Two suspicious insider trading transactions totalling $5.6 billion were reported to the Financial Intelligence Unit (FIU) during 2018 and represent the highest overall monetary value from among the 331 Suspicious Transaction Reports (STRs) submitted.
This is according to the unit’s annual report, which was submitted to Minister of Finance Winston Jordan on Monday. The document, which is the first to be submitted since 2014, is yet to be made public. A copy was obtained by Stabroek News. No details were provided in the report on the insider trading transactions and there is no information on whether they were investigated.
The report describes a suspicious transaction as any transaction in which there is reasonable ground to suspect that that transaction is related to a money laundering or a terrorist financing activity or serious offence.
The report informed that last year, 331 suspicious transactions totalling $8.5 billion were submitted by reporting entities as being connected to several offences which triggered STRs. Sixty-two per cent of the reports, it said, were indicated to have been possibly derived from “smurfing” activities.
Smurfing, according to the Association of Certified Anti-Money Laundering Specialists, is a commonly used money laundering method which involves the use of multiple individuals and/or multiple transactions for making cash deposits, buying monetary instruments or bank drafts in amounts under the reporting threshold. The individuals hired to conduct the transactions are referred to as “smurfs.”
Aside from insider trading, also scoring high values were 35 money laundering activities totalling $1.15 billion, 17 tax evasion offences valued $817.8 million and 23 fraud transactions totalling $254.1 million.
According to the report, the significant serious offences that were featured in the STRs were that the funds or transactions were linked to possible Money Laundering (10%), Fraud (7%), Tax Evasion (5%) and Drug Trafficking (4%). Also included in the list of serious offences are corruption and bribery, smuggling of precious metals and terrorist financing. In 29 cases, the offence was unclear.
“Even though the activity of Smurfing accounted for approximately 62% of all STRs submitted, it only accounted for 2.45% of the total monetary value of reported suspicious transactions. Insider Trading, on the other hand, accounted for the highest overall monetary value ($5.6b) even though only two STRs were submitted in this category. Money Laundering and Tax Evasion were the other two categories of offences that had significant financial values in the associated STRs,” the report stated.
It added that tax evasion had a higher average value per STR ($48 million) than Money Laundering ($33 million). “These three categories, Insider Trading, Tax Evasion and Money Laundering, accounted for approximately 89% (65%, 10% and 13.5% respectively) of the total money value of all reported suspicious transactions,” the report said.
It explained that all categories of reporting entities are required to report all transactions that equal or exceed the threshold limits established for their respective sectors.
Threshold
According to a table provided in the report, the threshold for small betting shops is $60,000; betting shops (other), $500,000; cambio dealers (purchases), $400,000; cambio dealers (sales), $1 million; casinos, lotteries and credit unions, $500,000 respectively; while for diamond dealers, gold dealers, used car dealers, insurance companies and brokers, banks, real estate agents, security companies/brokers/etc and international travellers, the threshold is $2 million. For money transfer agencies (MTAs), the threshold is $200,000 and for pawnbrokers, $300,000.
The report stated that the number of reporting entities reporting to the FIU has increased year over year from 2016 to 2018. Entities on-board and reporting to the FIU rose from 89 in 2016 to 211 in 2017 and to 217 in 2018. “The increase was a direct result of the FIU’s awareness, registration and training campaigns in 2017 and 2018,” the report said.
Another table providing a breakdown of the number of reporting entities reporting threshold transactions in each category for the period 2016 – 2018 was also included in the report. Topping the list in 2018 are used car dealers with 52 followed by 28 pawnbrokers.
According to the report, the number of reporting entities registered and reported to the FIU had a direct bearing on the volume and monetary value of data gathered from threshold reports. Overall, there was a small increase in the number and value of threshold transactions reported for 2018 compared with 2017. The number of transactions reported rose 8 per cent while the value of all reported threshold transactions rose 16 per cent. MTAs and Licensed Financial Institutions (LFIs) were responsible for higher volumes and value of transactions in both periods.
Further, the report informed that at the entity level, it was observed that the majority of Suspicious Transaction/Activity Reports (STR/SAR) came from three categories of Reporting Entities; MTAs (71 per cent), LFIs (22.36 per cent) and securities companies (5.14 per cent). The remainder, which forms less than 2 per cent of all STRs, comprised gold dealers, cooperatives and insurance companies.
Despite accounting for 71 per cent of all SARs/STRs, money transfer agencies accounted for only 3.1 per cent of the total money value of these reports. Reports emanating from securities companies and LFIs accounted for approximately 94 per cent (67 and 27 per cent respectively) of the total money value of all SARs/STRs. In fact, 27 per cent or 91 out of 331 STRs/SARs, accounted for approximately 94 per cent of the total money value of all STRs/SARs.
There was a marginal decline in the number of STRs received in 2018 when compared with 2017 even though the general upward trend remained for the five years, which ended in 2018.
Additionally, the report states that no Terrorist Property Reporting (TPR) was submitted by reporting entities for 2018 or previous years.
In keeping with requirement imposed in 2016, Reporting Entities are required to screen customers against the United Nations Security Council Sanctions list as part of their customer on-boarding process, periodically and before conducting a transaction. At the end of each quarter, all reporting entities are required to report to the FIU confirming the number of TPRs filed or confirming that there were no TPRs in the preceding quarter.
Matthew Langevine, the Director of the FIU, at the handing-over ceremony, had described 2018 as a successful year during which the unit strived to execute its mandate of working with all local and international stakeholders to protect the integrity of the financial system from money launderers and those trying to use the system to finance terrorism and proliferation.
