) any direction issued by the Bank pursuant to subsection 6C(1) or paragraph (h) of subsection 18(1); 18

(e) an order made by the Central Bank under this Act or under a regulation made pursuant to this Act. (iv) by the deletion of paragraph (c); (v) by the re-numbering of subsection (3) as subsection (2). (d) by the insertion immediately following subsection (2) of the following: (3)(a) The Central Bank, where it makes an order under this section, shall specify in the order: (i) the name of the person believed to have committed a contravention or an offence; (ii) the nature of the contravention or offence which the person has committed; and (iii) the penalty imposed by the Central Bank. (b) The Bank shall give a copy of the order to the person named in the order. (e) by the deletion of subsection (4); (f) by the re-numbering of subsection (5) as subsection (4); (g) by the re-lettering of section 24A as section 24B. 23. The principal Act is amended by the insertion of the following new section immediately following section 24: 24A. Contraventions and penalties (1) The Governor may make regulations (a) designating, as a contravention that may be proceeded with under section 24B, the breach of a specified provision of this Act or of a specified provision of a regulation made under this Act or the non-compliance with (i) conditions and or limitations imposed by the Central Bank; (ii) any direction issued by the Central Bank pursuant to subsection 6C(1) or subsection 18(1) (h); (iii) an order made by the Central Bank under this Act or under a regulation made pursuant to this Act. (b) classifying each contravention as minor, serious or very serious; and 19

(c) fixing, in accordance with subsection (2), a penalty, or a range of penalties, in respect of any contravention of the provisions of this Act or any regulations made under this Act. (2) The maximum penalty for a contravention (except in the case of a contravention described in section 24B(1)) shall be (a) in the case of a contravention that is committed by an individual two thousand five hundred dollars for a minor contravention, five thousand dollars for a serious contravention and ten thousand dollars for a very serious contravention. (b) in the case of a contravention that is committed by a company ten thousand dollars for a minor contravention, fifty thousand dollars for a serious contravention and one hundred thousand dollars for a very serious contravention. (3) A minor contravention that is a late or erroneous filing which is continued on more than one day, constitutes a separate contravention for each day during which it is continued. (4) The amount of a penalty (except for a penalty fixed under paragraph (c) of subsection 24A(1)) shall, in each case, be determined by taking into account (a) the degree of intention or negligence on the part of the person who committed the contravention; (b) the harm done by the contravention; (c) the history of the person or licensee who committed the contravention with respect to any prior contravention or conviction under this Act within the five-year period immediately before the contravention; (d) whether the contravention or non-compliance was brought to the attention of the Central Bank by the licensee or person concerned; (e) the seriousness of the contravention or non-compliance; (f) whether or not the contravention or non-compliance was inadvertent; (g) what efforts, if any, have been made to rectify the contravention or noncompliance and to prevent a recurrence; (h) the potential financial consequences to the licensee or person concerned and to third parties, including customers and creditors of the licensee, of imposing a penalty; (i) the penalties imposed by the Central Bank in other cases; and (j) any other criteria that may be prescribed by regulation. 20

24. Insertion of new sections 24C, 24D, 24E, 24F, 24G, 24H and 24I The principal Act is amended by inserting the following new sections immediately after section 24B: 24C. Election The Central Bank shall, where under this Act a breach or non-compliance may be proceeded with either as a contravention under section 24B or as an offence, proceed with the matter in one manner only and after such proceeding shall be precluded from proceeding in the other manner. 24D. Publication of fines and penalties Where the Central Bank imposes a penalty on a person, the Bank may publish in such manner as it deems appropriate a statement of the contravention or offence in respect of which the penalty is imposed. 24E. Proceedings. Whenever the Central Bank is of the opinion that any action under subsection (1) or (2) of section 24B should be taken against a person, the Central Bank may before taking such action, give that person, notice in writing of its intention so to do setting out in such notice: (i) the name of the person believed to have committed a contravention or an offence; (ii) the nature of the contravention or offence; (iii) the penalty that the Central Bank intends to impose; (iv) the right of the person, within 30 days after the notice is served or within any longer period that the Central Bank specifies, to pay the penalty or to make representations to the Central Bank with respect to the contravention or offence and the proposed penalty, and the manner for doing so; and (v) the fact that, if the person does not pay the penalty or make representations in accordance with the notice, the person will be deemed to have committed the contravention or offence, as the case may be and the Central Bank may issue an order imposing a penalty, in respect of it. 24F. Determination of Responsibility and Penalty (1) If the person pays the penalty proposed in the notice of contravention, the person is deemed to have committed the contravention or offence and proceedings in respect of it are ended. 21

(2) If the person makes representations in accordance with the notice, the Central Bank shall decide, on a balance of probabilities, whether the person committed the contravention or offence and, if so, may, subject to any regulations made under section 24A, (a) by order impose the penalty proposed or a lesser penalty; or (b) impose no penalty. (3) A person who neither pays the penalty nor makes representations in accordance with the notice is deemed to have committed the contravention or offence and the Central Bank may, subject to any regulations made under section 24A(1)(c), 24G. Time Limit (a) by order impose the penalty proposed or a lesser penalty; or (b) impose no penalty. (1) No proceedings in respect of a contravention may be commenced later than six months after the subject-matter of the proceedings became known to the Central Bank, in the case of a minor contravention, or two years after the subject-matter of the proceedings became known to the Central Bank, in the case of a serious contravention or a very serious contravention. (2) A document appearing to have been issued by the Central Bank, certifying the day on which the subject-matter of any proceedings became known to the Central Bank, is admissible in evidence without proof of the signature or official character of the person appearing to have signed it and is, in the absence of evidence to the contrary, proof of the matter asserted in it. 24H. Remission (1) The Central Bank may remit all or part of any penalty imposed under section 24B of this Act, or any regulation made under this Act, including any interest on that penalty. (2) A remission may be conditional or unconditional. 25. Amendment of section 26 of the principal Act. Section 26 of the principal Act is amended in subsection (1) by the insertion immediately after paragraph (c) of the following (d) serving a notice of objection under section 6B(1). (e) serving a decision notice under sections 18F(4) or 18G(5). (f) serving a notice in respect of a serious contravention or a very serious contravention under section 24E. 22

26. Repeal of the First Schedule The First Schedule is repealed and replaced by the following: FIRST SCHEDULE (Section 17) RULES FOR INSPECTION AND SUPERVISION OF BANKS AND TRUST COMPANIES The Inspector shall - (a) regularly evaluate the condition, solvency and liquidity of all licensees; (b) (c) (d) (e) (f) (g) (h) (i) establish appropriate and prudent standards for conducting safe and sound banking and trust business; set prudent and appropriate capital adequacy requirements for banks not less than those established in the Basel Capital Accord and its Amendments; evaluate banks policies, practices and procedures related to the granting of loans and making of investments and the on-going management of the loan and investment portfolios; ensure that banks and trust companies have management information systems that enable management to identify portfolio concentration in line with established limits; ensure that banks and trust companies have in place and use systems that accurately measure, monitor and adequately control market and other risks; ensure that banks establish and adhere to adequate policies, practices and procedures for evaluating the quality of assets and the adequacy of loan-loss provisions and loan-loss reserves; ensure that banks and trust companies have in place internal controls adequate to the nature and scale of their operations, and adequate policies, practices and procedures, including strict know-your-customer rules that promote high ethical and professional standards, and so prevent the use of the bank for criminal purposes; co-operate with inspectors and supervisors in other jurisdictions to the extent necessary for the purposes of cross-border supervision consistent with the policy established by the Basel Committee for cross-border supervision. 2. In this Part - Basel Capital Accord or Basel Committee means the committee of banking supervisory authorities established by central-bank Governors of the Group of Ten countries in 1975 and its report. 23

OBJECTS AND REASONS The purpose of the amendment is to expand and enhance the regulatory powers of the Central Bank. Clause 1 of the Bill empowers the Minister to appoint a commencement date for its enforcement. Clause 2 amends section 2 of the principal Act to define certain words. Clause 3 amends section 3 of the principal Act to clarify the requirement that only a company may be issued with a licence by the Central Bank to carry on any banking business from within The Bahamas. Clause 4 of the Bill amends section 3C by deleting references to sections 5 and 10a. Clause 5 of the Bill inserts new sections 3D and 3E into the principal Act to allow a group of persons in certain circumstances to apply to the Bank for pre-approval of the proposed business, directs the Bank to consider the fitness of persons to hold particular positions, provides criteria for use by the Bank in determining such fitness and empowers the Bank to refuse a licence or its approval where it believes a business would not be carried on by fit and proper persons. Clause 6 amends section 4(2) of the principal Act to update and enhance the factors to be taken into account by the Bank in its consideration of applications for a licence. Clause 7 inserts new sections 6A, 6B, 6C and 6D into the principal Act to provide the criteria for use by the Bank when determining whether to approve an application for the acquisition of shares by an existing or proposed controller of a licensee, sets out the procedure for the Bank to follow where it objects to an existing or proposed controller of a licensee, authorizes the Bank to make directions with regard to the controllers of a licensee, and provides for offences, penalties and defences in connection with obligations of controllers. Clause 8 inserts two new subsections into the principal Act to require licensees to submit their annual audited financial statements to the Bank and to authorise the Bank to extend the time for submission and publication of these statements. Clause 9 repeals and replaces section 9 of the principal Act to require any person that is subject to the supervision of the Central Bank to furnish the Bank with such information (including returns) as the Bank may require. Clause 10 repeals section 10. Clause 11 amends section 11 of the principal Act to require licensees to immediately inform the Bank where the licensee is or is likely to become insolvent or unable to meet its obligations. Clause 12 amends section 12 of the principal Act by repealing and replacing subsection (4) to set out the timeframe within which an auditor or former auditor of a licensee must provide the Inspector with written notice of a fact or matter of which he has or had become aware and which is of material significance to the discharge of the Inspector s functions in relation to the licensee. Clause 13 amends section 13 of the principal Act in subsection (3)(d) and (e) and repeals subsections (7) and (8). 24

Clause 14 amends section 13A of the principal Act by substituting the words Central Bank for the word Governor. Clause 15 inserts a new section 13B in the principal Act to require directors of a licensee to immediately notify the Inspector of any developments that pose a material risk to the licensee. Clause 16 amends section 18 of the principal Act to expand the circumstances in which the Bank may revoke the licence of a licensee. Clause 17 amends section 18C of the principal Act to extend its application to sections 18A, 18F, 18G and 24B. Clause 18 amends section 18D of the principal Act to extend its application to section 18F. Clause 19 inserts new sections 18E, 18F and 18G into the principal Act, respectively, to empower the Bank to issue prohibition orders, provide for the procedure to be followed by the Bank in issuing such orders and for the application by affected persons to the Bank, and thereafter to the Supreme Court, to have such orders varied or revoked. Clause 20 amends section 19 of the principal Act by deleting and replacing the reference to Governor with a reference to Central Bank. Clause 21 amends section 24 of the principal Act be deleting paragraph (b). Clause 22 amends section 24A of the principal Act to expand the instances where the Central Bank may issue an order for the payment of a penalty, in subsection (3) deletes and replaces references to fine with references to penalty, deletes references to licensee and re-letters section 24A as section 24B. Clause 23 inserts a new section 24A into the principal Act to empower the Governor to make regulations to designate and classify certain non-compliance as contraventions of the Act and to fix penalties in respect of such contraventions, provide maximum penalties for specific classifications of contraventions and for contraventions committed by specific persons, and provides for the factors to be taken into account in determining the amount of a penalty. Clause 24 inserts new sections 24C, 24D, 24E, 24F, 24G and 24H into the principal Act to provide that the Bank may proceed with a non-compliance either as a contravention or an offence, but not both, publish a statement of the contravention or offence, give notice of its intention to impose a penalty, determine whether on a balance of probabilities a person committed a contravention or offence and if so the amount of the penalty payable in respect of the contravention or offence, prescribes the time limit for imposing a penalty, empowers the Bank to remit part or all of a penalty with or without conditions. Clause 25 amends section 26(1) of the principal Act to extend the right of appeal to the Supreme Court to include the case where the Bank serves a notice of objection under section 6B(1), serves a decision notice under sections 18F(4) or 18G(5) or serves a notice in respect of a serious contravention or very serious contravention under section 24E. Clause 26 repeals and replaces the First Schedule to specifically include references to trust companies in paragraphs (b), (e), (f) and (h). 25

DRAFT ANNEX 2 BANKS AND TRUST COMPANIES (ADMINISTRATIVE MONETARY PENALTIES) REGULATIONS, 2013 (SECTION 24A) The Governor of the Central Bank of The Bahamas, in exercise of the powers conferred by section 24A of the Banks and Trust Companies Regulation Act, makes the following regulations --- 1. Citation These may be cited as the Banks and Trust Companies (Administrative Monetary Penalties), 2013. 2. Interpretation In these licensee means any person holding a licence under the provisions of the Banks and Trust Companies Regulation Act, (Ch, 316) and, for the purposes of these licensee includes the branches or subsidiaries of a licensee operating outside of The Bahamas; person means a natural person or a company; the Act means the Banks and Trust Companies Regulation Act, (Ch, 316). 3. Designation of contraventions (1) Pursuant to section 24A of the Act, the breach by a person, of the Act or a regulation as described and set out in the second and third columns respectively of the Schedule are designated contraventions of the Act. (2) Pursuant to section 24A of the Act, the non-compliance of a person with any direction issued or order made or any conditions and limitations imposed, under the Act or under a regulation, as described and set out in the second and third columns respectively of the Schedule are designated contraventions of the Act. (3) A contravention set out in the Schedule may be proceeded with under section 24B of the Act. 26

4. Classification A contravention shall be classified as a minor, serious or very serious contravention, as indicated in the fourth column of the Schedule. 5. Penalties for Late or Erroneous Filings (1) Subject to paragraph (2), the penalty in respect of a contravention that is classified as minor under any of items 3, 14, 15, 16, 17, 34, 35, 56, 63, 69, 84, 89 and 90 of the Schedule shall be two hundred and fifty dollars. (2) If a minor contravention referred to in paragraph (1), is continued on more than one day, the penalty in respect of each of the separate contraventions that, because of section 24A(3) of the Act, result from that continuation, shall be two hundred and fifty dollars for each day or part of a day during which the contravention continues up to a maximum of ten thousand dollars. 27

SCHEDULE ( 3 to 4) Administrative Monetary Penalties No. Description of Contravention Act or Regulation Classification BANKS AND TRUST COMPANIES REGULATIONS ACT, 2000 1. Carrying on a business without being licensed, approved or registered by the Central Bank Sections 3(1),(2) and (3), 3A(a) and (b) of the Act. 2. Failure of a specified person or class of persons to comply with the terms and conditions of an exemption granted by the Central Bank. 3. Failure by a licensee to forthwith notify the Central Bank in writing of any change in the licensee s principal office in The Bahamas. 4. Failure by a licensee to notify the Central Bank in writing of any change in the officers designated by the licensee pursuant to paragraph (a)(ii) or (iii) of subsection 4(4) of the Act. 5. Failure by a licensee to comply with the terms and conditions of its license. 6. Failure by a licensee to obtain approval of the Central Bank to establish outside of The Bahamas a subsidiary, branch, agency or representative office. 7. Failure by a company which is a licensee under the Act to obtain the prior approval of the Central Bank to issue/transfer or dispose of its shares, or any other securities of such licensee. 8. Failure by a person referred to in section 6A(1) (a) or (b) to obtain the approval of the Central Bank before acquiring shares or other securities in a licensee. 9. Failure by a person referred to in section 6A(1) or (b) to comply with any condition imposed by the Central Bank. 10. Failure by a person referred to in section 6A(1) or (b) to comply with any notice of objection issued by the Central Bank. 11. Failure by a person referred to in section 6A(1) or (b) to comply with any direction issued by the Central Bank. 12. Failure by a person to obtain the Central Bank s approval to use or continue to use a prohibited word in contravention of Sections 3(4) and 6(1) of the Act. Section 4(5)(a) of the Act Section 4(5)(b) of the Act Sections 4(6) and 18(1)(c) of the Act. Section 5 of the Act. Section 6(1) of the Act. Section 6A(1)(a) or (b) of the Act. Section 6A(2) of the Act. Section 6B(1) of the Act. Section 6C(1) and (2) of the Act. Section 7(1)(a) and or (b) of the Act. Minor Very serious Serious 28

No. Description of Contravention Act or Regulation Classification section 7(1)(a) and or (b) of the Act. 13. Failure to obtain the Central Bank s Section 7(1)(c) of the Act. approval to solicit or receive deposits from the public 14. Section 8(1) of the Act. Minor Failure by a licensee to publish a true and full yearly statement of its accounts on time. 15. Failure by a licensee to provide a copy of Section 8(4) of the Act. Minor its annual audited financial statements to the Central Bank on time. 16. Failure to furnish the Central Bank with information at the time or in the form specified. Section 9 Minor, if the contravention relates to information required as part of periodic reports. Serious, in any 17. Failure by a licensee to notify the Central Bank of an auditor s appointment at all or within the timeframe specified in the Act on time. 18. Failure by a licensee to replace an auditor on the request of the Central Bank. 19. Failure by a licensee to provide an auditor of the licensee with requested information. 20. Failure of an auditor or former auditor to give notice to the Inspector pursuant to section 12(3)(b) and or 12(4) of the Act. 21. Failure by a licensee to provide the Inspector with access to its books, records, vouchers documents, cash and or securities. 22. Failure by a manager or any officer designated by the manager of any licensee to provide the Inspector with such information or explanation, within the timeframe required by the Inspector, as the Inspector may reasonably require for the purpose of enabling him to perform his functions under the Act. 23. Failure by an auditor of a licensee to provide the Inspector with such auditor s reports, working papers, information or explanation within the timeframe required by the Inspector, as the Inspector may reasonably require for the purpose of Section 12(1) of the Act. Section 12(2) of the Act. Section 12(3) of the Act Section 12(3)(b) and 12(4) of the Act Section 13(3)(a) ) of the Act. Section 13(3)(b) Act. Section 13(3)(c) Act. of the of the other case. Minor Serious Serious Serious 29

No. Description of Contravention Act or Regulation Classification enabling him to perform his functions under the Act. 24. The making of untrue statements by an auditor in an audit report or the omission of essential facts in such report or the failure of such auditor to request pertinent information from a licensee which is being or has been audited by the auditor or failure by such auditor to report his findings to the Inspector. 25. Failure by the directors of a licensee to notify the Inspector of any developments that pose material risks to the licensee. 26. Failure by a licensee to permit a foreign Supervisory Authority approved by the Inspector to conduct an inspection. 27. Unauthorised disclosures of confidential reports of examination and breach of conditions related to disclosure of Report of Examination. 28. Failure by a licensee to comply with a direction of the Central Bank pursuant to section 18(1)(h) of the Act. 29. Failure by an individual against whom a prohibition order has been issued pursuant to section 18E(1) of the Act, to comply with the order 30. Disclosure of information relating to (a) the identity, assets, liabilities, transactions or accounts of a customer of a licensee; or (b) any application by any person under the provisions of the Act where such disclosure is made in contravention of section 19(1) of the Act. 31. Failure by a licensee to transfer dormant account balances to the Central Bank. 32. Failure by a licensee to keep all signature cards, signing authorities and records relating to dormant account balances transferred to the Central Bank. 33. Failure by licensee to expressly and specifically agree charges with customers. Section 13(3)(d), 13(3)(e) of the Act Section 13B Section 14(2) of the Act. Section 16(1) and (2) of the Act. Section 18(1)(h) of the Act Section 18E(3) of the Act Section 19(1) of the Act Section 20(1) of the Act. Section 20(2) of the Act. Section 21 of the Act. Very serious Serious Serious Minor Serious BANKS AND TRUST COMPANIES (FOREIGN CURRENCY POSITION) REGULATIONS, 2005 34. Failure by a Licensee to maintain the Regulation 3 of the Banks Minor larger of the sum of net short or long and Trust Companies positions in all foreign currencies (Foreign Currency 30

No. Description of Contravention Act or Regulation Classification including all outstanding spot and Positions) forward foreign exchange contracts and all on and off balance sheet assets and liabilities of the licensee at the appropriate spot exchange rates at ten percent or less of its capital base. 35. Failure by a licensee to immediately Regulation 4 of the Banks Minor notify the Inspector of a contravention of and Trust Companies regulation 3 and provide such particulars (Foreign Currency of the contravention in such form as the Inspector shall determine. Positions) 36. Failure by a Licensee to take any Regulation 5 of the Banks Serious remedial action required to be taken by and Trust Companies the Inspector to ensure compliance with (Foreign Currency regulation 3. Positions) BANKS AND TRUST COMPANIES (EQUITY INVESTMENTS) REGULATIONS, 2005 37. Failure by a licensee to obtain the prior Regulation 3 of the Banks Serious approval of the Bank to acquire or hold and Trust Companies the shares, securities or other interests in (Equity Investments) a related party or to acquire, either, 2005 directly or indirectly, more than five percent of the shares, securities, or any other interests in any other person. BANKS AND TRUST COMPANIES (PAYMENT OF DIVIDENDS) REGULATIONS, 2005 38. Failure by a Licensee to obtain the prior Regulation 3 of the Banks written approval of the Central Bank to and Trust Companies declare or pay out dividends on its shares in contravention of regulation 3. (Payment of Dividends) 39. Failure by a Licensee to comply with restrictions imposed by the Inspector on the payment of dividends. Regulation 4 of the Banks and Trust Companies (Payment of Dividends) BANKS AND TRUST COMPANIES (NEW APPOINTMENTS) REGULATIONS 2005 40. Failure by a Licensee to obtain the prior 3 and 4 of the Serious approval of the Central Bank for the Banks and Trust appointment or replacement of a director Companies (New or executive officer or to provide the specified information in relation thereto. Appointments) BANKS AND TRUST COMPANIES (LARGE EXPOSURES) REGULATIONS, 2006 41. Incurring exposures on an aggregate basis Regulation 3(1) of the Serious to any individual counter-party or group Banks and Trust of connected parties which exceeds Companies (Large twenty-five percent of the licensee s Exposures) capital base. 42. Holding non-capital investments in Regulation 3(2) of the Serious securities of a single issuer which exceed Banks and Trust ten percent of the licensee s capital base. Companies (Large 31

No. Description of Contravention Act or Regulation Classification Exposures) 43. Incurring exposures to related parties Regulation 4(1) of the Serious which in aggregate exceed fifteen percent Banks and Trust of the licensee s capital base. Companies (Large Exposures) 44. Incurring large exposures which in aggregate exceed eight hundred percent of the licensee s capital base. 45. Failure to implement and maintain internal policies and internal limits and or to review internal policies. 46. Failure by a Licensee to report all large exposures to the Inspector when required by the Central Bank and in the manner required by the Inspector. 47. Failure by a licensee to notify the Inspector of any breach of regulations 3, 4 or 6 pursuant to regulation 12. 48. Failure by a licensee to provide the Inspector with particulars of any breach of regulations 3, 4 or 6 in the manner determined by the Inspector, within two (2) working days after breaching the regulations. 49. Failure by a licensee to take immediate action to bring the exposure, which results in a breach of regulations 3, 4 or 6, within established limits, within ten Regulation 6 of the Banks and Trust Companies (Large Exposures) 9 and 10 of the Banks and Trust Companies (Large Exposures) regulation 11 of the Banks and Trust Companies (Large Exposures) Regulation 12 of the Banks and Trust Companies (Large Exposures) Regulation 12 of the Banks and Trust Companies (Large Exposures) Serious Regulation 12 of the Banks and Trust Companies (Large Exposures) working days of the breach. 50. Failure by a Licensee to take any Regulation 14 of the remedial action required by the Inspector Banks and Trust to ensure compliance with regulations 3, Companies (Large 4, or 6. Exposures) BANKS AND TRUST COMPANIES (PRIVATE TRUST COMPANIES)REGULATIONS, 2007 51. Failure by a Registered Representative to Regulation 3(4) of the Serious certify that a trust company for which it Banks and Trust provides services qualifies for an Companies (Private Trust exemption under paragraph (1) of Companies) regulation 3 of the Banks and Trust. Companies (Private Trust Companies) 32

No. Description of Contravention Act or Regulation Classification, 2007. 52. Failure by a Registered Representative to Regulation 3(5) of the Serious notify the Inspector if a private trust Banks and Trust company ceases to meet requirements of paragraph (1) of regulation 3. Companies (Private Trust Companies) 53. Failure by a private trust company to have a Registered Representative in The Bahamas. 54. Failure by private trust company to have at least one Special Director where an officer of a licensee is not its Registered Representative. 55. Failure by a private trust company to maintain at the offices of the Registered Representative a copy of the Designating Instrument pertaining to the private trust company. 56. Failure by a Registered Representative to notify the Inspector of any change in its principal address and or that it has ceased to act as a Registered Representative, on time. 57. Failure by a private trust company to maintain a paid up share capital of not less than $5,000 or be limited by guarantee in the sum of not less than $5,000. 58. Failure by a private trust company to provide its Registered Representative with requested information within a specified time. 59. Amendment by a private trust company of its Memorandum or Articles of Association in a manner inconsistent with the definition of private trust company as set out in the Act. Regulation 4(1)(a) of the Banks and Trust Companies (Private Trust Companies) regulation 4(1)(b) of the Banks and Trust Companies (Private Trust Companies) Regulation 4(1)(c) of the Banks and Trust Companies (Private Trust Companies) Regulation 4(2) of the Banks and Trust Companies (Private Trust Companies) Regulation 4(3) of the Banks and Trust Companies (Private Trust Companies) Regulation 4(4) of the Banks and Trust Companies (Private Trust Companies) Regulation 4(5)(a) Serious Serious Minor Serious Serious Minor 33

No. Description of Contravention Act or Regulation Classification 60. Acting as a Registered Representative to a private trust company without first having obtained either- Regulation 6(1)(a) and (b) of the Banks and Trust Companies (Private Trust (a) a valid bank and or trust Companies) company license; or (b) a financial and corporate service provider s license and the approval of the Central Bank to act as a Registered representative. 61. Failure of an approved Registered Representative, to restrict its business to the provision of Registered Representative services only. 62. Failure by a Registered Representative to maintain a minimum paid up share capital of $50,000. 63. Failure by a Registered Representative to advise changes in particulars provided in its application on time. 64. Failure by a Registered Representative to display its approval to act as a Registered Representative on its premises. 65. Failure of a Registered Representative to obtain possession of a Designating Instrument identifying the Designated Person or Designated Persons in respect of the private trust company for which it acts. 66. Failure by a Registered Representative to reasonably satisfy itself that the private trust company has been established for lawful purposes. 67. Failure by a Registered Representative to reasonably satisfy itself that the private trust company operates as a private trust company as defined in section 2 of the Act. 68. Failure by a Registered Representative to at all times maintain in The Bahamas copies of the documents specified in regulation 13(1)(a) (d) & (f). Regulation 6(1) of the Banks and Trust Companies (Private Trust Companies) Regulation 8 of the Banks and Trust Companies (Private Trust Companies) Regulation 10 of the Banks and Trust Companies (Private Trust Companies) Regulation 11 of the Banks and Trust Companies (Private Trust Companies) Regulation 12(a) of the Banks and Trust Companies (Private Trust Companies) Regulation 12(b) of the Banks and Trust Companies (Private Trust Companies) Regulation 12(c) of the Banks and Trust Companies (Private Trust Companies) Regulation 13(1) of the Banks and Trust Companies (Private Trust Companies) Minor Minor Serious Serious 34

No. Description of Contravention Act or Regulation Classification 69. Failure by a Registered Representative to Regulation 13(2) of the Minor obtain from the directors of the private Banks and Trust trust company a duly completed Companies (Private Trust Compliance Certificate on time. Companies) 70. Failure by a Registered Representative that act as a Bahamas Agent of a private trust company to enter into a service agreement with the private trust company to provide administrative services. 71. Failure by a Registered Representative to (i) verify the identities of persons listed in regulation 13(4)(a)(i) (iv) of the Banks and Trust Companies (Private Trust Company) and or (ii) make a suspicious transaction report to the Financial Intelligence Unit. Regulation 13(3) of the Banks and Trust Companies (Private Trust Companies) 13(4)(a) and (b) of the Banks and Trust Companies (Private Trust Companies) BANKS AND TRUST COMPANIES (MONEY TRANSMISSION BUSINESS) REGULATIONS, 2008 72. Failure by a Money Transmission Service Regulation 5(1) of the Provider to have and maintain a Banks and Trust minimum capital of $50,000 or such Companies (Money other sum as the Central Bank may require. Transmission Business) 73. Failure by a Money Transmission Service Provider to have and maintain insurance coverage in such amount as the Central Bank may require. 74. Failure by a Money Transmission Service Provider to have the accounts of its business audited annually or at such other times as the Central Bank may require. 75. Failure by a Money Transmission Service Provider to submit its audited accounts to the Inspector at all or within the specified time. 76. Failure by a Money Transmission Agent to comply with the terms, and conditions of its registration. 77. Failure by a Money Transmission Service Provider and Money Transmission Agent to comply with the provisions of the Financial Transactions Reporting Act and Financial Transactions Reporting Regulation 5(2) of the Banks and Trust Companies (Private Trust Companies) regulation 5(3) of the Banks and Trust Companies (Money Transmission Business) Regulation 5(4) of the Banks and Trust Companies (Money Transmission Business) Regulation 6(3) of the Banks and Trust Companies (Money Transmission Business) Regulation 8(a) and (b) of the Banks and Trust Companies (Money Transmission Business) Minor Serious 35

No. Description of Contravention Act or Regulation Classification. 78. Failure by a Money Transmission Service Regulation 8(d) of the Serious Provider and Money Transmission Agent Banks and Trust to maintain its head office or registered Companies (Money office in The Bahamas or to obtain the Central Bank s approval to establish its Transmission Business) head office or registered office outside The Bahamas. 79. Failure by a Money Transmission Service Provider to keep and preserve books, accounts and other records specified in regulation 9(1) of the Banks and Trust Companies (Money Transmission Business), 2008 for a period of five years. Regulation 9(1) of the Banks and Trust Companies (Money Transmission Business) Serious 80. Failure by a Money Transmission Service Regulation 9(2) of the Serious Provider to keep and preserve books, Banks and Trust accounts and other records in the form Companies (Money and manner specified in regulation 9(2) of the Banks and Trust Companies Transmission Business) (Money Transmission Business), 2009. BANKS AND TRUST COMPANIES (TEMPORARY BUSINESS CONTINUITY OPERATIONS) REGULATIONS, 2009 81. Failure by a person to apply for Regulation 4(1) of the Serious registration as an exempt person within Banks and Trust the time prescribed in regulation 4(1) of Companies (Temporary the Banks and Trust Companies Business Continuity) (Temporary Business Continuity), or at all 82. Failure by a licensee to notify the Regulation 5(1) of the Serious Inspector of matters specified in Banks and Trust regulation 5(1). Companies (Temporary Business Continuity) 83. An exempt person (i) establishing a permanent place of business in The Bahamas; (i) carrying on any banking or trust business in or from The Bahamas other than the exempted activities; (i) holding itself out as carrying on any banking or trust business other than the exempted activities. 84. Failure by an exempt person to notify the Inspector of changes in the name, address and occupation of any required person on time. Regulation 5(2)(a),(b) and (c) of the Banks and Trust Companies (Temporary Business Continuity) Regulation 5(3) of the Banks and Trust Companies (Temporary Business Continuity) Minor 36

No. Description of Contravention Act or Regulation Classification 85. Failure to comply with any conditions of Regulation 8(d) of the Minor an extension or series of extensions of the Banks and Trust time in which exempted activity may be Companies (Temporary carried out. Business Continuity) Banks and Trust Companies (Liquidity Risk Management), 2012 86. Failure by a licensee to Regulation 3 of the Banks Serious establish and maintain, a liquidity risk and Trust Companies management strategy appropriate to the (Liquidity Management) nature, scale and complexity of its activities.. 87. Failure by a licensee to implement its liquidity risk management strategy 4(a) and 4(b) of the Banks and Trust Serious and or to review the strategy on a Companies (Liquidity regular basis, and at a minimum Management). annually. 88. Failure by a licensee to provide the Regulation 5(1) of the Minor Inspector with a copy of its liquidity risk Banks and Trust management strategy. Companies (Liquidity Management). 89. Failure by a licensee to notify the Regulation 5(2) of the Minor Inspector of any change to its risk Banks and Trust management strategy, on time and to Companies (Liquidity provide the Inspector with a copy of the Management). revised risk management strategy. 90. Failure by a licensee to maintain a Regulation 6(1) of the Minor liquidity ratio of not less than twenty per Banks and Trust centum Companies (Liquidity Management). 91. Failure by a licensee to provide the Regulation 9(a) of the Inspector with such particulars of its Banks and Trust liquidity position, in such manner, Companies (Liquidity frequency and form as may be specified Management). by the Inspector. 92. Failure by a licensee to immediately Regulation 9(b) of the inform the Inspector of any concerns it Banks and Trust has about its current or future liquidity Companies (Liquidity position as well as plans to address such Management). concerns. 93. Failure by a licensee to take such Regulation 11 of the remedial action as the Inspector directs to Banks and Trust ensure compliance with paragraph (1) of Companies (Liquidity regulation 6. Management). Made this day of,2013 Governor of the Central Bank of The Bahamas 37

DRAFT ANNEX 3 SUPERVISORY AND REGULATORY GUIDELINES: PUxxxxxxx Administrative Monetary Penalties Guidelines Issued:, 2013 GUIDELINES FOR THE ADMINISTRATION OF MONETARY PENALTIES 1. INTRODUCTION 1.1 The Central Bank of The Bahamas ( the Central Bank ) is responsible for the supervision of banks, trust companies, Registered Representatives, non-bank money transmission businesses and money transmission agents ( supervised financial institutions or SIFs ) operating in and from within The Bahamas pursuant to the Banks and Trust Companies Regulation Act, 2000 ( BTCRA ) as amended, and the Central Bank of The Bahamas Act, 2000 as amended. Additionally, the Central Bank has the duty, in collaboration with its Licensees, to promote and maintain high standards of conduct and management in the provision of banking and trust services. 1.2 All SFIs are expected to adhere to the Central Bank s licensing or registration and prudential requirements and ongoing supervisory programmes, including periodic onsite examinations, and required regulatory reporting. SFIs are also expected to conduct their affairs in conformity with all other relevant Bahamian legal requirements. 2. PURPOSE 2.1 The BTCRA and the Banks and Trust Companies (Administrative Monetary Penalties), 2013 ( the AMP ) provide the Central Bank with a wide range of discretionary enforcement powers to address situations that give the Central Bank cause for concern, including the power to impose administrative monetary penalties ( penalties ) against any person in respect of their contravention of any provision of the BTCRA, any made under that Act, any direction or order issued by the Central Bank or any condition and or limitation imposed by the Central Bank. Administrative monetary penalties are monetary sanctions imposed by the Central Bank 38