Legal or Common Practices?
By Emilio Kalmera
The news in the last week of November about the court striking the licence fee for Travel Planners must have been an interesting state of affairs for the community. In a ruling which may have big consequences for the banking and financial sectors, the Court of First Instance decided that Windward Islands Bank (WIB) N.V. is no longer allowed to charge a one-percent licence fee over international transactions on behalf of Wise Travel Bureau N.V., the holding company of Travel Planners travel agency.
When reading the preliminary verdict details, there was part that stated “De Centrale Bank heeft aan WIB schriftelijk bericht dat zij de licentievergoeding correct in rekening brengt “ (translated: The Central Bank notified WIB in writing that it was handling the licence fee correctly). So let us look at the Central Bank perspective on the license fee as well as the legal bases (according to Central Bank regulations) for the licence fee.
The general foreign exchange policy is vested with the governments of the countries of Curacao and Sint Maarten. The Bank is charged with executing the foreign exchange regulations and managing the available foreign exchange reserves for account and risk of the governments. Therefore, the Bank is empowered to grant licenses and exemptions by virtue of the Foreign Exchange Regulation Curacao and Sint Maarten (2010).[1]
The license fee is set at 1% of the value of all transactions taking place from a resident to a non-resident account and on cash purchases of foreign currency. The amounts that are collected by the Bank in Curaçao and Sint Maarten are transferred fully to the governments of the countries. License fee is included in the selling rate of foreign exchange.[2]
The License Fee Matrix Explanation document from Central Bank[3] is worth the time to review as it gives examples of the fee matrix. A key excerpt from this document states: In principle, license fee is due whenever a transfer is made to abroad or foreign currency is bought. By law (P.B. 2000, no. 88), the fee is fixed at 1% of the value of the transaction and should be paid by the foreign exchange bank (FEB) to the Bank. The cost can be recovered by charging the client the official selling rate of the currency used for the transaction, which includes the license fee. In case no selling of foreign currency takes place, the client may be charged the license fee separately. FEBs are free to use lower selling rates or not charge the license fee to their clients. The amount of the fee payable to the Bank, however, cannot be influenced by such commercial decisions. The official rates must be used for these purposes.
The license fee matrix is intended to be used by the FEBs. The examples are, therefore, designed from a FEB’s point of view and provide specific information on which type of transactions is subject to the license fee, whom to charge the license fee, and which exchange rate to use.
Even after reviewing all of the above mentioned, it seems as though it is still not straightforward. For example, in the matrix examples, if a resident transfers USD 1,000 from his USD account to his USD account by another commercial bank, the 1% is not levied. If he however withdraws $1,000 from his USD account, the 1% is levied. When reading the following, “The license fee is set at 1% of the value of all transactions taking place from a resident to a non-resident account and on cash purchases of foreign currency”, it is still not clear why the cash withdrawal is considered cash purchases of foreign currency if the funds were already on the resident account. The resident did not execute any cash purchase.
The verdict in the case of Travel Planners basically says that there is no legal basis for WIB to recoup the 1% license fee from the client. Thus, although the Central Bank states in their document that the client can be charged the license fee separately, there seems to be no law that specifically states that they can do this. And since it is stated that the general foreign exchange policy is vested with the governments of the countries of Curacao and Sint Maarten, the governments of Curacao and Sint Maarten has work to do considering the outcome of this case. Common practices are not the law.
Another interesting perspective is if the Central Bank should also take some responsibility here considering what was stated earlier that the Central Bank notified WIB in writing that it was handling the licence fee correctly. Thus, should WIB be the one solely doing the reimbursing or should the Central Bank also play a role with the reimbursement, albeit partially?
[1] http://www.centralbank.cw/foreign-exchange-regulations
[2] Foreign Exchange Regulation 2017: Implementation Decrees of the Foreign Exchange Regulation Curacao and Sint Maarten (2010)
[3] http://www.centralbank.cw/uploads/files/License%20fee%20matrix%2011%20jan%202016.pdf and http://www.centralbank.cw/uploads/files/license%20fee%20matrix%281%29.pdf
