Frequently Asked Questions
Dormant Accounts Legislation and the Disaster Relief Fund

1. What is a dormant account?

Accounts that have not been used by the account holder for seven (7) years or more, and where the banks, after repeated efforts to contact the customer, have been unable to establish any contact for those seven years.

2. Whose money is in dormant accounts?

At end-June 2018, there were 42,452 dormant accounts valued at $88.7 million (Bahamian Dollar equivalent) held by the Central Bank of The Bahamas, of which $41.3 million had been held in dormant status for 17 years or more. A substantial amount of the total funds - nearly $70 million – belong to offshore foreign currency accounts. While 81.3% are Bahamian dollar accounts, they only represent 21.3% of the total value. The majority of them are valued at $500 or less.

3. What happens to dormant accounts?

After seven years, they are closed by the bank and the money is transferred to the Central Bank to hold and administer, until they are claimed by the depositors or their estate. The process is not arbitrary; it is strictly regulated and includes rules for banks to make concerted efforts to contact account holders. With the new amendments, if these deposits remain unclaimed for a further period of 10 years, they will now be transferred to the Government. In many jurisdictions, this happens after the initial seven year period, but The Bahamas has extended the time allowed for people to claim their dormant accounts.

4. Why not just leave the money there forever? 

Collectively, the cost to manage money for people who are not using their accounts and not claiming their money is significant. After banks have exhausted all reasonable efforts to contact account holders to have them regularize their accounts, and these funds have been transferred to the Central Bank, and remain unclaimed for an extended period of time, the practical and fiscally responsible thing to do is to extinguish the claim and allow these to be transferred to the State.

5. Why is this happening now? What changed? 

Legislation on dormant accounts has not changed since 1989, even though the need to update and modernize the legislation has been well established. The draft legislation was developed and finalized over six years ago in response to weaknesses and challenges identified in the current legislation by the commercial banks, offshore banks and the Central Bank. Consistent with responsible governance, the Government is moving expeditiously to conclude this outstanding matter. The amendments will allow for better overall administration of the dormant account regime. It was also bring greater clarity to the definition of dormancy and allow institutions holding other facilities which meet this definition to turn these over to the Central Bank.  

6. What do other countries do about dormant accounts?

The draft legislation took into account leading practices around the region and world, including in countries such as Australia, Barbados, Canada, Ireland, New Zealand, the United Kingdom, Switzerland and the United States. It was issued for consultation back in 2014 and the final draft was completed by 2016 following feedback from the public and the financial institutions.

7. Why is the Government getting $41 million?

Of the $88.7 million held in dormant accounts by the Central Bank as at end-June 2018, $41.3 million had been unclaimed for a further ten years or more.  The initial seven years of dormant status with the financial institutions, together with this additional ten years constitute the new seventeen year threshold set by the new legislation to extinguish any claims to these funds. The funds in these long-standing dormant accounts would now, by law, be transferred to the Consolidated Fund.

8. How is the money going to be used? 

The Government proposes to invest these funds to start the Disaster Relief Fund, previously announced as part of the Government’s fiscal strategy. This demonstrates to Bahamians and the international community the Government’s seriousness at mitigating the material risk to fiscal sustainability and economic resilience of natural disasters. The phenomena of global warming has increased both the frequency and ferocity of hurricanes in the region. Definitive measures are needed to minimize the potential havoc that mega storms can wreak on the fiscal welfare of small island nations, like The Bahamas.

9. Will any other money go into the Disaster Relief Fund?

The Government’s long-term fiscal sustainability plans include provisions to set aside a small percentage (0.5%) of GDP, annually, for investment in the Disaster Relief Fund. This will commence in 2020.  The International Monetary Fund, in its recent Article IV Report on The Bahamas, has placed the optimal size of such a fund at between 2% and 4% of GDP, that is, some $200 to $400 million. The Bahamas plans to grow the Fund over time. All countries in the region grapple with fiscal constraints that limit their ability to substantially capitalize disaster relief funds. The Government’s policy on the use of proceeds from dormant accounts to invest in a fund is an innovative policy proposal.

10. How is the Disaster Relief Fund going to be safe guarded?

The Government plans to set up a legal structure for the Disaster Relief Fund with a built-in oversight and accountability framework. The structure, utilization and reporting on this Fund will comport to international standards of accountability and transparency. Until a legal framework is created, the Central Bank of The Bahamas will segregate the funds and continue to hold and manage them on behalf of the Disaster Relief Fund.