~ Blaming banks solely for delays ‘unfair’ ~
PHILIPSBURG–Applicants not always having all the required documentation at hand and having to go to multiple departments to obtain them and, in the past two years, staffing challenges due to COVID-19 are amongst the issues that contribute to the time it takes to open a bank account, says Windward Islands Bank General Managing Director Derek Downes, who is also President of St. Maarten Bankers Association.
Banks have come in for some amount of criticism in recent years over what some consider the lengthy time it takes to open an account and what is viewed as extensive documentation requirements.
The Daily Herald approached Downes to shed light on the matter. He said putting the length of the process solely on the shoulders of the bank is unfair. He made clear that the processes in which the bank engages to open an account are based on its interpretation of the requirements to satisfy the law coupled with due diligence best practices, as well as based on the Central Bank for Curaçao and St. Maarten (CBCS) guidelines, which guide banks on how to satisfy the law.
Downes does not find the process to be lengthy when it concerns opening a personal account. He said personal accounts are easy to open. Once you have basic items – proof of address, valid identification and proof of income, the process is relatively quick.
“They are open in 24 hours. We give the client the account number right away. What makes it lengthy is, in a number of cases, clients don’t have the documentation or they do not have all the documentation that they need and in some cases do not want to provide the documentation,” explained Downes.
The effects of the COVID-19 pandemic might result in some delays, but this is the case at many establishments.
“We have to also take into consideration that we are in a pandemic and the pandemic has affected everyone. It has also affected WIB and banks – everyone.
“This means that you don’t have your full staff on hand at all times, as people are out –whether with COVID, whether in quarantine or due to contact-tracing. Simply because of that fact, banks are taking a little longer. All banks, including WIB, have implemented reduced opening hours because of the high number of positive COVID cases and reduced hours mean less time to work on requests,” he said.
Documentation, due diligence
Unlike personal accounts, when it comes to business accounts, the process is more lengthy, as banks have to conduct the necessary due diligence and if the applicant does not have all the required documentation, it can take time.
“What I know contributes to the delay is that customers don’t always have all the information that they need. They take time to get the information and what is frustrating for customers is that some of the information that they need for the bank they cannot get from one place.
“If they have to get a Chamber extract, they have to go to the Chamber of Commerce. If they have to get a proof of address they have to go to the Department of Civil Registry. If you don’t have the articles of incorporation and shareholder’s register, you have to go to a notary to get them. You don’t have one repository where people can easily access company documentation needed to satisfy the due diligence of the bank.”
The due diligence process on business accounts is important for the financial institution. “The business account opening process is more lengthy than for personal accounts because it involves a legal and compliance review, which is standard for banks. One of the reasons for the legal review is that the bank has to understand what the articles of incorporation allow the business to do or not do.
“You have to understand who represents the entity in and out of court. There have been cases where the articles were in conflict with each other and we had to advise the client of these conflicts. And in cases where persons want to authorise or deputise others who are not listed in the articles of incorporation on behalf of the entity, the board resolution to effect this needs to be vetted to ensure that it’s properly passed and not in conflict with anything else.
“That is the reason for the legal review of the documentation, because at the end of the day, we are granted access to monies of these entities and we have to ensure that we are standing on firm legal grounds when doing so.”
The law, he stressed, prescribes that the bank determines how business accounts are expected to operate. “For instance, you cannot just say you will deposit a million dollars. The bank needs to understand how. Do you have a business plan? Then the business plan has to be reviewed. Any financial projections you provide have to be reviewed so that we can get a clear understanding of the character of the account for monitoring purposes.”
He said many applicants have challenges preparing this information and WIB tries to make it easy by providing a financial projection template so that persons can make reasonable projections.
“Because applicants may have to prepare this information or may have to get help, this makes the process lengthy. There may also be a need to complete further due diligence or drilling down on the owners of an entity, as the CBCS’ guidelines require that the ultimate beneficial owner (UBO) of the entity be identified. You cannot just tell the bank that someone is the beneficial owner of a company. The bank must be able to see documentation that gets them to the UBO,” he explained.
Additionally, high risk businesses accounts are subjected to enhanced due diligence, which requires more procedures, more documentation and more searching. Downes said each bank has its own guidelines to determine whether an account is considered high risk.
If someone has a criminal record, WIB would not grant them an account. One of the things that WIB does is Google search various databases to, amongst other things, determine whether someone has a criminal record.
“We will reject you,” Downes said of cases with criminal records. “We reserve the right to reject you, especially if it’s for a financial crime. As it stands today, banks are private institutions. We reserve the right to determine what clients we want in our books. We Google check you.” The bank also searches an entity that produces this sort of information.
“Politically exposed persons need additional due diligence. We get this list from an entity that compiles this information.
“The key thing is that we have to do KYC (know your customer) due diligence around the entity itself and around the persons associated with the entity and that is for us to know who you are dealing with, but mainly we also have to do due diligence on how the account is expected to be used – the deposits, the withdrawals – because the law requires us to monitor accounts.
“So you know what behaviour to expect – that is why we get the projections upfront. That will tell you the expectation and you monitor based on that expectation.
“These are some of the things that go into determining whether or not a bank would want to onboard a client.”
Don’t like waiting
While Downes advises what he sees as the importance of speeding up any process, he believes that the ability to have many things done right away may have also had a negative impact on people’s acceptance of the need to spend time to conduct due diligence. “Many people don’t like to wait. Everybody wants their stuff done right now.”
He also indicated that COVID-19 has had a devastating effect on employment and there are a lot of people who are opening businesses. “So now you have additional pressure for requests to be handled and this also puts pressure on resources.”
Basic bank account
CBCS has approached the St. Maarten Bankers Association to engage in discussion around coming up with a basic bank account to enable every individual to at least have an account. Basic bank accounts have restrictions. Downes declined to speak on the issue, as discussions are still in progress.
However, according to moneyexpert.com and information obtained online, basic bank accounts are essentially current accounts with restricted features. Unlike regular current accounts, some basic bank accounts do not offer certain facilities such as a debit card, overdraft or to be able to set up standing orders, etc.
Downes stressed that the country is in the midst of a pandemic and resources are being stretched as a result.
“The pandemic is also courting people to come up with their own business, their own enterprise and that is putting pressure on the system, because we are working with the same or less numbers than before the pandemic, as everyone had to cut back based on the situation that we are going through,” he said.
“Yes, you would get some delays and people will become legitimately frustrated. I won’t deny that there are some delays in the system, but trying to say that these are solely only coming from the banks is unfair, because I know for a fact, customers have challenges to provide their documentation to satisfy procedures.”
Bron: Daily Herald