Bankers zero in on money laundering By Mark Ramotar
Guyana Chronicle
May 10, 2002

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`As regulators, you would be aware of the need for concerted efforts to secure the integrity of our financial systems from use for illegal or illicit purposes' - Dr. Ashni Singh, Financial Consultant

CARIBBEAN bankers are to zero in on the menace of money laundering currently plaguing economies in the region at an important two-day conference which opened in Georgetown yesterday.

The XXth Annual Conference of the Caribbean Group of Bank Supervisors is being hosted by the Bank of Guyana at Le Meridien Pegasus Hotel with a packed agenda which includes deliberations on several topics under the theme `Evolution and Dynamics of the Supervisory (Banking) Processes in the Caribbean'.

Among those participating are supervisors and officials from regional central banks, monetary authorities, international financial institutions, and lending and advisory institutions.

Financial Consultant and Budget Director in the Ministry of Finance, Dr. Ashni Singh, in the opening address at the conference, alluded to events last year which he said "provided us with a stark reminder" of the spectre of international terrorism and organised crime.

The risk, he said, of money being laundered through the official banking system has been known for some time.

Recently, however, the use of the financial system to aid and facilitate terrorist activities has become a subject of focus, he said.

Singh said, too, that apart from the illegality of the activities associated with money laundering, the international movement of funds in the substantial sums involved, and in economies as small and open as those in the region can have very significant influences on currency and other market prices and on financial stability itself.

Given the dangers in this regard, he pointed out that Caribbean Community (CARICOM) Heads of Government issued the Nassau Declaration on International Terrorism last October.

This declaration recognised the potential for abuse of the financial services industry by terrorists and their agents and supporters, and undertook a redoubling of efforts to prevent such illegal use and abuse of the financial services sector.

"As regulators, you would be aware of the need for concerted efforts to secure the integrity of our financial systems from use for illegal or illicit purposes," Singh told the gathering.

"Your decision to include emerging money laundering issues in your agenda for this conference is therefore timely and appropriate," he said.

According to Singh, the two-day conference "comes at a time when we in the Caribbean are especially aware of the challenges that confront us in economic policy formulation and implementation".

The Caribbean Development Bank recently reported that last year, of its 17 borrowing member countries, many of whom are represented at this week's conference, 13 recorded lower rates of real economic growth than in the previous year, and six recorded negative growth.

Singh said this "contracting and slowing of growth" reminds us of the under-diversification of our economies and the fragility that results from this structural weakness.

"It reminds of the central importance to our economies of agricultural industries, all of which are susceptible to weather fluctuations, and other primary products, many of whose markets display volatile pricing behaviour," he added.

Further, it reminds the region of its dependence on tourism and vulnerability to external shocks as caused by the terrible events of September 11 last year, Singh said, referring to the terrorist attacks on the United States.

Referring to Guyana, Singh pointed out that "we achieved real growth of 1.9 per cent in 2001, an achievement that owes much to performance in the traditional sugar and rice industries".

He said Trinidad and Tobago's very commendable 3.5 per cent growth owes much to that country's robust petrochemical industries.

"As Caribbean bank supervisors, you will be very familiar with the challenge of ensuring the maintenance of an environment and architecture that facilitate a financial system capable of withstanding the macro-economic pressures arising from all these factors," he charged.

"Indeed, you face the challenge of regulating a sector, the strength of which will be a significant influence in determining our success in diversifying and deepening our economies," the Budget Director declared.

The Caribbean also faces the reality of shallow and under-developed markets, including its capital markets, he told the gathering.

As a result, the region does not reap the disciplinary benefits traditionally associated with markets that are active and efficient, Singh said, adding that good corporate governance and sound economic performance are demanded by the rigours of market monitoring.

"Thus, empirical evidence from developed markets suggests that management quality, financial reporting practices and actual financial performances are all likely to be priced (and) where the market for capital lacks depth, as is the case in almost all of our countries in the Caribbean, the monitoring and disciplining influences of the market are diminished and the task of institutional regulation and supervision has to be performed without the aid of credible market signals," Singh stated.

He pointed out, too, that the banking industry in the Caribbean and all over the world "faces the steady onslaught of an increasingly innovative environment". Innovations occur both in the technological input into the production and provision of banking services, and in the design of complex financial products and instruments, he said.

Also on the conference agenda is the issue of technological innovations in the banking industry. In this regard, Singh urged the gathering to discuss the impact that rapidly advancing information and communication technologies can have on the production of banking services.

"Internet banking, for example, may bring very peculiar management and supervisory challenges with its international and cross-jurisdictional reach," he asserted.

"Similarly, financial engineering innovations in terms of the array and complexity of available financial products and instruments present both opportunities and challenges to banks and the financial sector as a whole," Singh added.

The Budget Consultant also noted that the economies of the Caribbean and its financial sectors, in particular, face a number of other formidable threats and challenges which include the pressures exerted by international standards, stipulations and pronouncements.

Singh also said Guyana's financial sector has had its fair share of difficulties over the past year. "We have seen one small deposit-taking institution suffer its demise, having been found to be insolvent," he recalled, hastening to add that the matter is still engaging the attention of the courts.

"We have also seen specific borrower sectors, the rice industry in particular, come under tremendous pressures as a result of prevailing factors in their market and environment," he noted.

In this regard, Singh said the Government of Guyana and the Guyana Association of Bankers demonstrated their commitment to working closely together in the national interest by reaching agreement on a relief package to facilitate restructuring of loans to small borrowers in the rice sector.

However, he noted that apart from those developments, a number of significant advances have been achieved by the Guyana Government in its efforts to strengthen and deepen the financial sector.

"Specifically, we licensed our first merchant bank during 2001; we constituted the Guyana Securities Council and are in the process of putting in place regulations to operationalise the Guyana Securities Exchange; steps are also being taken to bring into operation the recently passed Money Laundering (Prevention) Act and to strengthen supervision of the insurance industry," he reported.

It is also anticipated that a Commissioner of Insurance will be appointed shortly, he said. The Minister of Finance has announced the intention to pass major amendments to both the Bank of Guyana and the Financial Institutions Acts, aimed at tightening some gaps in those pieces of legislation as identified during recent experiences.

In addition and very importantly, the process of privatising the Guyana National Cooperative Bank will continue apace, Singh said.

He also noted that "conferences such as the current one provide excellent opportunities for exposure and ventilation of alternative perspectives and current issues (and) serve the useful purpose of debating, determining and advocating best (banking) practices."

"I believe that the agenda you have set out for the next two days identifies a number of the areas of current and immediate interest (and) I therefore have every confidence that your discussions will be interesting and productive," he added.