US report lists Guyana as ‘major’ money laundering state
-points to weaknesses in AML fight
Guyana is among 14 Caricom countries listed as “major money laundering” nations in the March 2017 International Narcotics Control Strategy Report (INCSR), despite the implementation of a legislative framework, and according to Minister of Finance Winston Jordan this now adds to the country’s misery.
The report, which was compiled by the US Department of State and released recently, said that ill-equipped investigative agencies and the lack of cooperation from the business community are hampering Guyana’s ability to successfully tackle this issue. Canada and the UK were also listed as major laundering nations
The report focuses on two areas – Drug and Chemical Control (Volume 1) and Money Laundering and Financial Crimes (Volume 11) – and a report on Guyana was included in both.
All Caricom member states, except Montserrat, are included on the list 106 countries described in the report as “major money laundering” countries in 2016.
Barbados has already rejected the contents of the report, describing it as “baseless” and “misleading.”
Recently Barbados Minister of Industry, International Business, Commerce and Small Business Development Donville Inniss called for a joint regional reaction against the classification.
On Thursday, Jordan was asked about the possible impact of the contents of the report. While he acknowledged that he had not yet read it but had seen the media headlines, he said that the region will have to take collective action to deal with “whatever fallout may come from such bold headlines.”
He said that Guyana is already “under the gun” as it relates to money laundering and havens of offshore facilities and these have contributed to the de-risking by international banks which has taken place over the last five years.
“This now adds more to our misery. To lump all the countries which might be at various stages of the implementation of the money laundering legislation, to lump 14 countries which don’t appear on either FATF or CFATF list of countries in default, it is a sad blow to the Caribbean and it is a denial of recognition of the efforts made by all of these countries…to making our countries safer, to rid our countries of bad money,” he said.
He added that the region as a collective will now have to go back to the drawing board and come up with a plan of action to deal with the bold headlines.
The report states that Guyana’s geographic location makes it attractive for transnational organized crime groups, including human and drug trafficking organizations and the country continues to be a transit country for South American cocaine destined for Europe, the United States, Canada, West Africa, and the Caribbean.
In the report, a major money laundering country is defined by statute as one “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.”
According to the report, “there is a culture of using informal networks to move money between Guyana and the diaspora, and Guyana has a large cashbased economy.” It was also stated that many criminals use cash couriers or familial networks to move large sums of money between Guyana and the United States.
Exchange houses
Unregulated currency exchange houses, the report said, also pose a risk, as they are used both
‘To lump all the countries which might be at various stages of the implementation of the money laundering legislation, to lump 14 countries which don’t appear on either FATF or CFATF list of countries in default, it is a sad blow to the Caribbean and it is a denial of recognition of the efforts made by all of these countries…to making our countries safer, to rid our countries of bad money’ – Finance Minister Winston Jordan
for the exchange of currency and to transfer funds to and from the diaspora. In addition, casinos are legal in Guyana and these pose a risk for money laundering. Guyana has one casino.
It was pointed out that in 2013, the Caribbean Financial Action Task Force (CFATF) issued a public statement noting significant strategic deficiencies in Guyana’s anti-money laundering (AML) regime and declaring Guyana a money laundering risk to the international financial system. Subsequently, the government created an action plan to address noted deficiencies and, in mid-2015, passed amendments to update its AML legislation to include a definition of beneficial ownership and broaden the definition of property subject to confiscation, among other improvements, the report said adding that in 2016, the CFATF removed Guyana from its public statement.
According to the report, the primary sources of laundered funds are believed to be narcotics trafficking and corruption. However, the laundering of proceeds from other illicit activities, such as human trafficking, contraband, illegal natural resource extraction, and tax evasion, is substantial.
It stated that common money laundering typologies include the use of fictitious agreements of sale for non-existing precious minerals to support large cash deposits at financial institutions; crossborder transport of small volumes of precious metals, declared as scrap or broken jewellery to avoid scrutiny by the relevant officials and the payment of relevant taxes and duties; trade based money laundering (TBML) using gold; and the use of middleand senior-aged cash couriers for the cross-border transport of large sums of US dollars.
The report said that the Government of Guyana has legislation in place that could enable a “more effective response” to the threat of money laundering. It reminded that in June, 2015, Guyana passed and began to enforce the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Amendment Act, seeking to address remaining deficiencies in its AML regime, such as the availability of proportionate and dissuasive sanctions.
Guyana, it was noted, has comprehensive Customer Due Diligence (CDD) and Suspicious Transaction Report (STR) regulations in the financial sector. There is also a records exchange mechanism in place with the United States, the report said, before adding that Guyana is a member of the CFATF, a FATF-style regional body.
With regards to AML deficiencies, the report stated that international experts recommended Guyana make major improvements to its AML regime: adequately criminalize money laundering; to establish a fully operational and effectively functioning FIU (Financial Intelligence Unit); institute effective measures for customer due diligence and enhanced financial transparency; and establish adequate STR requirements.
The report said that to correct noted deficiencies, Guyana passed the AntiMoney Laundering and Countering the Financing of Terrorism Regulations 2015; issued the Guidelines on Targeted Financial Sanctions 2015; and completed amendments to the AML/CFT Act in 2015 and 2016. Guyana’s AML regime also extends to legal persons and provides for enhanced due diligence for politically exposed person (PEPs), it said.
Though created in 2003, the Financial Intelligence Unit was severely understaffed and ineffective. In June, 2016, a new director of the FIU was appointed, and the functional capacity of the unit has been enhanced. Guyana, the report said submitted a letter of interest to join the Egmont Group of FIUs in 2011 but this is still being considered.
The report said although the AML legislation gives the FIU authority to investigate alleged money laundering, the entity does not have the capacity to conduct such investigations and as such the Special Organized Crimes Unit (SOCU ) investigates those cases referred to it by the FIU.
“The effectiveness of these agencies at investigating money laundering is limited, as they lack adequate human resources, training to ensure successful prosecutions, and a strong interagency network,” it added, while noting that lack of co-operation by the business community also hinders Guyana’s AML efforts.
Despite its limited staffing capacity, the report said that in February, SOCU seized roughly US$80,000 worth of local and foreign currency and arrested two persons suspected of money laundering. This was the first seizure under Guyana’s updated AML legislation.
It recommended that Guyana raise awareness and understanding of AML laws and implementation procedures, through training and the publication of guidelines, within the judicial system and in agencies with the authority to investigate financial crimes. STR requirements, wire transfers, and customer due diligence regulations should be strengthened and additional resources extended to the FIU and SOCU, the report said.