The Cost of Compliance: Jamaica’s Foreign Exchange Market

For Jamaica's licensed foreign exchange dealers, following the law comes at a price. Every year, they invest thousands of dollars in licensing fees, audits, staff training, compliance programs, and security to meet the Bank of Jamaica's regulatory standards. Yet many operators say they continue to lose customers to informal currency exchangers who operate without the same obligations, raising questions about whether the country's regulatory system is creating a level playing field.

Image Source: Jamaica Observer

"We're doing everything by the book, but many customers simply go elsewhere," said a compliance officer at one of the busiest cambios in St. Ann.

To obtain and maintain a foreign exchange licence, operators must satisfy the Bank of Jamaica's strict requirements. According to the compliance officer, licensing fees range between US$2,000 and US$3,000 per year. In addition, the company also pays for independent internal audits costing between J$300,000 and J$500,000 annually. Staff must also complete regular compliance training, with an additional cost between J$15,000 to J$25,000 per person.

The struggle for business operations extends further, the officer explained.

Under current Bank of Jamaica guidelines, customers conducting certain transactions at a local cambio must provide identification and documentation showing the source of their funds. 

"Most customers reply that customs allow US$10,000 into the country, so why are these questions being asked?" he explained. "Some become upset and even curse our tellers."

According to the officer, some customers become frustrated and ultimately choose not to complete their transactions at licensed cambios. Instead, he says, they exchange money at supermarkets, stores, or through informal exchanges where they believe fewer questions will be asked.

For licensed operators, that trend raises broader concerns about fairness within Jamaica's foreign exchange market. The compliance officer argues that while licensed cambios face licensing costs, banking requirements, security expenses, staff salaries, rent, utilities, audits, and extensive compliance obligations, informal exchangers operate without many of the same apparent costs. He also says maintaining banking relationships has become increasingly difficult, commercial banks have become more cautious because of increasingly strict know-your-customer (KYC) and anti-money-laundering requirements.

However, the consequences of informal currency exchange extend beyond lost revenue. The office recalled one incident in which, according to his account, a customer who exchanged money with an informal trader was allegedly followed and robbed by the same individual. 

He points to countries such as Colombia and Canada, where travellers are more clearly directed to licensed banks and authorized foreign exchange dealers. He believes Jamaica could adopt a similar approach by providing guidance at airports and ports of entry, helping visitors understand where they can legally and safely exchange foreign currency.

At the heart of the issue is not whether Jamaica  should stop regulating foreign exchange, but whether those regulations are being enforced fairly. Licensed cambios acknowledge the importance of anti-money-laundering measures and customer due diligence. However, they argue that while legitimate businesses absorb the costs of compliance, unlicensed operators continue to exchange currency with little apparent oversight. This is about creating a system where following the law is rewarded rather than becoming a commercial disadvantage.

If licensed operators invest thousands to comply with the law, should they be competing with businesses and individuals who operate outside those same rules?