Combating Financial Crime in the Region (Part 3)
(Read Part II)
There has been a growing concern, by both the Bankers Association and the Chamber about the possible fallout from identified strategic deficiencies in Trinidad and Tobago’s anti-money laundering architecture. This week the Chamber concludes a three-part series on the national effort to combat the laundering of money and financing of terrorism. These articles both inform the reader on the subject matter and discuss some of the implications for non-compliance.
Combating Financial Crime in the Region, Part 3: The internationally imposed sanction of blacklisting and its implications.
In Part 11 of the current series, the Chamber adverted to some of the more insidious modalities being employed by money launderers to cloak criminal proceeds and to the fact that immediate corrective measures have been advocated by the International Cooperative Review Group (Americas) for Trinidad and Tobago to keep in step with international anti-money laundering standards.
Preliminary warning of Trinidad and Tobago’s tenuous non-compliant status mushroomed from as far back as 2007, following release of this country’s Third Round Mutual Evaluation Report. The Executive Director of the Task Force echoed the concerns of the global community in these words –
“Robust and expeditious action to rectify deficiencies in Trinidad and Tobago’s anti-money laundering and combating the financing of terrorism architecture will undoubtedly be rewarded with rich dividends. Inaction or delay however, will be crucial to this country’s reputation and standing, attract censure from the international community and stymie moves to become the region’s premier financial centre.”
{Ref. Transnational Organized Crime Threat Assessment 2007 – Securing All Frontiers for Safe Communities pp 34-35}.
These remarks would presage the designation of Trinidad and Tobago in 2009 as a jurisdiction earmarked for“enhanced scrutiny” and subjected to a rigorous “Follow-Up Process” on account of identified strategic deficiencies in its anti-money laundering architecture. Imminent “blacklisting” in 2011 is now the ultimate in a series of externally-propelled escalated action being taken to stimulate full compliance.
Staving off “blacklisting” entails the adoption of three specific corrective measures advocated since February 2010 by the Financial Action Task Force in Abu Dhabi, and subsequently re-iterated in CFATF Plenary Sessions in May and November 2010. These are:
(1) Establishment of a fully operational and effectively functioning Financial Intelligence Unit, endowed with supervisory powers
(2) Implementation of adequate procedures for the confiscation of money laundering funds; and
(3) Putting into action legally enforceable procedures to identify and freeze terrorist assets, without delay.
BLACKLISTING AND ITS IMPLICATIONS
Trinidad and Tobago can draw upon lessons learnt from the experiences of other CFATF members in the early 2000s when specific countries found themselves at the punitive edge of international censorship and were designated as “non-cooperative” with the global anti-money laundering effort. This course of action was initiated by the International Cooperation Review Group (ICRG), as an arm of the FATF.
In June 2000, the Bahamas, Dominica, St. Kitts and Nevis and St Vincent and the Grenadines were among the first countries in the hemisphere to be blacklisted. In September 2001, the Bahamas was removed and Dominica, Grenada, St Kitts and Nevis and St Vincent and the Grenadines remained on “the list.” By June 2002 when the list was re-visited by FATF, Dominica, Grenada and St Vincent and the Grenadines were refused reprieve, with Grenada being removed in February 2003.
The removal of an unenviable accolade that has been internationally conferred on a country is a demeaning, protracted, and non-negotiable process entailing an unforgiving history and harsh political realities. Countries which have been called upon (as is now the case of Trinidad and Tobago) to expedite legislative measures to either pre-empt listing or as a prerequisite for their removal from “the list” are obliged to demonstrate that enhanced laws are in fact being successfully invoked and applied.
The calculus for “success” in this instance translates into successful criminal prosecutions, rather than a formidable and impressive trail of investigative and judicial paper work. This is a basis for further delay in being removed from “the list”.
History has demonstrated that during this interim period the economies of listed countries had virtually collapsed, dragging in their wake diminished trade, inflationary trends and stalled investment opportunities. The full brunt of Recommendation 21 was brought to bear, that is to say, members of the international community were served with advisories by their supervisory regional bodies urging the exercise of extreme caution in doing business with “listed” countries and the rigid application of due diligence standards in dealing with companies, financial institutions and individuals.
Moreover, the conduct of international business was subjected to long delays and as a consequence, became costlier. Parallel to this,correspondent banks, seeking to protect their interests moved swiftly to avert their possible use as gateways for illicit money flows. The element of trust, which is crucial for smooth business relations, was effectively ousted. Compounding all of this was attendant reputational ramifications.
This and more was the experience in the early 2000s.
The Bankers Association of Trinidad and Tobago (BATT) have signaled that the effects of some of these measures are already being felt.
STATUS OF COMPLIANCE AND FUTURE WORK PLAN
What does the current and future landscape look like, domestically?
The first tranche of legislative activity culminating in the mid-2000s entailed amendments and enactments that addressed FATF Recommendations 1, 5,10 and 23 – procedures that compelled the criminalization of money laundering for predicate offences, reporting of suspicious transactions, the institution of systems for record keeping within the regulated system and the exchange of information among authorized bodies.
The second phase of legislative work, promoted in the late 2000s, was directed at fulfilling Special Recommendations II and IV. These pertain to the criminalization of terrorist financing and reporting of suspicious transactions related to terrorism.
The current agenda commits to installing a fully operational FIU as a central facet of this country’s AML/CFT regime and institutionalizing procedures to identify and freeze terrorist assets without delay. Already, FIU legislation and Terrorist Financing Regulations have been dispensed with in Parliament.
In terms of the way forward, the Terrorist Financing Regulations, now have to be open for scrutiny by the FATF (before June 2011) to ensure that they adequately address the prescribed special and general criteria for the freezing and seizing of assets, pursuant to relevant United Nations Resolution requirements, to which we are legally bound.
Further to this, an “on-site visit”to Port of Spain must be scheduled by the FATF with the objective of scrutinizing the operations of the recently established Financial Intelligence Unit and determining its congruence with standards set by its parent body, the Egmont Group. Prevailing employment practices, inclusive of hiring and integrity testing of prospective employees, mechanisms and protocols for the collection, receipt, analyzing and sharing of financial information, the capacity to stop transactions deemed suspicious as well the quality of cooperation displayed with local and international partners, would undoubtedly feature in this on-site assessment.
Upon the fulfillment of these benchmarks Trinidad and Tobago’s Financial Intelligence Unit will finally qualify for formal admission to the Egmont Group of Financial Intelligence Units, the meridian of FIU accomplishment, that is long overdue.
All of this requires tenacity of purpose and rigid adherence to a formidable timetable.
The Chamber joins with its members and BATT in registering our unwavering support for the national effort to successfully confront these critical issues with the due expediency.
