Former Finance Minister Selby Wilson's appraisal of some weaknesses of the Financial Intelligence Bill (as reported in the Sunday Guardian of October 11) is correct and requires looking into, if its provisions deliberately conceal relationships particularly with its major stakeholder, the Central Bank.
Notwithstanding demands by the international community, the intent of the bill creates an expectation in the mind of the ordinary man that the entire financial sector (banking, insurance and investment) which services him will be regulated by the strictest adherence to new and extensive rules and requirements, which will enhance his customer confidence and, by extension, the country's financial health. For many years, citizens have been reeling from the effects of the lack of accountability by public officials and private citizens who create moral hazards or sit on boards of publicly traded companies where rampant, incestuous insider trading is the order of the day. Will the non-participation of the Central Bank under the new sweeping powers of the FIU, headed by any minister of government, keep at bay legitimate concerns of ordinary citizens which may be brought to light by independent comments of Central Bank officials? ?
Will the FIU be moulded into another super agency, like Udecott or the anti-crime special unit? Will "Mr Big" be caught and successfully prosecuted as a result of the FIU's awesome powers and disciplined approach or will we have to wait for Uncle Sam to do the job we should be doing ourselves? ?It is not entirely true, as the Inspector of Financial Institutions Carl Hiralal asserts in the Guardian report, that the FIU does not change the regulatory role of the Central Bank. If the FIU bill represents a significant overhaul in the way the financial sector is regulated, and it should, vested as it is with sweeping powers which do not spell out its relationship with the Central Bank, what then is the role expected to be of the Central Bank under the FIU? The fact is the Financial Intelligence Unit, in taking over significant core regulatory responsibi- lities of the Central Bank, changes if not its legal personality, its terms of reference. Hiralal is only evangelising when he states that "this is not a matter of control." It is in fact a matter of control.
In order for the premier regulatory institution in the country, the Central Bank, to be effective, it has be seen as in control of primary responsibilities of regulatory functions, like the regulation of financial institutions, or be bypassed and made to be ineffective down the road.?Ineffectiveness will be hastened if there is overlapping of roles, inconsistency in roles or competing roles, and no institutional memory guidelines existing in the incoming agency. One either enhances the effectiveness of an institution like the Central Bank by increasing its powers and providing it with built-in safeguards/protection from within and without, or diminishes it by seductively removing its powers and safeguards and leaving it in limbo, like the Office of the President. Certainly, the greatest institutional challenge for the Central Bank would be dealing effectively with a super powerful parallel organisation without an institutional memory. At the end of the day, where will the Treasury reside in all of this? In the meantime, the financial institutions under whose control the regulators should be putting under manners will have a field day of us all.