However relaxation of Exchange Controls being consideredBy MINDELL SMALL,Guardian Staff Reporter mindell@nasguard.com
Even with the recent modifications to a series of financial services legislation, laws still exist in The Bahamas making it extremely difficult for Bahamians to open and operate bank accounts overseas.
However, Governor of the Central Bank of The Bahamas, Julian Francis recently indicated that a relaxation of the country's Exchange Control regulations is being considered. Still, it is still not clear which aspects of those regulations would be "relaxed."
When The Guardian visited the Central Bank last week and asked for monies to be placed on a fictitious U.S. account, an Exchange Control officer said that such transactions needed Central Bank approval.
She called her manager who said, "You would have to write to us and give us justification as to why you need a U.S. account and what you will be doing with it."
"If you are a student, you can have an account in the country where you are studying but if you are coming back here to live, you should not have a foreign account, at least that is what the policy states."
The manager did not say that the request to wire money to a foreign account would not be approved, but made it clear that the Central Bank would have to thoroughly "review" the request first, a process that could take a week.
The procedure sounded so cumbersome, it was enough to deter anyone from performing what is otherwise a simple transaction in the U.S. and Canada.
The Central Bank was unavailable for comment yesterday however, last month, after announcing that the Central Bank had lowered interest rates due to the country's relatively high reserves, he said discussions were underway with a view to relaxing Exchange Control regulations.
Exchange Control false protection?
The purpose for an Exchange Control system in a country is to regulate the foreign currency transactions between residents of that country and residents of foreign countries. Exchange Controls apply only to resident Bahamians and companies, not to non-residents and offshore entities that are normally used by international businesses.
On its website, the Central Bank indicates that exchange control procedures have their legal basis in the Exchange Control Act of 1952 as well as in the Exchange Control Regulations, 1956.
It said the origin of those Acts lie in the early economic and monetary relationship that existed between the United Kingdom and other British Commonwealth countries at that time, including The Bahamas.
"These countries reportedly adopted common Exchange Control policies, to ensure that the reserves were protected and spent only in the interest of all concerned."
"This relationship, though ended in 1972 with the dissolution of the Sterling Area, upon the British government's decision to float Sterling and join the European Economic Community."
The statement added that the Bahamian government's decision to continue to maintain Exchange Control after the dissolution of the Sterling Area reflected a desire to ensure disciplined use of the country's foreign currency reserves and to assist in its Balance of Payments.
Controls can't police credit cards
Interestingly enough, the Exchange Control Act, more than 50 years old, does not apply to credit card transactions, which were unheard of during that era.
Today, an individual could go online and purchase thousands of dollars worth of products from a foreign country without "consulting" the Central Bank. When the products are shipped to The Bahamas, the purchaser only pays the applicable customs duties.
This is a clear example of how the present Exchange Control system is ineffective, at least in the world of plastic money, since an increasing number of people are resorting to Internet shopping. Those without credit cards simply use cards of their friends and relatives in exchange for cash.
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