Introduction
For the remaining columns in this series on money laundering in Guyana, I shall concentrate on portraying a strategic road map for the way ahead, in light of the current impasse in Guyana’s relations with the Caribbean Financial Action Force (CFATF). The columns presented so far have been informed by a Memorandum entitled, Guyana: Anti Money Laundering and Countering the Financing of Terrorism and Proliferation – The Way Ahead, which I have submitted to the Special Select Committee, established by the National Assembly.
The road map for the way forward begins with four Guideposts. These are 1) The size and scale of the money laundering threat 2) Assessment of government’s strident demands for the immediate passage of the legislative amendments before the Special Committee 3) The dimensions of Guyana’s money laundering situation and 4) the core weaknesses of Act №. 13 of 2009, which the legislative amendments seek to address. These are discussed respectively below.
Guidepost 1: Size and Scale
The most important strategic consideration for devising a way ahead is the magnitude of the threat posed by money laundering. Both the FATF and the CFATF have adopted the position that because these matters are criminal in nature, nobody can measure their true magnitude. This is correct, but the use of proxy indicators, combined with personal judgements have useful roles to play in providing estimates. Several renowned international organisations have offered such estimates; for example, the IMF and several United Nations’ “specialized agencies”. Furthermore, several studies have attempted to estimate the size of the underground economy in Guyana, a phenomenon closely related to money laundering.
One of those studies is by Faal 2003, covering the period 1970-2000. In that study Faal argued tax evasion is the driving force behind Guyana’s underground economy. This is useful for our purposes because tax evasion is the most important driver of money laundering. Faal’s estimates are provided in the Schedule below. For the decades, 1970s, 1980s and 1990s to 2000, these reveal the average size of the underground economy was 40, 76, and 47 percent respectively of official GDP. Thomas, Jourdain and Pasha (2011) have applied Faal’s techniques (adjusted) to Guyana for the period 2001-8 and obtained an estimate of 61 percent (see Schedule).
Schedule: Guyana: Underground Economy
(Faal Method)
Period Average size (% of official GDP)
1970s 39.70
1980s 76.00
1990-2000 47.18
2001-2008 61.00
Source Thomas, Jourdain and Pasha, Transition Issue № 40, 2011
These proxy indicators suggest the size and scale of the money laundering problem is considerable. This assessment confirms to my personal professional experiences. Pertinently, a recent Kaieteur News Editorial (September 29, 2013) under the caption “Guyana and the drug trade” states: “The drug trade is pervasive … the authorities would complain they cannot get information … but we could catch the most serious drug dealers on tax evasion … we have so far failed to hear or read about anyone being prosecuted”. The Editorial goes on to assert bluntly: “Money laundering is the order of the day and those tasked with correcting the situations are weaker than could ever have imagined”. Although the Editorial does not provide numerical estimates, it represents a fairly commonplace perception among the Guyanese public.
Guidepost 2: Crying Wolf!
Another strategic guidepost for the road map on the way forward is to determine whether speedy implementation of the actions demanded by the CFATF should override a more methodical and deliberate approach to reform. In other words the issue is whether or not to accept the publicly stated fears of the government to the effect that, if the legislative amendments before the National Assembly are not passed by November this year, the CFATF (in concert with the FATF) will visit Guyana with massive sanctions, thereby seriously disrupting its cross border financial transactions, trade, and investment flows. If this position is not taken, then there is little doubt the government is “crying wolf” with two main objectives in mind. One is to pressure the parties in the National Assembly to act speedily, even as the government itself has been dealing with these matters since the 2000s, while these parties have not! Crying wolf also lets the Government represent to the CFATF that delays and deficiencies in Guyana’s fulfilment of its Recommendations are due to local politics, or worse (better!) the “irresponsibility of the Opposition”.
At this juncture the earlier assessment of CFATF needs to be recalled. The main inference from that assessment is, I believe, the intrinsic ambiguity of that body. While arising out of anti-colonial and anti-imperialist rhetoric in defence of the sovereignty of small Caribbean states, as was observed, CFATF now zealously pursues the main Mission of FATF. Nevertheless, I believe that CFATF would lean towards supporting Caribbean states, save and except where it is amply demonstrated that their non-compliance with the Forty Recommendations (2012) is extreme, flouting, and in blatant disregard and disrespect of that body.
The position taken here is supported by the following considerations: 1) In regard to Guyana’s compliance, CFATF has rightly distinguished between the legislative and non-legislative elements of its Recommendations to Guyana. The CFATF appears to have accepted the latter elements are being satisfactorily addressed 2) There is absolutely no intended automaticity to CFATF’s required actions against Guyana, if the legislative element is not fulfilled. First, CFATF has executive discretion over steps it can take if the legislation is not passed by November. Second, CFATF’s call to its Members is: “to consider implementing counter measures to protect their financial systems” (my emphasis). This is a discretionary call. And thirdly, after that call “the CFATF will consider referring Guyana to FATF’s International Cooperation Review Group” (my emphasis). Again, this is also discretionary.
Next week I shall consider the two remaining guideposts.
