Overseas option sought for casino transactions
Overseas options are being explored to potentially handle Bermuda's casino transactions, the new head of the gaming commission has revealed.
Cheryl-Ann Mapp told The Royal Gazette that the Bermuda Casino Gaming Commission is seeking advice from its counterparts abroad on alternatives to the island's three local banks, none of which has yet agreed to any involvement in the fledgeling industry.
Commission chairwoman Ms Mapp said there was “very positive and encouraging dialogue” ongoing with the local banks and she was “confident” they would be able to work with the casinos.
But Richard Schuetz, former executive director of the regulatory body, claimed it was highly unlikely that local banks would get permission to be involved from their correspondent banks in the United States.
Mr Schuetz, who quit the commission in July last year, claimed negative global publicity surrounding recent amendments to the Casino Gaming Act would deter the correspondent banks — and their approval was necessary for local banks processing US dollar transactions.
“Any correspondent bank would do due diligence on Bermuda and I doubt that the newspaper and magazine articles over the last year would help the cause,” he said.
“One only needs to look at my resignation letter to understand that a US correspondent bank may have concerns about doing business in Bermuda.”
Ms Mapp's predecessor, Alan Dunch, who quit the commission in protest at legislative amendments, warned in November 2016 that there would not be a casino industry without buy-in from local banks.
At that stage, Mr Dunch said the local banks had told the Government they “won't bank the casinos” and correspondent banks for Butterfield and Clarien had indicated they would need to be satisfied the island had tough anti-money-laundering controls in place.
The commission's plan was to introduce a stringent regulatory framework for the casino industry to persuade the US banks to get on board.
But the bulk of the necessary regulations have yet to be tabled in Parliament, despite being drafted by the commission and delivered to the Attorney-General's Chambers for approval in May last year.
Tourism minister Jamahl Simmons said in November that delivering a “full set of casino gaming regulations necessary to set the highest level of standards for the industry” was a priority, but has said little on the topic since.
Last week's Budget made no specific mention of casinos, other than a pledge to give Bermuda College additional funds to provide gaming industry training.
David Burt, the Premier and Minister of Finance, said: “The Ministry of Finance will soon commence consultations on expanding the types of banks that can operate in Bermuda.”
The Royal Gazette asked the island's local banks if they had decided whether to conduct financial transactions for any casinos that open here.
A HSBC Bermuda spokeswoman said: “Following a thorough review some years ago, the HSBC Group took the decision to limit its involvement with the gambling sector. This represents further progress in the HSBC Group strategy since May 2011.”
That decision was part of improvements HSBC made to its compliance systems after having to pay a $1.9 billion settlement in the United States in 2012 for helping Mexican drug cartels launder money and breaching international sanctions by doing business with Iran.
A Clarien spokesman said: “Clarien continues to gain further understanding of the casino gaming legislation and regulation. Upon completion of this analysis, Clarien management will make a risk-based decision to progress further discussions with various stakeholders including our board and shareholders and, most importantly, our correspondent banks.
“While we wish to support Bermuda, we also have to ensure that such business is in alignment with our regulatory obligations, our banking licence and our risk appetite.”
Butterfield declined to comment.
Ms Mapp said: “The commission continues to have very positive and encouraging dialogue with the local banks, regarding the banking of casino funds. [I am] confident that the local banks will be able to work with the casinos. However, the commission is seeking the advice of our overseas counterparts as to any other options which might be available to a casino operator.”
Mr Schuetz and Mr Dunch met with Wells Fargo, a correspondent bank for Clarien, and Bank of New York Mellon, Butterfield's correspondent bank, in 2015.
“Both stated to me they would feel most comfortable with a US model of regulation,” said Mr Schuetz, adding that was because “the US had been addressing anti-money laundering since the passage of the Bank Secrecy Act in 1971, the US casino regulatory system had a strong culture of compliance and there was a great deal of institutional knowledge in the US about addressing anti-money-laundering issues in casinos”.
He added that the amendments tabled in November, giving the tourism minister the power to sack gaming commissioners without cause and compelling them to follow his “general directions” on policy, were hardly in line with the US model. The amendments were described as a “recipe for disaster” by experts in the States.
Mr Schuetz said: “While Minister Simmons seems to think he's involved in best practices, I think the rest of the casino world and the banking system may disagree.”
Neither the Ministry of Tourism and Economic Development nor the Attorney-General's Chambers responded to requests for comment on the gaming regulations by press time.
The gaming commission has granted one provisional casino licence so far, to the Hamilton Princess Hotel and Beach Club.