Time to get serious about funny money
EDITORIAL
Stabroek News
June 4, 2004
The recent anti-money laundering seminar should have been a wake up call to the government that the United States and other developed countries are taking this issue very seriously.
It is not clear they had heard the message given that the official tasked with setting up the Financial Intelligence Unit (FIU) could not remember what its initials stood for. (He thought the 'I' was for institutions.)
But that moment, in a room full of international and regional officials dedicated to the fight against money laundering, characterised the somewhat laissez-faire attitude of the government to the whole issue, as if this was a system being imposed upon Guyana and it must go through the motions. Yes, the Money Laundering Prevention Act (MLPA) was passed in February 2000 but that's a long step from actually implementing even one line of the Act and in this respect, Guyana is still behind many of its Caribbean partners. St Kitts and Nevis, Grenada and St Vincent and the Grenadines have all made progress in fighting money laundering. In St Kitts the FIU has received 82 suspicious transaction reports with 44 referred to the police. In Grenada the FIU's staff of five employees had received 29 reports as of December 2002.
And it is not as if we can say that this country is not affected by money laundering. People are soaking, scrubbing and drying their money every day in major shopping thoroughfares at the expense of honest businessmen. Let's not be in any doubt about that.
The commercial banks are also in jeopardy in part from being swamped by illicit deposits but more to do with their reputation. This relates to the fact that the US banks are governed by rules relating to the Patriot Act and the fight against terrorist funding. If they are not satisfied that their correspondent bank in Guyana is doing enough to monitor transactions it may sever ties. Foreign investors may well be reluctant to have dealings with banks that have a reputation for turning a blind eye.
It is not just future deposits that the banks will have to examine but also those already in their accounts. US giant, Citibank was compelled to go back six years after it found a deposit from an African dictator on its books.
Which brings us to the issue banks here will likely face: that of their own employees' reluctance to report suspected launderers.
Under the regulations set out for banks to report suspicious transactions, a clerk who accepts, let's say a suitcase stuffed with cash, or some other large deposit out of character for the customer, is required to fill out a form and pass it up the chain of management until it reaches the compliance officer. This information is then passed on to the FIU for investigation.
To say that Guyana is a close-knit society is an understatement. Very little is confidential and any teller or other bank employee willing to stick out his or her neck and make a report could find themselves in the firing line, literally. After all, many money launderers have links to hardcore criminals. Putting systems in place that guarantees the confidentiality of the information passed to the FIU will be critical and possibly life-saving. The law does provide for three years in jail and/or a fine of $100,000 for anyone found tipping off someone about an investigation or pending investigation, but that would be of little comfort to a teller facing a stack of cash and deciding what to do.
One way to address this would be to state up front to all customers either by signs or via a pamphlet that unusual transactions will be reported.
There is also another issue that should be examined. As it stands the FIU is to be located within the Ministry of Finance. This may not be the best place given that the unit must have the strictest of independence. Some have suggested that the Bank of Guyana should be the institution to run the FIU given that it is already charged with regulating the banking system. (The Central Bank had been given responsibility to oversee the implementation of the Act but it was subsequently taken over by the Office of the President.)
That would require increased human resources but the bank could add to its regulatory portfolio the cambios, remittance services and credit unions - all areas where funny money can be found.
But there is another opinion that laundered money in the banking sector is merely an indicator of such activity and that it really is more a matter for the finance ministry and the legal authorities.
What is clear is that the government must get on with naming a director, a Central Bank official and a police officer to make up the FIU. That would be an important first step to cleaning out the money launderers before they damage the country's reputation and even its financial stability.