Marcella Scarlett, Business Reporter
National Commercial Bank (NCB) Jamaica's decision to shun dealings with foreign-exchange dealers has already began to affect the non-cambio operations of mainstream customers, among them persons doing business with Sterling Asset Management.
It signals that the intervention by the central bank at the behest of the Cambio Association of Jamaica, which sees the NCB policy as a threat to the viability of some forex traders, has failed to blunt or reverse the commercial bank's new policy.
Sterling Asset, which is headed by Charles Ross, has asked NCB to explain why cheques unrelated to its cambio are being denied clearance by the bank and to resolve the issue, according to correspondence seen by the Financial Gleaner.
Sterling, which specialises in bond trading, says the block is impacting both its corporate and individual clients, and that NCB's "discriminatory practice amounts to a restraint on trade".
NCB is yet to respond to requests for comment and Ross was out of office when the Financial Gleaner sought comment.
Jamaica's largest bank first advised its cambio and money-trading clients in January that, due to pressures from its own overseas bankers, it would be cutting off all foreign-exchange related transactions with them. RBC Royal Bank, the third-largest commercial bank, made a similar decision in 2011.
The cambios and commercial banks are rivals in the foreign-exchange market, with cambios claiming 43 per cent of the business. NCB disclosed that it now has 14.55 per cent of the market based on trades valued at US$1.4 billion last year.
Forced to restructure
NCB has made changes to its procedures, which require that customers provide supporting documentation to prove that transactions relating to foreign-currency drafts or wire transfers are non-cambio related.
Foreign-exchange traders say what this means is that they will be forced to restructure their businesses to create separate corporate vehicles for their cambio operations at a cost to their operation.
Cambios that are not part of a larger corporate group do not have this option, and are likely to be hurt more by the policy.
But Cambio Association President Heather Ferguson said the issue is still developing and would be reviewed internally before any public statements are made.
Past President Dennis Hickey said that he was not aware of the new developments, but said his firm, MoneyMasters Limited, has already began the process of registering its cambio as a separate corporate entity.
"That is what we are doing. So far, we have opened different accounts, one for investment and a separate one for cambio, and we are to go to the regulators for the different licence; and you know this will cost money," said Hickey.
An affected broker, who asked for anonymity, shared correspon-dence from NCB's Legal and Compliance Division with the Financial Gleaner responding to the broker's request for information on how to resolve the issue of NCB accommodating its customers, even when doing non-cambio transactions.
The bank said in instances in which a business has multiple licences, such as a securities dealer licence and a cambio licence, the restriction should not be on the non-cambio operations "once we can be satisfied that this transaction does not relate to your cambio operation.
"In order to minimise the impact on your non-cambio operations, we encourage you to have your customers (when conducting non-cambio related transactions) provide our staff with requisite documentation supporting the business to which the transaction relates in order not to have their transactions delayed," the bank wrote.
As examples, NCB suggested customers may provide a statement of account or an investment card corresponding to the account to which the funds will, ultimately, be credited.
Ferguson said a minority of association members, about 10, belong to operations with multiple licences. Among them are Barita, where Ferguson is a forex trader, JMMB, Alliance Investment, MoneyMasters and Stocks & Securities Ltd, according to information on the Bank of Jamaica website.
Move to tackle money laundering
In the email correspondence, the bank reiterated that money-services businesses are high-risk and that its actions are part of its efforts to tackle money laundering.
"This has affected the perspective of some of our correspondent bankers on transactions for these businesses, notwithstanding the fact that the businesses are regulated in Jamaica," NCB said.
The Cambio Association has already pushed back against that rationale, saying the sector is highly regulated by the Bank of Jamaica - which also regulates commercial banks - and that there have been no signs that forex traders are engaged in money laundering.
Meantime, Sterling has advised its clients to request local USD manager's cheques from NCB made payable to Sterling Asset Management as a workaround.