Financial Crime World

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Jamaica’s Financial Regulation Landscape Undergoes Major Overhaul

In a significant move, Finance Minister Nigel Clarke has announced that the Bank of Jamaica (BOJ) will take over the regulation of investment companies and other entities from the Financial Services Commission (FSC). This marks a major shift in Jamaica’s financial sector, as the central bank cements its position as the super regulator of the system.

New Role for BOJ

According to Clarke, the BOJ will now oversee:

  • Insurance companies
  • Securities
  • Private pension markets
  • Banks
  • Building societies
  • Merchant banks
  • Remittance and bill payment companies
  • Credit reporting agencies
  • Microfinancing companies
  • Credit unions

This move is seen as a step towards consolidating what was previously a fragmented regulatory structure.

FSC’s New Role

The BOJ’s takeover of FSC’s prudential functions will take effect within two years, during which time the FSC will transition to its new role as a financial consumer watchdog. This means that the FSC will focus on:

  • Monitoring compliance with laws and regulations related to:
    • Consumer protection
    • Anti-money laundering
    • Anti-fraud measures

Background and Rationale

The move comes in response to the alleged $3 billion fraud at Stocks and Securities Limited, which has shaken investor confidence and put pressure on the government to address the opaqueness of Jamaica’s financial institutions. The US Federal Bureau of Investigation will assist Jamaican investigators in tracking down perpetrators and recovering lost funds, including over $12 million allegedly lost by international sports celebrity Usain Bolt.

Twin Peak Model

Clarke emphasized that the “twin peak model of financial sector supervision” aims to:

  • Address duplication of effort
  • Eliminate duplicate oversight
  • Improve coordination between regulatory bodies

The new structure is designed to promote greater nimbleness in regulating financial groups.

Increased Transparency and Investor Confidence

Licensed investment companies will now be required to disclose their financial accounts, a move aimed at increasing transparency and investor confidence.

Timeline and Next Steps

The FSC was created in 2001 to tighten regulation of the non-banking financial sector, and its merger with BOJ is expected to take effect within 18-24 months. The government has committed to seeking input from the financial sector on what the new regulatory system should look like, as it works to address the systemic issues that have plagued Jamaica’s financial institutions.