Ramesh Sujanani, Contributor
I saw an interesting article from Financial Investigations Division director Justin Felice in The Gleaner last week, and I concur with Mr Felice when he suggested the minimal use of cash in transacting large-scale business simply because the volume of money required is prohibitive to carry, expensive to obtain, and risky to store.
But cash money is a payment of preferred and last resort. Many Jamaicans cannot work with cheques, drafts, money orders, and telegraphic transfers. The latter would be the quickest and safest, as it is a bank-to-bank transaction and it can be tracked. At this time, the average Jamaican will not accept $5,000 bills in payment; many do not trust it. The only popular settlement besides cash is a bank draft, or cashier's cheque.
But here are the problems, somewhat unique to our situation. If the person transacting business earned his money overseas, a personal cheque or a bank draft is required to be presented in Jamaica. But here is the catch: Whether or not it is a bank draft, or cashier's cheque, the bank will hold payment for at least 23 working days, and up to 30 working days, depending on where the cheque is drawn. So if you have business to complete, are buying a property or a car, are paying tuition, and you hurry from overseas, you cannot pay for service in the allotted time.
You have to go home and return when the cheque is validated by the bank, and lose the time, without being compensated by interest. If you bring some of the money in cash, you have to pay the bank .75 per cent to deposit the cash. Incidentally, those deposit charges are the reason why more foreign earners may be going to suppliers or to cambios, whether your money is cash or cheque. If you bring USD cash and buy a USD draft in Jamaica, the charge is 1.5 per cent, levied by your bank.
At this time, all telegraphic transfers require charges to be paid, at both the issuing end and the receiving end, amounting to one to two per cent in either situation. For example, a wire of US$10,000 from a bank overseas to a popular bank in Jamaica may cost J$20,000.
The other scenario is a little different. The person receives US$900 in cash and transacts with a bank, and there is no charge over this amount, only over amounts of US$1,000. Jamaican dollars are obtained at a poor rate up to 4.5 per cent less their value, cash to cash. She could take a cheque in payment, but this can only be redeposited to her account under third-party rules, or nominated in the supplier's name.
When this is done, the client loses a negotiating point, which is the ability to obtain a better price. Then the payee has to call the bank, verify the customer's ID, and take all particulars from her, showing that any cheque paid compromises the flexibility that cash allows.
The final payee may wish to wait until this cheque clears the bank before delivering value as often, there are three-day hold instructions on a cheque deposit, assuming the bank accepts the explanation. In many countries overseas, the cheque is a preferred mode of payment as any loss can be replaced.
The only time the client tends to obtain a cheque is in regard to specific instructions from the ultimate payee, or a deposit to a bank account for safekeeping. Further, the issuer of the cheque, whether cambio or bank, has to be trusted by the final payee and the client.
Whether you are a businessman or beggar, you are subject to queries from each teller at the bank for every sum over J$200,000 (US$2,200 or £1,370), you have to give explanations amounting to your life story. These sums would scarcely get attention in a US or British bank, or, for that matter, most banks the world over. And the result: Many persons are opening several bank accounts in banks all over the country, and depositing their cash, to follow the rules, and yet keep the flexible use of their money.
Ramesh Sujanani is a businessman. Email feedback to email@example.com and firstname.lastname@example.org.