The global measures implemented under the Financial Action Task Force (FATF) on money laundering, well-intentioned though they may be, are beginning to have a constricting effect on the operations of some key and critical social support measures in the Caribbean, not least non-profit organisations designed to provide timely responses to emergency circumstances arising out of natural disasters in the region.
On the back of the August 24 Hurricane Dorian that flattened several communities in The Bahamas, the President of The Bahamas Institute of Financial Services, Ryan Pinder, has said that there is a real danger that the regulatory constraints imposed on the financial operations of charitable organisations could place crippling restrictions on the degree of effectiveness with which they can respond to dire emergencies.
FATF is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001, in response to global occurrences, the organisation expanded its mandate to include the financing of terrorism.
However, at the recently concluded 8th Annual Anti-Money Laundering/Counter-Financing of Terrorism Conference hosted by the Jamaica Bankers Association and the Jamaica Institute of Financial Services, Pinder, a former Minister of Financial Services in The Bahamas declared that the measures mandated by FATF, while designed to place optimum restrictions on illicit financing of terrorists and other schemes, places undue pressure on non-profit organisations which, the critical, often life-saving nature of their operations notwithstanding, are subjected to the same constricting scrutiny as are rogue organisations.
Pinder’s recent outburst in Kingston is a microcosm of a wider region-wide fretfulness over the constraints imposed by the regulations associated with the effective implementation of FATF, not least what has been the widespread protestations by ordinary Caribbean people against FATF-related constrictions linked to the operation of bank accounts.
At the Jamaica forum, Pinder was specifically concerned with the addition of non-profits to the list of entities that are required to adopt AML/CFT measures, a move which he says has led to concern that there is the danger of regulatory obligations seriously undermining the substantive purpose of those organisations. There is now “a risk for overregulation in the Caribbean islands,” Pinder is quoted in saying, in addition to which he reportedly called for greater collaboration among governments across the region in pursuit of a collaborative approach to seeking to realise relaxation of the FATF regulations as these pertain to non-profit and charitable organisations.
Asserting that the region has “limited capacity’ to keep pace with the changes” to FATF regulations, Pinder told the Kingston forum that “It seems at times, as we implement one regime to address one component that is imposed on us, the activities evolve into another regime and we are always playing regulatory catch-up.” Arising out of this he asserted that Caribbean territories face the real danger of regulating themselves out of business, thereby creating a circumstance in which their economies are likely to continue to struggle.
Uppermost in Pinder’s mind would have been the extensive and costly rebuilding exercises and humanitarian ‘holding’ initiatives currently underway in those parts of The Bahamas flattened by Dorian in August and the extent to which those initiatives depend on the contributions made by charitable organisations. His fundamental position on the issue is that the framers of FATF “just don’t understand or want to appreciate the struggle of what it is to be a small island country operating in a global environment.”
FATF’s Recommendation Eight mandates countries to review their laws and regulations to ensure that non-profits are not being used as a source of financing of terrorism and countries in the region have already signed on to meeting the requirements of FATF. The Bahamas, as well as Guyana, are members of the Caribbean Financial Action Task Force, (CFATF), which is an organisation of states and territories of the Caribbean Basin, established in the early 1990s, that have agreed to implement common countermeasures against money laundering.
Under the measures prescribed for non-profit organisations under FATF rules are regulations that allow for FATF to review those organisations’ charitable purpose, the identity of the controller and other members, and information on its Board structure. Non-profit organisations with no proof of registration or otherwise failing to comply with FATF regulations face operating restrictions relating to the opening of bank accounts, and doing financial transactions with financial institutions, constraints that effectively cripple their ability to function as they should.
Non-profit organisations, meanwhile, are required under FATF regulations to declare any donation in cash or kind in excess of US$100,000 which it receives, records of the operation of the organisation must be kept for a minimum of five years and Controllers of those organisations must be stationed at the organisation’s registered address.
Pinder explained that apart from the fact that the FATF imposes upon small Caribbean territories the burden of “an ever-expanding regulatory envelope in financial services,” those countries also face a situation in which “one misstep in the arena of financing has a detrimental effect on the viability of our country, on the viability of our region.”
With non-profit organisations, now, perhaps more than ever before, badly needed in circumstances of a national crisis that has impacted poor communities, Pinder noted that the constrictions of FATF have meant that many such organisations have had to wind up businesses to avoid the additional expenses associated with meeting FATF regulations. Other charitable organisations in The Bahamas have also voiced similar concerns.
