Keeping anti-money laundering in

focus

There has been quite a lot of information circulating as it pertains to legislation of Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) and much of that information has to do with how complaint Guyana is with respect to the accepted requirements. But what might not have been so clearly outlined is; what exactly is AML/CFT, what are its implications, why is it important and why is Guyana being forced to implement it? According to the International Monetary Fund (IMF) criminal activities, such as drug trafficking, smuggling, human trafficking, corruption and others, have the propensity to generate large amounts of profits for the individuals engaged in criminal activities. However, “by using funds from such illicit sources, criminals risk drawing the authorities’ attention to the underlying criminal activity and exposing themselves to criminal prosecution. In order to benefit freely from the proceeds of their crime, they must therefore conceal the illicit origin of these funds.” And this is where money laundering comes in, “money laundering” the IMF posits is the process by which proceeds from a criminal activity are disguised to conceal their illicit origin. Moreover, “according to the Vienna Convention and the Palermo Convention provisions on money laundering, it may encompass three distinct alternatives, the first being the conversion or transfer, knowing that such property is the proceeds of crime.” Secondly “the concealment or disguise of the true nature, source, location, disposition, movement or ownership of or rights with respect to property, knowing that such property is the proceeds of crime.” Thirdly, the “acquisition, possession or use of property, knowing, at the time of the receipt, that such property is the proceeds of crime.” Now the financing of terrorism has to do with collection or provision of funds with the intention of using the said funds to support terrorist acts or organizations. Funds may stem from both legal and unlawful sources. “More precisely, according to the International Convention for the Suppression of the Financing of Terrorism, a person commits the crime of financing of terrorism if that person by any means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out” an offense within the scope of the Convention,” the IMF states. The international standard for the fight against money laundering and the financing of terrorism has been established by the Financial Action Task Force (FATF), which is a 33-member organization with principal responsibility for developing a global standard for anti-money laundering and combating the financing of terrorism. The FATF was established by the G-7 Summit in Paris in 1989 (now the G-20) and works in close cooperation with other key international stakeholders. The FATF has an extended body known as the Caribbean Financial Action Task Force (CFATF) to which a host of countries within the Caribbean basin have signed on to and agreed to implement AML/CFT policies. Guyana is one of those signatory countries. So in essence, Guyana’s directives for its fight in AML come from CFATF. The IMF states that fighting money laundering is integral, especially on the global front, since the consequences of allowing money laundering has far-reaching effects. “These include risks to the soundness and stability of financial institutions and financial systems, increased volatility of international capital flows, and a dampening effect on foreign direct investment. The problem is global; money launderers and terrorist financiers exploit loopholes and differences among national AML/CFT systems and move their funds to or through jurisdictions with weak or ineffective legal and institutional frameworks.” What the CFATF seeks to do is make recommendations to countries that are weak in their AML/CFT fight to put legislative measures in place to enable them to fight money laundering and financing for terrorism on par with other countries that are complaint. Should those recommendations fall on deaf ears then counter measures are instituted on defaulting countries in the form of blacklisting to deter the defaulting country and force them into compliance so as to eliminate the money laundering and terrorist financing risks emanating from each jurisdiction. When a signatory country is blacklisted, its members are called upon to consider implementing counter measures to protect their financial systems from the ongoing money laundering and terrorist financing risks emanating from the blacklisted country. So, for example, banks from other jurisdictions would protect themselves by cutting of financial ties with a host country that has been blacklisted and the influx of foreign investment is also significantly curtailed due to the blacklisting status that is given to a defaulting country. Guyana was cited by the CFATF in 2011 as a country with significant strategic deficiencies in its AML/CFT mechanism. As such, CFATF developed a plan as well as deadlines for Guyana to address its AML/CFT deficiencies. According to the FATF “as a result of not meeting the agreed timelines in its Action Plan, the CFATF issued a public statement in May 2013 recommending that Guyana take steps to ensure that it addressed its AML/CFT deficiencies. Guyana has made efforts to address its deficiencies, however, it has not taken sufficient steps towards improving its AML/CFT compliance regime by failing to approve and implement required legislative reforms.” Guyana, for political reasons that have been highlighted extensively, could not meet the required deadlines proposed by CFATF, the consequences of which saw the country being blacklisted along with other defaulting countries. Guyana must now put legislative mechanisms in place for AML/CFT, as well as show signs of implementation before the CFATF’s extended deadline in May 2014, or it will be reviewed by the ICRG (FATF’s International Co-operation Review Group) and sanctioned with a higher tier of blacklisting which will effectively take years before the country can be relieved of the blacklist status, all the while feeling the sanctions. “Guyana must therefore pass the relevant legislation and implement all the outstanding issues within its Action Plan including, fully criminalising money laundering and terrorist financing offences, addressing all the requirements on beneficial ownership, strengthening the requirements for suspicious transaction reporting, international co-operation, and the freezing and confiscation of terrorist assets, and fully implementing the UN [United Nations] conventions,” FATF unambiguously asserts.