In the final analysis, the ultimate test is the extent to which we are able to translate all the legislative requirements into real action. The cornerstone is a strong, independent and effective FIU that is committed, willing and able to go after those who have and are violating the AML/CFT Act, and proceed to institute criminal charges against them without the slightest degree of compromise. Or, are we going to allow narrow political and other considerations to continue to influence our decision-making on the matter at the expense of the broader national interest?
Last week’s article looked at the Access to Information Act 2011. A key requirement of the Act relates to the submission to the National Assembly within nine months of the close of the year of an annual report on the operations of the Act. The report is to include the following:
(a) number of requests made to the Commissioner of Information;
(b) number of decisions that an applicant was not entitled to access information, citing the relevant provisions of the Act;
(c) number of applications for judicial review of decisions and the outcome of such reviews;
(d) number of complaints made to the Commissioner in respect of the operations of the Act and the nature of such complaints;
(e) number of notices served upon the Commissioner under Section 11(1) of the Act and the number of decisions by the Commissioner which were adverse to the person’s claim;
(f) particulars of any disciplinary action taken in respect of the administration of the Act;
(g) amount of fees collected by the Commissioner under the Act;
(h) particulars of any reading room or other facility including official websites provided by each public authority for use by applicants or members of the public; and
(i) any other facts which indicate an effort by public authorities to administer and implement the spirit and intention of the Act.
A search on the Assembly’s website did not turn up any evidence that such a report was laid in the Assembly, and a check with Parliament Office confirmed that no such document was tabled. In the circumstances, any assessment of the effectiveness of the Act could not be determined. This is a significant shortcoming in our attempts to provide citizens and organisations with access to information of government programmes and activities.
Today, we turn our attention to an important aspect in our fight against drug trafficking, money laundering, terrorist financing and organized crime. It will be recalled that in 2009, the Assembly passed the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Act. There were a number of amendments to bring the Act in line with international standards as determined by the Financial Action Task Force (FATF).
Politically Exposed Persons
The Act defines a politically exposed person (PEP) as “an individual who is or has been entrusted with prominent functions on behalf of the State, including a Head of State or of government, senior politician, senior government, judicial or military officials, senior executives of State-owned corporations, important political party officials, including family members or close associates of the PEP whether that person is resident in Guyana or not”. This definition is consistent with that of the Financial Action Task Force (FATF) as well as the United Nations Convention against Corruption. According to FATF, many PEPs hold positions that can be abused for the purpose of laundering illicit funds or other predicate offences such as corruption or bribery. Because of the risks associated with PEPs, the FATF Recommendations require the application of additional AML/CFT measures to business relationships with PEPs. These requirements are preventive (not criminal) in nature, and should not be interpreted as meaning that all PEPs are involved in criminal activity.
FATF has two recommendations on PEPs – Recommendations 12 and 22. The language of Recommendation 12 is consistent with a possible open ended approach (i.e., “once a PEP – could always remain a PEP”). However, financial institutions have to adopt a risk-based approach in dealing with a PEP who is no longer entrusted with a prominent public function, and take effective action to mitigate this risk. Possible risk factors are: (a) the level of (informal) influence that the individual could still exercise; (b) the seniority of the position that the individual held as a PEP; or (c) the individual’s previous and current function being linked in any way (e.g., formally by appointment of the PEPs successor, or informally by the fact that the PEP continues to deal with the same substantive matters). In essence, implementation of this recommendation requires enhanced customer due diligence requirements.
Recommendation 22 relates to measures to be taken by financial institutions and non-financial businesses and professions to prevent money-laundering and terrorist financing. In respect of countries that do not or insufficiently comply with FATF recommendations, financial institutions should ensure that the principles applicable to financial institutions are also applied to branches and majority owned subsidiaries located abroad, especially in countries which do not or insufficiently apply the FATF Recommendations. FATF has developed guidance which will assist in the effective implementation of these additional measures for foreign, domestic and international organisation PEPs, their family members and close associates, as set out in Recommendations 12 and 22. The annex to FATF’s guidance notes sets out a collection of red flags and indicators for suspicion that can be used to assist in the detection of misuse of the financial systems by PEPs during a customer relationship. Examples of such red flags are: the use of corporate vehicles to obscure ownership by PEPs; information provided by the PEP being inconsistent with other publicly available information (such as asset declarations and published official salaries); and doing business with PEPs who are connected to higher risk countries or high risk industries or sectors.
An individual may no longer be entrusted with prominent position in the context of the definition of a PEP. Can such a person be ruled ineligible for appointment to a senior position in an agency (whether government or otherwise) that is required to identify PEPs and monitor their financial activities in accordance with the requirements of the AML/CFT Act? The answer appears to be in the negative, unless enhanced due diligence procedures suggest otherwise, since to do so will be a violation of the individual constitutional right to seek gainful employment commensurate with his/her qualifications, skills and experience.
Financial Intelligence Unit
The Financial Intelligence Unit (FIU) is the backbone of the AML/CFT Act. It is responsible for requesting, receiving, analyzing and disseminating suspicious transactions reports and other information relating to money laundering, terrorist financing or proceeds of crime. The FIU is to comprise of a Director, a Deputy Director, an attorney-at-law, an accountant and such other personnel trained in financial investigations and other employees as the Director considers necessary for the discharge of the functions of the Unit. However, up to March 2011, the FIU functioned with only two persons – a Director and an Administrative Assistant.
The third evaluation report of the Caribbean Financial Action Task Force (CFATF) dated 25 July 2011 was very critical of the Act. The main conclusion was that Guyana’s legislation needed to be overhauled to conform to the standard recommendations used to evaluate countries’ efforts to combat money laundering and terrorist financing. CFATF informed Guyana that the steps it had taken were minimal and that it remained in “expedited follow-up”. In particular, there was concern that the FIU had only the Director, whereas it is to be staffed also with a lawyer, an accountant and such other officials trained in investigative work. It was therefore not surprising that the FIU did not produce any periodic reports nor were there any prosecutions.
In April 2011, a Financial Analyst was recruited followed by a Database Administrator in June 2011 and a Legal Advisor in September 2011, giving a total staffing of five.
At the end of 2013, staffing had increased by one with the inclusion of a second Financial Analyst. The Attorney General is reported to have stated that when the new Administration took over, there were only two active members, namely the Director and a Lawyer. The Director demitted office at the end of last year, and his replacement, along with the appointment of other key positions, is being considered by a Parliamentary Committee on Appointments.
The new requirements provide for the Director and other senior management personnel to be appointed by the National Assembly by simple majority based on a recommendation by the Committee on Appointments. Requirements for the position are: (a) at least 10 years’ experience in law, finance, economics, or accounting at the highest managerial position; and (b) formal training in and sound knowledge of statistics, financial information or banking. According to the Attorney General, the Director has already been selected; interviews for the post of Deputy Director were concluded; and the process continued for the positions of lawyer and accountant.
Withdrawal of services by the Bank of America
In an effort to manage its risks, the Bank of America has decided to sever ties as a correspondent bank for local banks operating out of Guyana with effect from early next month. This was confirmed by Central Bank Governor Dr. Gobind Ganga who indicated that Bank of America’s pull-out might not have any implications for the country as other banks from North America and Europe had already expressed an interest in filling the void. He nevertheless acknowledged that a few local banks would be affected. He further stated Bank of America has given several reasons its exit, including de-risking, and the need to concentrate more on larger customers due to the high level of liquidity.
De-risking refers to situations where financial institutions terminate or restrict business relationships with categories of customer.
According to FATF, this is a complex issue that goes far beyond anti-money laundering and counter-terrorist financing and points to the continued need to improve the evidence base in order to determine the causes, scale and impact of de-risking.
The approach recommended requires financial institutions to identify, assess and understand their money laundering and terrorist financing risks, and implement AML/CFT measures that are commensurate with the risks identified.
Whatever the reasons for Bank of America’s withdrawal of its services, this is not good news for Guyana, despite recent efforts to bring its anti-money laundering and countering of terrorist financing legislation in line with international standards. In the final analysis, the ultimate test is the extent to which we are able to translate all the legislative requirements into real action.
The cornerstone is a strong, independent and effective FIU that is committed, willing and able to go after those who have and are violating the AML/CFT Act, and proceed to institute criminal charges against them without the slightest degree of compromise. Or, are we going to allow narrow political and other considerations to continue to influence our decision-making on the matter at the expense of the broader national interest?
