Uproar after Butterfield stamp duty collection glitch

A late afternoon email from Butterfield Bank to its Cayman customers announcing that they would be charged retroactively for unpaid government stamp duty on debit transactions led to an avalanche of complaints from outraged account holders on Thursday.

The email informed customers that the 25 cents government stamp duty on “qualifying debit transactions” had not been charged to their accounts from 1 Oct. 2023 to 31 March 2024, and that those charges would be debited automatically from their accounts on Friday, 27 Sept. It noted that customers would see the total amount on their online statement the same day, reflected in a single charge.

It did not explain why the fees had not been collected during that six-month period, nor how much customers were expected to pay.

Bank capping unpaid stamp duty at $15

In a response to queries from the Compass, the bank on Friday afternoon issued a statement, which read: “Due to a software issue, Cayman Islands Government Stamp Duty of $0.25c per transaction was not collected on certain debit card transactions and internal online transfers made by Butterfield clients following the update of Butterfield Online.

“We have informed our clients of the charges, which amount to a maximum of $15 per account, and moved the collection date to 31 October, 2024. We sincerely apologise for any inconvenience caused.”

The bank also sent a further email to its customers on Friday afternoon, advising them of the software error, and saying that the collection date for the stamp duty had been moved to 31 Oct.

It also noted that all associated charges will be capped at $2.50 per month, per account, to a maximum of $15.

A Compass reporter, who is also a Butterfield account holder, had earlier contacted the bank’s customer service line, and was informed that not all customers who received the email were affected, and that any customers who did not see the fee charged to their account on Friday were not among the clients impacted.

He said, however, that “thousands” had been affected by the glitch that led to the stamp duty not being collected.

The customer service representative said the bank had decided to cap the unpaid fees charged to affected customers at $2.50 a month, or a maximum of $15 for the six-month period, regardless of how many debit card transactions had been made during that time.

Mandatory stamp duty

Richard Lewis, chief operating officer of Cayman Islands Bankers Association told the Compass that all debit transactions on all bank accounts are subject to the government stamp duty fee of 25 cents.

“It’s a government transaction,” he said. “It has nothing to do with the bank really, but it’s the bank’s obligation to collect the funds and remit them to government.”

The Cayman Islands Monetary Authority publishes an annual breakdown of fees paid by bank customers, which includes the 25 cents government stamp duty, as well as the various other charges implemented by the banks.

Angry customers

Many customers who took to social media Thursday night and Friday to complain about the bank’s plan to charge them retroactively noted that, when they checked their accounts online, they found they had paid government stamp duty between October last year and March this year. They queried whether they were now going to be charged another 25 cents on every debit card payment on top of that.

One wrote, “Absolutely ridiculous! Robbery in my eyes. How can they just debit our accounts for THEIR error!”

Another wrote, “How on earth can they justify 12-hour notice to debit 6 months worth of stamp duty?”

A customer also wrote, “The worst thing is that nobody will know the amount that is correct – nobody will have tallied up the amount of times they used their card since October. Their problem not ours. How is this legal?”

Another urged other customers to call and complain, saying, “Even if the amount charged for me is small, I made a complaint about it. The way they act and the fact that we received an email the day before without any information is outrageous.”

Others questioned the authenticity of the email, wondering if the bank’s email account had been hacked. Calls to the phone number supplied in the email determined that the email was genuine.

‘Know Your Customer’ compliance complaints

Butterfield over the past year has also been coming under fire from disgruntled customers after the bank implemented strict banking compliance requirements amid increased scrutiny over money-laundering threats. Some customers who failed to send in the extensive paperwork the bank requested in its ‘Know Your Customer’ requirements found themselves locked out of their accounts.

Customers, many of whom have had the same bank account and the same job for decades, were asked to provide proof of funds for their current account, as well as notarised or certified identity documents. 

Butterfield Bank customers were alerted to the requirement, in most cases by email, and warned that they risked having their accounts being impacted if they did not comply within 30 days. However, as the Compass reported last month, several account holders said the emails went into their junk folder, or they assumed the emails were spam, and they were unaware of the requirement until they found their accounts blocked.