Money laundering and you
Money laundering is, foremost, a crime. It is no longer mainly about illicit gains from narco-trafficking.
As recently as 10 years ago, money-laundering statutes referred to predicate offences as wide-ranging as prostitution, extortion, tax evasion and human trafficking. Not so anymore.
Modern statutes have now broadened the definition of money laundering to include the list of former predicate offences, and more.
Most of our citizens have no idea that in committing certain breaches, such as fraud, robbery, illegal possession, purchasing of a vehicle with cash in excess of a million dollars, they can be charged with money laundering. For most law-abiding citizens, their first encounter with money-laundering and anti-money laundering measures arises when they do their normal banking and financial service transactions.
When they want to open an account, they have to give up so much personal information. When they want to deposit funds, they are asked the ignominious question, "What is the source of the money"?
And having safely placed their money in the bank and one day wishing to retrieve it, they are asked a seemingly stupefying question, "Why are you withdrawing the funds?" Stories abound about colourful responses from the customers that would make a drunken sailor blush.
actions taken by the banks
There is good reason for the actions taken by the banks and other regulated financial institutions as they are influenced by international agreements and local anti-money laundering laws. It may be that not much money is laundered via the commercial banks, at least via the placement stages of the funds. Yet, rightly or wrongly, the most draconian regulatory and detecting emphasis is being placed on the regulated deposit-taking financial institutions.
The fact is, Jamaicans are clever, and like the criminal mind the world over, the crooks are steps ahead of the authorities. In the local sense, the launderers would do well to not use the old-fashioned techniques to get cash into the banks. Rather, they've found ways to use the insurance and investment products that offer a more sophisticated challenge for the regulated entities and the authorities to spot the dirty money.
However, more alarming is the potential for money laundering via non-regulated financial entities referred to as designated non-financial businesses and professions (DNFBPs). This group includes lawyers, accountants, real estate agents, casino operators and dealers in precious stones and metals.
While it does not follow that DNFBP entities or persons associated with these entities or industries are involved in money laundering, according to the Financial Action Task Force (FATF), they are high-risk industries because they pose a higher money-laundering risk.
By way of an oversimplified example, a criminal network may have come into cash but is unable to place it with a bank. So, they use low-level operatives, or smurfs, to make lots of low-risk wagers in the gaming setting. Even if they lose 40 per cent of the funds, that is the cost of doing business for them.
The winnings are paid over by the gaming entity and under local law, such payments are not illegal. Whatever the quantum of the winnings, even if it represents a degree in the original sum of the ill-gotten gains that were used to fund the wagers, the dirty money has been laundered as these winnings are seen as legitimate.
In this scenario, even with the regulation of the horse racing industry, it is clear that the imposition of the local AML regulatory framework is nowhere nearly as effective as that imposed on the regulated financial sector.
Criminal arbitrageurs will simply ply their trade where the risk of being detected is lowest. They will spend less effort trying to launder funds via the regulated financial sector and shift their efforts to the DNFBP sector, where AML regulation is either non-existent or ineffective at best.
While the IMF may not have explicitly set a condition that requires a governmental commitment to ramp up the quality and effectiveness of the local AML framework, we should not be surprised to learn that it is being considered. Not only by the IMF but the World Bank and the other multilaterals and international donor-granting agencies.
How will we respond to this creeping crisis of money laundering and her many mistresses that threaten the economic viability and prospects of our nation? Only time will tell.