Legislation

The Bank of Jamaica’s supervisory authority and responsibility for deposit-taking financial institutions is established by virtue of a number of Primary and Secondary Legislative Acts of Parliament. These statutes provide the legal and policy parameters for the licensing and supervision of deposit-taking financial institutions, as well as the various powers available to the BOJ and the Minister of Finance in the event that bank distress or failure appear imminent or threatens the soundness of the financial system. Secondary legislation prescribing prudential criteria and minimum solvency standards to be maintained by licensees, also specify the precise requirements and procedures in dealing with certain areas of operations of commercial banks, merchant banks and building societies. (See also Recent Legislative Changes – “Banking Services Act” below)

Principal Legislation
The Bank of Jamaica Act, 1960 (amended 1992, 1994, 1995, 2001, 2002, 2004, 2005)
The Banking Act, 1992 (amended 1997, 2002, 2004)
The Financial Institutions Act, 1992 (amended 1997, 2002,2004)
The Building Societies Act, 1897 (amended 1995, 2002, 2004)

Subsidiary Legislation
The Bank of Jamaica (Building Societies) Regulations, 1995 (amended 2005)
The Building Societies (Licences) Regulations, 1995
The Banking (Establishment of Branches) Regulations, 1996
The Banking (Amalgamation and Transfers) Regulations, 1996
The Banking (Licence Fees) Regulations, 2003
The Financial Institutions (Establishment of Branches) Regulations, 1996
The Financial Institutions (Amalgamation and Transfers) Regulations, 1996
The Financial Institutions (Licence Fees) Regulations, 2003
The Banking (Capital Adequacy) Regulations, 2004
The Financial Institutions (Capital Adequacy) Regulations, 2004

 

Licensees also have statutory responsibilities under other pieces of legislation the administration of which reside principally with other competent authorities (e.g. The Jamaica Deposit Insurance Corporation; The Financial Intelligence Division; the Department of Public Prosecution):

Other Legislation
The Income Tax Act
Deposit Insurance Act, 1998
Companies Act, 2004
Terrorism Prevention Act, 2005
Proceeds of Crimes Act, 2007
Financial Investigations Division Act, 2010
Terrorism Prevention (Reporting Entities) Regulations, 2010
Credit Reporting Act, 2010
Copies available at the Ministry of Justice

Recent Legislative Changes
Banking Services Act - The Banking Services Act was passed on 13 June 2014 and is to take effect on a date to be determined by the Minister of Finance. The legislation will serve to further strengthen oversight of the deposit-taking financial sector and achieve greater conformity with the Basel Core Principles. The legislation will also consolidate three deposit-taking statutes – The Banking Act, The Financial Institutions Act and The Bank of Jamaica (Building Societies) Regulations – into a single piece of legislation and eliminate existing inconsistencies and arbitrage situations. Other significant enhancements/ provisions to be incorporated in the Banking Services Act include:

  1. Supervisory autonomy
  2. Enhancements to provisions for consolidated supervision
  3. Strengthening the corrective and sanctioning Framework
  4. Rulemaking powers which will allow the Supervisor to issue legally binding rules that will treat with certain operational and prudential aspects of banking operations.
  5. Agent banking framework which will permit some banking businesses to be undertaken through agents authorized by the Supervisory Authority
  6. An enforceable Code of Conduct for deposit-taking institutions, which will outline their responsibilities to customers (e.g. disclosure of relevant information regarding product and service offerings; fees and charges; and resolution of disputes with customers).

Credit Reporting Act - A credit reporting regime was introduced in Jamaica with the passage of the Credit Reporting Act 2010 and the Credit Reporting Regulations (2010) to ensure that credit reporting is done through reasonable procedures that meet the needs of commerce for credit information in a manner that is fair and equitable to the consumer, having regard to the confidentiality, accuracy, relevance and proper utilization of such information in accordance with the provisions of the Act. Two credit bureaus were licensed by the Minister of Finance and commenced operations during 2013. Under the Act, licensed deposit-taking institutions are eligible credit information providers to credit bureaus.

Proceeds of Crimes Act – The Proceeds of Crimes Act (POCA) was passed by Parliament in March 2007 and came into effect on May 30, 2007. POCA is a wide-ranging legislation that targets benefits derived from the commission of any crime, and incorporates the concept of money laundering as well as introduces the principle of civil procedure.

With the passage of POCA the Drug Offences (Forfeiture of Proceeds) Act, Dangerous Drugs Act, Money Laundering Act, 1996, and the Money Laundering Regulations, 1997 have been effectively repealed and replaced.

Since its passage in 2007, further amendments were made to the POCA to extend the list of predicate offences and offences in respect of which an assumption of criminal lifestyle can be made, to include offences under the Law Reform (Fraudulent Transactions) Special Provisions Act, which targets offences such as lotto scam activities. In 2013, other amendments to the POCA were passed to:

  1. Clarify the suspicious transactions reporting requirements;
  2. Outline the powers that competent authorities designated under the POCA will have in relation to their role of monitoring compliance with the AML requirements;
  3. Ensure that obligations placed on financial institutions are similarly placed on the entities that are responsible for the implementation of AML prevention, policies and procedures in the financial institution’s group of companies; and
  4. Effect other amendments to the previous Money Laundering Prevention Regulations to strengthen the requirements for Customer Due Diligence (CDD), the application of CDD measures for politically exposed persons (PEP), and the use of risk-based processes to identify and address AML/CFT risks.

Financial Investigations Division Act - The Financial Investigations Division Act was passed in March 2010. The Act gives the existing Financial Investigations Division (FID) of the Ministry of Finance and the Public Service the necessary statutory powers and protections to carry out that Division’s mandate of investigating and prosecuting financial crime, including money laundering and the financing of terrorism. The FID which operates as Jamaica’s Financial Intelligence Unit (FIU) was admitted to the Egmont Group1 at their meeting held 2 – 4 June 2014.

Terrorism Prevention Act - The Terrorism Prevention Act, which was passed by Parliament during April 2005 and took effect in June 2005, serves to criminalize acts of terrorism and the financing of terrorism and imposes obligations on financial institutions for customer identification, record keeping, internal controls and reportage of suspicious transactions relating to possible terrorist activities or terrorist entities to the Designated Authority.

Amendments were passed in October 2013 to, among other things:

  1. ensure that property of corresponding value can be confiscated;
  2. address the omission of an express suspicious transaction reporting obligation; and
  3. allow for the implementation of the listed entity provisions in the Act.

Terrorism Prevention (Reporting Entities) Regulations - These Regulations were promulgated under the Terrorism Prevention Act in March 2010. They outline the operational controls that must be maintained by financial institutions particularly when contemplating the commencement of a business relationship or one-off transaction, and largely mirror Know Your Customer (KYC) obligations contained in Regulations under the Proceeds of Crime Act.


1The Egmont Group is an informal group of financial intelligence units (FIUs) established in 1995 with the objective of providing a forum for FIUs to improve support to their respective national anti-money laundering programmes inclusive of expanding and systemizing the exchange of financial intelligence information, improving expertise and capabilities of FIU personnel and fostering better communication among FIUs through application of technology.

In October 2013, the Terrorism Prevention (Reporting Entities) Regulations were amended to consolidate and intensify the requirements for customer due diligence, the application of Customer Due Diligence (CDD) measures for politically exposed persons (PEP), and the use of risk-based processes to identify and address AML/CFT risks.

LEGISLATIVE AMENDMENTS AND DEVELOPMENT OF SUBSIDIARY LEGISLATION

On-going review of the legislative framework is a necessary and fundamental step in achieving supervisory policy and developmental objectives, especially given the dynamism in local and international markets and the evolving nature of international best practice standards in banking supervision. In this regard, the Bank of Jamaica is involved in a number of initiatives for amendment of legislation and development of related Regulations as follows:

Credit Regulations - The Credit Regulations have been comprehensively re-drafted to take account of, inter alia, the latest Basel Committee standards on credit risk and loan valuation, as well as impairment requirements prescribed under the International Financial Reporting Standards (IFRS) to achieve greater convergence in regulatory and accounting provisioning methodologies.

Qualifications of Auditors Regulations - Regulations that specify expectations for auditors in undertaking an external audit of a supervised financial institution have been drafted. Among other things, the criteria specified in these Regulations relate to the independence, experience and academic qualification of the external auditors. These proposed Regulations would also require prior notification to the Bank of Jamaica of proposed appointments. The Bank of Jamaica would be empowered to object to the appointment of an external auditor if, in the view of the Bank of Jamaica, there is evidence that such auditor is not in compliance with the provisions of the Regulations.

Bank of Jamaica (Credit Unions) Regulations - Regulations to establish the supervisory regime that will be applicable to credit unions have been drafted. These Regulations will introduce licensing criteria and prescribe prudential criteria covering, inter alia, capital adequacy, liquid assets, credit limits, non-accrual and provisioning requirements, submission of financial statements, solvency standards and remedial action that can be taken by supervisory authorities with respect to statutory violations, unsafe and unsound practices or insolvency. The draft Regulations have benefited from extensive dialogue with the credit union sector and are pending presentation to Parliament by the Minister of Finance.


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