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, 2005,2009,2010)
Amendment of Bank of Jamaica Act (Tenth Schedule Banking Services Act, 2014)
Act to amend the Bank of Jamaica Act – Act 24 of 2015
Act to amend the Bank of Jamaica Act – Act 32 of 2017
The Bank of Jamaica (Amendment) Act, 2020 – Act 12 of 2020
The Banking Services Act, 2014
The Building Societies Act, 1897 (amended 1995, 2002, 2004)
*Note: The Building Societies Act also amended by section 138(2) of the Banking Services Act 2014

Subsidiary Legislation
The Banking Services (Financial Holding Companies) (Licensing Application Form), 2019
The Banking Services (Deposit Taking Institutions)(Agent Banking) Regulations, Resolution, 2016
The Banking Services (Deposit Taking Institutions) (Customer Related Matters)Code of Conduct, 2016
The Banking Services (Deposit Taking Institutions)(Licence Application) Rules, 2015
The Banking Services (Establishment of Branches) Regulations, 2015
The Banking Services (Amalgamations and Transfers) (Banks and Merchant Banks), Regulations, 2015
The Banking Services (Licence Fees) Regulations, 2015
The Banking Services (Deposit Taking Institutions) (Capital Adequacy) Regulations, 2015
The Banking Services (Hours of Opening) Regulations, 2015

 

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 Investigations 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
Proceeds of Crime Act (POCA) 2007
Proceeds of Crime (Money Laundering Prevention) Regulations 2007
Proceeds of Crime (Amendment) Act 2019
Proceeds of Crimes Act (Money Laundering Prevention) (Amendment) Regulations, 2019
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

Pending Amendments to Financial Legislation

This amendment to the Co-operative Societies Act will, among other things, bring credit union cooperative societies under the regulatory ambit of the Minister of Finance and the Public Service and Bank of Jamaica. Accordingly, this Bill includes provisions that will restrict the deposit-taking activities of co-operative societies to those co-operative societies which operate as credit unions. The Bill also contains substantive enhancements to the Co-operative Societies Act which are contemplated by the Ministry of Industry, Investment and Commerce (formerly Ministry of Industry, Commerce, Agriculture and Fisheries (MICAF)), the Ministry with portfolio responsibility for co-operative societies. It is anticipated that this Bill will be presented to Parliament jointly with the proposed Credit Unions (Special Provisions) Act, which contains the substantive prudential requirements to which credit unions will be subject once the aforesaid regulatory regime comes into effect.

The Credit Unions (Special Provisions) Bill

A decision was taken to revise the regulatory legal framework that governs credit unions by creating a stand-alone principal statute which will replace the subsidiary legislation (as Regulations under the Bank of Jamaica Act). The requisite Cabinet submission from Ministry of Finance & Public Service (MOFPS) was considered by Cabinet on 01 May 2017 and approved. The Bill contains the framework that was initially proposed as Regulations to bring the operations of credit unions fully under Bank of Jamaica’s prudential supervisory regime. Accordingly, the Bill will cover, among other things, licensing, capital, reserves, prohibited business, remedial and intervention processes as well as define the role of specially authorized credit unions (see Supervision of Deposit-Taking Financial Institutions).

The Micro Credit Bill

To address the proliferation of privately-owned money-lending businesses operating in Jamaica, a determination was made for these institutions to be regulated by Bank of Jamaica. This is to ensure that these services operate within an environment of transparency and accountability and that the operations of these services are not used to facilitate financial crimes. The Bill will create a licensing regime and will incorporate the usual safeguards: fit and proper requirements for licensees and their owners; operating requirements for licensees; mandate inclusion of processes to address complaints. The regime will accord the standard regulatory powers to conduct inspections, examine the records of licensees, impose regulatory sanctions for non-compliance and issue standards and guidance as well as a Code of Conduct for the money-lending services that will be governed by this legislation. Penalties with custodial sentences will be applicable on conviction for committing an offence in this legislation and the regime will allow for the less egregious offences to be answered by payment of a fixed penalty. The Bill was tabled in Parliament in February 2019 and following amendments to address issues arising from further consultation with the industry, the Bill was re-tabled in December 2020.

The Financial Institutions Resolution Bill

In October 2017, Cabinet approved Drafting Instructions for the preparation of legislation to establish a special resolution regime for financial institutions.

The proposed legislation will establish an approach to resolution under which non-viable financial institutions which are deemed systemically important can be resolved using administrative mechanisms. The legislation will also include the provisions for the winding up of non-viable financial institutions.

The regime primarily targets those entities whose distress or disorderly failure, because of their size, complexity and systemic inter-connectedness, could cause significant disruption in the wider financial system and to general economic activity. The entity applying the administrative mechanisms under the SRR – the Resolution Authority (RA) – must be able to act quickly and decisively to secure continuity of critical financial services as well as to contain the wider systemic impact of a financial institution’s failure. To achieve these objectives, the RA will have powers to act in a manner that affects contractual and property rights and potentially the amount of any payment shareholders and creditors may receive in resolution.

In addition to administrative mechanisms, the legislation will incorporate modified insolvency rules to be applied to (i) the residual entity after a financial institution has been resolved by the RA and (ii) financial institutions which are insolvent but whose demise will not cause significant disruption in the wider financial system.

The legislation will also incorporate enabling provisions for a funding framework addressing options to meet the cost of resolving financial institutions.

Due to the complexity of the issues involved, the development of this bill is being overseen by a technical working group pulled from the Financial Regulatory Committee under the BOJ Act and comprising sub-working group teams with representatives from Ministry of Finance and the Public Service, Ministry of Industry, Investment and Commerce, Bank of Jamaica, Financial Services Commission and the Jamaica Deposit Insurance Corporation.

Pending Subsidiary Financial Legislation (Regulations, Rules, Codes of Conduct)

REGULATIONS

There are no pending Regulations.


SUPERVISORY RULES

Anti-Money Laundering, Counter Financing of Terrorism (AML/CFT) and Proliferation of Weapons of Mass Destruction Rules.

The international standards on AML/CFT and proliferation (i.e. the revised FATF Recommendations 2013) include a number of enhanced requirements with which countries are asked to comply. These enhanced requirements include the application of a risk- based approach to allow competent authorities to ensure that measures to prevent or mitigate money laundering or terrorist financing are commensurate with the risks identified. The rules also enable such authorities to make decisions on how to allocate their resources in the most effective way. Accordingly, the framework that is implemented should, among other things: -

  1. maintain the requisite focus on the risks to the system, customers, services (including the business line and products) and the quality of compliance;
  2. have express triggers for periodic reviews, that is, major events, changes in management or operations;
  3. ensure that the frequency and intensity of supervision are clearly dependent on risks;
  4. ensure consolidated supervisory obligations with respect to AML/CFT remain applicable, including the requirement for regulatory co-operation nationally and cross border, including co-operation on a diagonal basis;
  5. ensure that supervisors have the range of disciplinary and financial sanctions (including the application of administrative fines and the power to revoke and/or restrict or suspend the licence); and
  6. ensure that co-operation and collaboration with local competent authorities can be undertaken.

Proposals for the development of drafting instructions for AML/CFT Supervisory Rules under the Banking Services Act, 2014 and the Bank of Jamaica Act are being developed. These rules will, among other things:

  1. codify the risk-based examinations and oversight processes pertaining to the AML/CFT oversight functions of Bank of Jamaica; and
  2. outline the areas in the BOJ’s AML/CFT Guidance Notes with which compliance will be expressly mandated and allow BOJ to directly sanction breaches of those requirements. BOJ is currently the competent authority with responsibility for monitoring compliance with the requirements of the Proceeds of Crime Act (POCA) and Terrorism Prevention Act (TPA) for institutions comprising of the following:
    1. DTIs under the BSA;
    2. cambios (Exchange Bureaux);
    3. money transfer and remittance agents and agencies; and
    4. a society registered under the Cooperative Societies Act, which carries out credit union business.

The requirements under the Guidance Notes with which compliance will be expressly mandated pertain to areas regarding:

  1. Risk Based Framework;
  2. Know Your Customer, Know the Transaction Counterparty and Customer Due Diligence;
  3. Special Guidance - UNSEC Resolutions on the Proliferation of Weapons of Mass Destruction;
  4. Special Guidance - Branches and Subsidiaries;
  5. Nominated Officer Regime;
  6. Board Responsibility and Employee Integrity and Awareness;
  7. Compliance Monitoring;
  8. Transaction Monitoring and Reporting; and
  9. Record Keeping

The draft Rules for the development of AML/CFT Rules under the BSA have been issued for feedback.

Non-Financial Legislation

THE DATA PROTECTION ACT, 2020

This Act was passed in June 2020 and seeks to protect Jamaicans from unlawful and/or reckless disclosure of their personal information. The Act sets ‘standards’ for data processing (sections 21 through 31) to ensure that personal data is processed fairly and lawfully, and only where necessary. PART V - Exemptions to Data Protection Standards or to Disclosure to Data Subject Requirements - outlines exemptions that Regulators should be able to rely on as not limiting their ability to undertake their statutory regulatory functions and ability to cooperate with domestic authorities and international counterparts.

The Minister of National Security can also issue a certificate of exemption from any of the standards or disclosure to data subjects requirements in order to safeguard national security (see section 33). The Minister’s powers in this regard can be appealed by application to the court for judicial review on the grounds on which the certificate was issued.

The Act will be brought into effect on a phased basis. Responsibility for implementation and administration of the Act will fall under the Ministry responsible for information and communications technology.


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