There have been further revelations by VICE News of alleged Chinese involvement in money laundering activities, the use of intermediaries, and the paying of bribes to secure government contracts, especially in relation to large infrastructure developmental works being undertaken. Since then, there has been a public outcry for an investigation to be carried out to determine the truth or otherwise of the allegations. The President responded by stating that the law enforcement and security agencies are expected to carry out their investigations.
Considering: (i) the scale of the alleged money laundering activities; (ii) lack of capacity of these and other watchdog agencies and their reporting relationships; and (iii) their less-than-impressive track record in dealing condignly with issues relating to corruption in government, the President should instead appoint a Commission of Inquiry to look into the allegations. Depending on the outcome of the inquiry, an internationally recognized investigative agency, selected with the assistance of the United Nations, should be hired to undertake the assignment.
In today’s article, we revisit Guyana’s efforts over the years to address the issue of money laundering, drug trafficking and the financing of terrorist activities.
Some background information
The Financial Action Task Force (FATF) was established in 1989 in response to mounting concerns over money laundering and the threat it posed to the banking system and financial institutions. FATF is an inter-governmental body that sets standards and promotes ‘effective implementation of legal, regulatory and operational measures for combatting money laundering, terrorist financing and other related threats to the integrity of the international financial system’. It has developed a set of recommendations that are recognised as international standards for combating money laundering, terrorist financing and proliferation of weapons of mass destruction.
The FATF conducts periodic peer reviews of its members to assess levels of implementation with its recommendations, providing an in-depth description and analysis of each country’s system for preventing criminal abuse of the financial system. To date, three rounds of reviews were carried out. The fourth is currently being undertaken.
The Caribbean Financial Action Task Force (CFATF), which is the regional body of the FATF, has agreed to, among others, implement the 1988 UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and the 40 recommendations of FATF as well as 19 of its own recommendations. The UN Convention provides comprehensive measures against drug trafficking, including provisions against money laundering and the diversion of precursor chemicals. It also provides for international cooperation through, for example, extradition of drug traffickers, controlled deliveries and transfer of proceedings.
Membership to the CFATF and first evaluation report
Guyana became a member of the CFATF in 2002. In its first Mutual Evaluation Report (MER) issued in October 2006, the CFATF highlighted the absence of legislation on money laundering; the lack of a formally established Financial Intelligence Unit (FIU); limited mutual legal assistance in anti-money laundering (AML) matters; and the exclusion of the insurance sector from the AML regime. In response to these shortcomings, the Government tabled draft legislation in the National Assembly in January 2007. The Assembly referred it to a Select Committee. However, it took more than two years for the legislation to be approved in the form of the Anti-Money Laundering and Countering of Financing of Terrorists (AML/CFT) Act 2009.
First amendment to the AML/CFT Act
The Act was amended on six occasions. The first was in August 2010 where Section 15 was amended to provide for the Minister by order to further extend the period for a reporting entity to terminate a business relationship with a customer where the entity is unable to identify the customer. The maximum period of extension is 24 months.
Guyana’s second mutual evaluation report
Guyana’s second MER report 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. The CTATF 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 for the first two years of the operations of the Act, the FIU did not produce any periodic reports nor were there any prosecutions.
Second amendment
On 7 May 2013, almost ten months after the CFATF drew attention to the deficiencies in the Act, the Government tabled the related amendments. The Assembly referred them to a Select Committee for detailed scrutiny and reporting to the Assembly. This approach was consistent with the action taken when the Act was passed. The Government at the time was, however, unhappy with the Assembly’s decision. It wanted an urgent passage of the amendments as presented, contending that: (i) they addressed all the concerns that the CFATF had raised; (ii) the CFATF had dictated the contents of the amendment Bill; and (iii) if the amendments were not approved by the 27 May 2013 deadline, Guyana would be blacklisted. The CFATF later clarified that draft versions of the legislation were submitted to it for review to assess compliance with the outstanding recommendations, and that a response was sent to the Government. It was therefore not a case of the CFATF dictating the contents of the proposed amendments.
The then Opposition felt that the opportunity should be taken to carry out a more rigorous and comprehensive review of the Act. The Government was, however, unwilling to extend the Select Committee’s work to other aspects of the legislation and was concerned only with the deficiencies identified by the CFATF. Around the same time, Guyana once again had made the international news following the arrest in the United States and Italy of at least two dozen persons attached to criminal networks in New York, Mexico, Southern Italy and Malaysia for planning to ship 1,000 lbs. of cocaine from Guyana valued at US$1 billion. Guyana also reportedly joined Mozambi-que at the bottom of the list of 55 countries that the FATF had evaluated in terms of their anti-money laundering efforts.
The Opposition’s position was that it would not be rushed into passing the amendments to the Act. If the deadline was not met, it would be the Government’s fault since it had adequate time since July 2011 to prepare the amendments. The Opposition had stated that it would not support the Bill because the Government withheld information it was requested to share with the Opposition. That information was contained in a letter dated 10 April 2013 from the CFATF addressed to the President. The letter referred to several warnings and references to earlier notifications of the precarious position to which Guyana was exposed since November 2012 as well as assurances given by the Attorney General, the Minister of Finance and the Head of the Presidential Secretariat that the issues raised were being dealt with expeditiously.
The Government had suggested that in order to meet the deadline, whatever amendments agreed upon so far should be passed in the Assembly, and that the other proposed amendments could be dealt with later. The suggestion did not, however, find favour with the Opposition on the ground that, based on past experience, the Government could not be trusted to keep its word. A key concern was that the Bank of Guyana, the FIU, the Special Organised Crime Unit, and the Office of the Director of Public Prosecutions needed to be adequately equipped and provided with the desired level of autonomy to effectively discharge the functions assigned to them by the Act. Fuelled by the thought that doomsday had arrived, the business community, through their elected representatives, went full gear into a panic-stricken mode in support of the Government’s position that caused quite a hysteria among the populace. Before any further action could have been taken, Parliament was prorogued, followed by its dissolution and the holding of fresh elections on 11 May 2015.
One of the first tasks of the new Administration was the tabling of the proposed amendments to the Act based on the position it had taken while in Opposition. The political Opposition chose to boycott the event and therefore the Bill gained unanimous support from those legislators who were present. The amendments, which were assented to by the President on 10 July 2015, cover three main areas, namely: (i) the expansion and tightening of certain definitions, and the inclusion of new ones in the Interpretation Section of the Act; (ii) the creation of an AML/CFT Authority to act as a kind of Board to provide oversight of the operations of the FIU; and (iii) new procedures for the appointment of the Director and the Deputy Director of the FIU.
In addition, the entire subsection 2(1) has been replaced, essentially removing the role of the Attorney General in recommending to the Minister of Finance appropriate action in respect of any person or entity suspected of being involved in anti-money laundering activities and of violating the Act. The amendments now vest that responsibility with the Director of the FIU. The creation of an AML/CFT Authority also removes ministerial control over the functioning of the FIU and places oversight responsibility in the hands of the AML/CFT Authority, comprising ten members appointed by the National Assembly by simple majority on the recommendation of the Parliamentary Committee on Appointments. The key responsibility of the Authority relates to providing advice to the FIU of a general nature as to policies that need to be followed in the exercise of its functions.
Under Section 8 of the Act, the Minister of Finance was responsible for appointing the Director of the FIU. This section has now been amended to provide the Assembly by simple majority with the authority to appoint the Director and the Deputy Director, based on a recommendation of the Parliamentary Committee on Appointments.
Third amendment
This amendment, assented to by the President in January 2016, provides for, among others, a new definition for beneficial ownership; procedures for the freezing of property of a terrorist or terrorist organization; and amendments of three other Acts referred to in the Schedule.
Fourth amendment
The fourth amendment to the Act, passed in May 2016, continued in the same vein as the three previous amendments, including: (i) the tightening of the language in the Principal Act; (ii) the requirement for all financial institutions to adopt effective risk-based procedures relating to wire transfers; (iii) additional responsibilities of the FIU Director as regards funds or assets of persons or entities suspected to have met the criteria set out in the United Nations Security Council Resolution 1267 and its successor resolutions, and the procedures to be followed for the freezing of those funds or assets; and (iv) amendments to four other Acts contained in the Schedule.,
The Opposition had wanted the related Bill to be referred to a Select Committee but the proposal was voted down. The former Attorney General contended that the previous Administration did everything it could to amend the Act but was constrained by its minority status in the Assembly; and that it had taken all administrative actions. He also lamented the fact that since the beginning of the year the FIU has been without a Head.
The Attorney General responded by stating that the Government inherited a situation of great disadvantage. He cited three of the four CFATF statements published to date identifying Guyana as a jurisdiction with strategic AML/CFT deficiencies that had not made sufficient progress in addressing the deficiencies or had not complied with its action plan developed with the CFATF to address the deficiencies. The Attorney General further stated that to date the number of unimplemented recommendations was reduced to one, and this had been addressed in the latest amendment to the Act.
Fifth amendment
This amendment, assented to in August 2017, was in respect of Section 3 of the Principal Act dealing with offences to provide for stiffer penalties for violation of the Act by natural persons and bodies corporate.
Sixth amendment
This final amendment, assented to in September 2018, essentially replaces the Anti-Money Laundering Authority contained in the second amendment, with a national coordinating committee headed by the Attorney General and comprising heads of key agencies such as the Bank of Guyana, Director of Public Prosecution, FIU and the Guyana Revenue Authority.
Conclusion
Despite political wrangling over the years, Guyana has made significant progress in having in place a strong legislative framework for dealing with money laundering, drug trafficking and financing of terrorist activities. However, these legislative measures are not enough: they need to be translated into real action plans, coupled with rigorous monitoring to ensure full and effective compliance with the provisions of the AML/CFT Act. In this regard, the serious commitment and unwavering support of the Government and the Legislature is required if real progress is to be achieved.
