Combating Financial Crime in the Region (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 continues 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 II)
The proceeds of crime are derived from a vast assortment of oppressive and yet profitable activities such as the drugs and firearms trade, prostitution, human trafficking, corruption, large-scale theft of money, blackmail and extortion, customs and Value Added Tax fraud, and illegal exportation of new or used vehicles, fraud, forgery, terrorism and the smuggling of items ranging from illegal alcohol and tobacco to historical icons or works of cultural importance.
WHAT IS EXPECTED OF THE BUSINESS COMMUNITY
The fundamental precepts of all internationally adopted measures to combat the laundering of money and financing of terrorism are (1) that the banking and business sectors will, in general, not knowingly deal with the proceeds of crime (2) that the business world will take steps to identify their customers as well as their source of funds, and (3) that should suspicion arise at any stage of a financial relationship, of suspected involvement in money laundering and/or criminal activities as a result of incomplete, conflicting or incongruous information, such activity would be reported forthwith to the relevant official body.
Trinidad and Tobago has an extremely viable business environment and financial institutions have played a central role in the economy by providing the necessary links to economic growth and stability. Local history has shown that a great deal of confiscation of proceeds from illegal activities originates from reports of suspicious activity and further investigations carried out by competent authorities. Successfully laundered money has a concealed provenance so that criminals are continuously seeking out and identifying weak points in the country’s financial and business infrastructure.
Organized crime is vulnerable at the point of sale; however the placement of cash into the financial system must bear continued focus and attention since asset cloaking techniques have become extremely sophisticated. This calls for a strong and collaborative relationship between the regulated sector and designated anti- money laundering authorities such as the Financial Intelligence Unit, the Central Bank of Trinidad and Tobago and Securities and Exchange Commission.
CURRENT TRENDS IN ‘CLOAKING’ OF ASSETS
More recent techniques used by launderers include:
(1) assignment of title to trusted nominees
(2) involvement of intermediaries
(3) trust arrangements specifically designed to facilitate estate and pre-marital planning, wealth transfer, tax deduction strategies, including moving trusts off-shore
(4) transferring assets to a corporation, having regard to the fact that corporate commercial law offers an array of mechanisms by which assets can be held – a corporation can have a trustee of property and a series of corporations can be structured through horizontally and vertically integrated entities, both domestic and off-shore
(5) asset collateralization and equity stripping – in the former, a thinly capitalized corporate entity can be maintained, having stripped out assets through dividend payments; the latter technique entails conversion of proceeds and thereafter borrowing money on the strength of equity – a portion of the tainted proceeds thus becomes transformed into cash from a seemingly legitimate source.
Trinidad and Tobago is endowed with an extremely sophisticated business and banking environment – a fact duly noted in this country’s (Caribbean Financial Action Task Force (CFATF) Third Round Mutual Evaluation Report. The CFATF which partners closely with the International Cooperation Review Group (Americas) will be focusing on specific aspects of this country’s laws during the Fourth Evaluation Round of Country Assessments due to commence in 2011-2012.
NEED TO STRENGTHEN LAWS FURTHER
A very pertinent aspect is the enactment of legislation permitting civil forfeiture, an important tool that enables governments to recover criminal proceeds as part of the sentence imposed in a criminal case. By allowing forfeiture laws to have a civil component, the State could recover the proceeds of crime whether there is a criminal prosecution of the wrongdoer or not. Action is thus brought against property (in rem) instead of against a person (in personam). Case law presents several instances whereby civil forfeiture becomes necessary – where the forfeiture is uncontested; where the defendant has died; where the wrongdoer is unknown; where property belongs to a third party; where the wrongdoer is a fugitive or, in rare instances, where the interests of justice do not require a criminal conviction.
The Chamber has noted the need for Trinidad and Tobago to maintain a favorable reputation among international partners politically as well as in the business and financial spheres and is highly supportive of the efforts of Government. The Chamber is similarly mindful of the deleterious effects of international censorship on countries that have in the past displayed strategic deficiencies and deemed “uncooperative” by international peers in relation to the global effort to combat the laundering of money and financing of terrorism.
GOVERNMENT AND CFATF ASSURED OF CHAMBER’S SUPPORT
Recommendation 21, in particular, urges countries to give special attention to business relationships and transactions with persons, including companies and financial institutions in countries which either do not or insufficiently apply the Financial Action Task Force (FATF) Recommendations. Accordingly, the Chamber expresses optimism that a culture of bi-partisanship pervades the legislative process in Trinidad and Tobago as our Government seeks culmination in adhering to unfulfilled CFATF Recommendation requirements, more specifically the full grooming of a Financial Intelligence Unit.
Finally, the Chamber commends the Caribbean Financial Action Task Force for pro-activity in devising a 2011-2015 Strategic Plan along with guiding principles that take into account the specific concerns of its twenty-nine Members. Trinidad and Tobago (and indeed the Chamber’s membership) stands ready to benefit from plans of the CFATF to deliver Technical Assistance and Training Programmes that would build capacity and promote greater synergy between the business sectors and competent authorities, their powers and resources. Already the CFATF has concluded an assessment of the training interests and needs of members (December 2010), prioritized these needs with the support of a technical assistance matrix (December 2010) and scheduled training and technical assistance (February 2011). Equally noteworthy is the resolve of the CFATF to promote diplomatic missions through interface with the new administrations of Member countries, while actively continuing to canvass on the importance and implications of full compliance.
