Legislation

Pending Legislative Changes

The Bank of Jamaica (Amendment) Bill

Section 34C of the Act and the First Schedule to the Act, will be amended to qualify the prohibition on authorised officers’ or authorised persons’ and directors’ holdings in financial institutions supervised by Bank of Jamaica and in credit bureaus. The prohibition will reflect as not applying where such holdings comprise investment in a collective investment scheme which has included, in its portfolio of assets, equity holdings in a financial institution supervised by Bank of Jamaica or in a credit bureau.

Thus to qualify for exemption from the prohibition, a holding must demonstrably be indicative of the following characteristics:

1. the assets of the scheme are widely held with no less than one hundred participants;
2. the authorized officer or person has no ability to exercise control over the scheme’s investment decisions;
3. the scheme does not have a stated policy of concentrating in investments in financial institutions; and
4. the officer or person holds less than one per cent of the value of the investment scheme at any given time.

A similar amendment will be consequentially effected to The Banking Services Act in relation to the holdings of appointed members of the Supervisory Committee.

Proposals for Amendment to The Bank of Jamaica Act

Amendments to the Act will be made to update and strengthen the statutory oversight regime for Money or Value Transfer Services (MVTS)  and for exchange bureaus.

Accordingly, the amendments will:

1. provide the Bank with remit or powers to confront and penalise unlicensed operations engaging in business as MVTS and as exchange bureaus and penalise licensees who facilitate dealings with such persons by:
   
   1. Creating new offences for:
      • MVTS and exchange bureaus who deal with such unlicensed operators;
      • using any name, designation, trademark or advertisement that implies or leads the public to believe that the person is a licensed or approved MVTS provider or exchange bureau when that person is not so licensed;
      • fraudulent misrepresentation that a person is approved or authorised to operate as a money transfer and remittance agent or exchange bureau
   2. Granting the Bank power to, by itself or through an agent, obtain a search warrant to enter premises where the Bank has reasonable grounds to believe a person is carrying on the business of a MVTS or exchange bureau without approval.
2. Increase the penalties for non-compliance as the current monetary sanctions are not deemed to be dissuasive.

The Payments, Settlement and Clearing Bill

The Payment Clearing and Settlement Act (PCSA) provides the Bank with the legal mandate for oversight of the clearing and settlement systems of Jamaica. Currently, the PCSA does not provide the Bank with legal powers for: (i) the licensing and supervision of payment service providers; or (ii) the regulation of payment services. As a consequence, the Bank sought to amend the PCSA to introduce new provisions for the oversight of payment service providers.  These amendments also seek to strengthen the Bank’s enforcement powers in relation to the operators of Financial Market Infrastructures, by the introduction of new offences and penalties for breaches of the PCSA.

The proposed amendments would address the following issues:

1. Description of key terms, such as payment services, payment instrument and payment service provider;
2. Create a licensing framework for Payment Service Providers (PSPs), which would be non-Deposit Taking Institutions;
3. Address the fit and proper requirements for substantial shareholders, directors, managers and key employees of PSPs;
4. Record-keeping requirements;
5. Examination powers and enforcement powers in relation to PSPs;
6. Oversight of PSPs’ agents;
7. Criminal Offences; and
8. Fixed penalty offences.

The Cabinet Submission was approved in December 2023, and the Ministry of Finance and the Public Service (MOFPS) dispatched its drafting instructions to the Office of the Parliamentary Counsel (OPC) in January 2024. The legislative process progressed significantly in 2024, with the MOFPS sharing with the Bank the draft bill amending the PCSA.

The Co-operative Societies (Amendment) Bill

This amendment to the Co-operative Societies Act will, among other things, bring credit union cooperative societies under the regulatory ambit of 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 (MIIC) (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. The requisite Cabinet Submission from the Ministry of Finance & the Public Service (MOFPS) was considered by Cabinet on 01 May 2017 and approved. The Bill will cover, among other things, licensing, capital, reserves, prohibited business, remedial and intervention processes as well as define the role of specially authorised credit unions (see Supervisory Responsibility for Deposit-Taking Institutions).

The Financial Institutions Resolution Bill

A Cabinet Submission re-affirming the earlier policy decision to establish a special resolution regime for financial institutions has been prepared. Once finalised and approved, this later Submission which includes additional framework clarifications, will inform the continued work on the development of the Bill.

Background

In October 2017, Cabinet approved drafting instructions for the preparation of legislation to establish a special resolution regime (SRR) 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.

There will be consequential amendments to the Bank of Jamaica Act to incorporate the establishment of the reporting structure and operating framework through which the activities of the Resolution Authority will take place. Other consequential legislative amendments have been proposed for the legislation applicable to the financial sector.

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. The working group will comprise of sub-working group teams with representatives from the Ministry of Finance and the Public Service, 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 at this time.

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 (last amended March 2022)) include a number of enhanced requirements with which countries are asked to comply.^[1]  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 (BSA) 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 third draft of the AML/CFT Rules under the BSA have been issued for feedback.