MEET THE BANKING REGULATOR WITH AN 8,000-MILE COMMUTE ^∧

By MAX COLCHESTER, Wall Street Journal, 16^th June 2015{3}

Remote St Helena has a volcano, Napoleon’s empty tomb and a bank regulator who sails in

One day in February, a British bank regulator caught the boat on his regular commute.

Six days later, Chris Duncan arrived at work on a remote island in the South Atlantic Ocean. The critical things were there: Napoleon Bonaparte’s empty tomb; Jonathan the tortoise; the stacks of cash to count in what may be the world’s smallest regulated financial system.

Mr. Duncan is Chairman of the Financial Services Regulatory Authority of St Helena, a rocky tropical isle 1,200 miles off Africa’s coast. Amid burgeoning global financial regulation, even tiny outposts need oversight, Mr. Duncan says.

Could the financial system of St Helena, population about 4,600, ever implode? “Yes,” he says. Among other things, “the bank is on top of a volcano.”

St Helena is a British Empire relic. Queen Elizabeth II has executive authority over it. The U.K. helps appoint the governor{11} who administers its122Km².

The only way to get there is by sea, as Mr. Duncan does every year. There isn’t cellphone reception. It has a currency - the St Helena Pound - but no ATMs. It has one bank and, hence, needs a bank regulator.

Its residents, many of British, Asian or African origin call themselves ‘Saints.’ Some are descendants of settlers who made it a stopover for sailing ships after its discovery, uninhabited, in the 16^th century. Today, big exports are fish and an expensive coffee said to have been enjoyed by Napoleon, who died there in exile and was later reburied in France.

The volcano that created the island is extinct, not much of a threat to its financial system. But St Helena faces upheaval of another sort: It is preparing for a global debut when its first airport opens next year.

“We will be the newest tourist destination in the world,” says Niall O’Keeffe, chief executive for economic development at Enterprise St Helena, which promotes investment into the island.

Touted attractions include picturesque walks, Napoleon’s first tomb and Jonathan, a giant tortoise that lives on a colonial-mansion lawn and may be 183 years old. The rocky coastline doesn’t offer white-sand beaches, but it is pleasantly warm year-round.

Mr. O’Keeffe hopes airplanes will bring visitors to invigorate an economy long reliant on U.K. subsidies. Mr. Duncan worries visitors may include shadier types, perhaps money launderers aiming to exploit the offshore banking system. “I have been preparing for the time,” he says, “when the potential eyes of criminals will come into focus on such a place.”

Thousands of miles north, from his house on England’s south coast, 67-year-old Mr. Duncan can oversee much of what happens at the island’s bank via computer.

But some things he just can’t see without going.

The credit-card system is limited, so cash prevails for many things. The Bank of St Helena’s busiest day is Thursday, says Rosemary Bargo, its general manager. That is when fresh vegetables arrive and a queue snakes outside as customers withdraw cash.

It once hand-delivered pay envelopes to government workers, who then queued to deposit them back. Now there is online banking; the bank expects an ATM soon.

The bank closes at 3 p.m. “But on the upside, there’s rarely any reason to spend money after dark anyway,” says August Graham, a Briton who recently moved to the island.

Mr. Duncan spent his career with British bank Barclays PLC working in West Africa, Japan and South Korea. Four years ago, as Mr. Duncan lined up at a lunch buffet for Barclays retirees, a former colleague suggested the St Helena job.

After consulting a map, he applied. “In retirement,” he says, “I have refused to go to the golf course.”

Mr. Duncan takes his St Helena trip in February, when British weather is inclement.

It is a regulatory odyssey. Flying the roughly 6,000 miles to South Africa, he boards a Royal Mail Ship for St Helena, about 2,000 miles away. It boasts a fine galley, and sometimes passengers play cricket on deck. When it storms, he reads banking rules on his bunk.

Disembarking at the capital, Jamestown, he dons blazer and tie and embarks on a whirlwind tour. After checking in to a bed-and-breakfast, he meets the governor and bank management.

He goes on a radio phone-in show. “I get asked, ‘Is my money safe?’ and I say ‘Yes, it is.’”

Mr. Duncan takes a hands-on regulatory approach. He looks inside the bank’s Victorian-era vault and inspects the bank notes that make up its £500,000 customer cash reserves. He visits the pub for local gossip. “It’s important to really kick the tires.”

Outside a few minor procedural issues, he hasn’t found anything amiss.

More problematic is overseeing other islands under St Helena’s jurisdiction, including Tristan da Cunha, an archipelago of about 300 residents 1,500 miles farther south.

The archipelago includes Inaccessible Island and has no bank branch. “I don’t know what they do there,” Mr. Duncan says, adding he can’t justify the cost of visiting and relies on emailed reports and phone calls. Sometimes, he says, the U.K. Foreign Office calls him to check if the islands are solvent.

He isn’t worried St Helena’s government-owned bank is “too big to fail” but about how its 36 staff handle a visitor influx. He wants it to keep up with a global push to make banks safer, particularly by increasing money-laundering controls like identity checks.

Ms. Bargo, the bank manager, says its ‘Know Your Customer’ protocols are up to scratch: “We know everyone on the Island.”

Off work, Mr. Duncan hikes, fishes and visits Jonathan. He soon ships back out: “A week for me is fine.”

See also: Notes and Coins of St Helena