There appears to be a misconception as regards calls for the renegotiation of the 2016 Petroleum Sharing Agreement (PSA) between the Government of Guyana and ExxonMobil. The Authorities, while in Opposition, had agreed to renegotiate the Agreement if elected to office. They are, however, now arguing against any form of renegotiation on the grounds that such an action will not only destroy what they term the “sanctity” of the PSA but also discourage foreign investment. However, the Agreement is clear that it can be renegotiated but with the written consent of all the parties involved. By Article 31.2, the Agreement ‘shall not be amended or modified in any respect except by written agreement entered into by all the Parties which shall state the date upon which the amendment or modification shall become effective’. In an article appearing in the Stabroek News on 16 September 2022, Chartered accountant and Attorney-at-Law Christopher Ram pointed out that the Granger Administration had successfully negotiated an amendment to Section 3.3 of Annex C of the PSA to preclude royalty paid by ExxonMobil’s subsidiaries from being considered recoverable costs.
The International Monetary Fund had stated that the Agreement is overwhelmingly weighted in favour of the US oil giant. Several countries have found it necessary to demand a higher share of revenue from oil companies, mainly in the form of higher taxation on windfall profits, in the midst of soaring oil prices fuelled by the Russian invasion of Ukraine. In the interest of the country, our Government should make a sincere and dedicated effort to formally request a renegotiation of the Agreement. From a transparency point of view, any such request, along with Exxon’s response, should be made available to the public. In this way, citizens would feel satisfied that the country’s interest is properly being taken care of. At the moment, the overwhelming view among citizens is that the Government has shown more of an inclination to defend the interest of Exxon rather than that of the country and its peoples, for reasons only best known to it.
On another matter, the audit of the pre-contract costs incurred by Exxon during the period 1999 to 2017 has uncovered a minimum of US$214.4 million in expenditure that the Government can dispute because of ineligibility or lack of adequate supporting documentation. It therefore means that Guyana’s share of profit oil has been reduced by US$107.2 million. The Authorities have stated that should Exxon reject the findings of the auditors, the only recourse is international arbitration as provided for in the Agreement. There, however, appears to be a reluctance to go this route perhaps because of cost implications and the time it would take for proceedings to be concluded. Suffice it to state that such reluctance is likely to embolden the US oil giant to continue to charge as recoverable costs expenditure that may be deemed ineligible. That apart, the failure to go to arbitration renders ineffective and meaningless Article 26 of the Agreement dealing with the unresolved disputes.
In today’s article, we discuss the latest proposal for further amendment to the Anti-Money Laundering and Countering of Financing of Terrorism (AML/CFT) Act to address the outstanding recommendations of the Caribbean Financial Action Task Force (CFATF) and its parent body the Financial Action Task Force (FATF). This is in preparation for the fourth round Mutual Evaluation by the CFATF scheduled for September 2023. It will be the eighth time the Act will be amended since its passage in 2009. However, this piecemeal approach to having in place a comprehensive piece of legislation to address the issue of money laundering and drug trafficking in compliance with international standards, is a reflection of an apparent reluctance over the years by the Authorities to go this route. It was only under pressure from the international community that such amendments have so far been made, with the latest proposed amendment being one of them.
Background information on the AML/CFT Act and its amendments
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 Assembly in January 2007. The Assembly referred it to a Special Select Committee for detailed consideration. 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.
The Act was amended on seven occasions. The first was in August 2010 with the amendment to Section 15 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 MER 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 CFATF informed Guyana that the steps it had taken were minimal and that it remained in “expedited follow-up”.
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 again referred them to a Special Select Committee, much to the unhappiness of the Government at the time. 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.
The then Opposition felt that the opportunity should be taken to carry out a more rigorous and comprehensive review of the Act. Its position was that it would not be rushed into passing the amendments to the Act and that 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 also stated that the Government had withheld information it was requested to share, which 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 key Government officials 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. 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 APNU-AFC 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 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) was 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 Authority, comprising ten members appointed by the 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 was 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.
The third amendment, made 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. Five months later a fourth amendment was made mainly: (i) to tighten the language in the Principal Act; (ii) to require all financial institutions to adopt effective risk-based procedures relating to wire transfers; (iii) to assign 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) to amend four other Acts contained in the Schedule.
The fifth amendment to the Act, made in August 2017, was in respect of Section 3 of the Principal Act dealing with offences and providing for stiffer penalties for violation of the Act by natural persons and bodies corporate. The sixth amendment was made in Septem-ber 2018, essentially replacing the AML/CFT Authority 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 (GRA). The final amendment – the seventh of its kind – was made in August 2022. It relates mainly to Guyana’s proposed application for membership to the Egmont Group that facilitates the sharing of information and knowledge, and cooperation among its 166 Financial Intelligence Units. Three sections of the Principal Act have been amended.
The proposed eighth amendment to the AML/CFT Act
The main purpose of the proposed amendment is to update the Principal Act to ensure the FIU meets the necessary requirements for membership of the Egmont Group. Section 2 is being amended to provide, among others, for certain new definitions as well as updated definitions. These include those relating to auto dealers, politically exposed persons (PEPs), digital assets, financial inclusion, non-profit organization, precious metals, serious offence and tainted property. In relation to PEPs, the definition is extended to include a person who is or has been entrusted with a prominent function by an international organisation, at the level of senior management, including directors, deputy directors and members of the board or equivalent functions. One of the apparent shortcomings is this definition is that once a person is deemed a PEP he/she is deemed a PEP for life. For example, although I demitted office as Auditor General in 2004, some 12 years later, I was denied consideration for an important position in government because I was still considered a PEP!
To be continued –
