Tue | Dec 1, 2015

Jamaica AMT compliance high but still seen as vulnerable

Published:Wednesday | October 10, 2012 | 12:00 AM
Hugh Reid, president of the Insurance Association of Jamaica. - File

Sabrina Gordon, Business Reporter

Jamaica is ranked among the members of the Caribbean Financial Action Task Force (CFATF) with high levels of compliance with anti-money laundering rules, but sector interests still say areas of the financial system remain vulnerable and require vigilance.

The CFATF is an organisation of 29 states of the Caribbean Basin, which have agreed to implement common counter measures to address the problem of criminal money laundering through the AML/CFT framework policed by central banks.

"The securities sector is perhaps unique among the industries, in that it can be used to both launder illicit funds obtained elsewhere and to generate illicit funds within the industry itself," said Gary Peart, president of the Jamaica Securities Dealers Association.

Peart was speaking on a panel Monday on the first day of a two-day confab on 'Anti-Money Laundering/Counter Financing of Terrorism (AMT/CFT)' hosted by the Jamaica Bankers Association in Kingston.

"In Jamaica, reported cases of money laundering in securities far outweigh those related to terrorist financing, hence there are key vulnerabilities in the securities industry related to money laundering," said Peart, who is also the CEO of Mayberry Investments Limited.

"For example, the change of share ownership can also transfer wealth across borders, redeeming a long-term investment in a short period, opening multiple account or nominee account, using brokerage account as long-term deposit accounts for funds, and effective transaction involving nominees as third party," he said.

The securities dealers sector in Jamaica now manages approximately J$600 billion in funds for over 500,000 clients. The funds under management have diminished from close to J$800 billion pre-recession.

Comparatively, Jamaica's seven banks hold J$423 billion of deposits.

Peart said with its global reach, speed and its adaptability, the financial sector is attractive for those persons wanting to use the system for illicit purposes.

He and other sector leaders agree that improvements in the 'Know Your Customer' process can help to deal with these issues as well as give a clearer understanding of the ebbs and flows of client accounts to identify gaps in the system.

Lack of data on customers

Hugh Reid, president of the Insurance Association of Jamaica, who was also on the panel, pointed to challenges due to lack of retrospective biographic data on customers. He said new procedures are being implemented to collect more data at the policy application stage.

"It is challenging to get updated IDs across the board and so we have to update as and when customers visit offices," said Reid, who runs Scotia Jamaica Insurance, one of four life companies in the market.

Meanwhile, CFATF Executive Director Calvin Wilson used the conference to implore lagging countries to become compliant with AML/CFT regulations.

"Which credible investor or entity will invest in an international financial centre located in a country that has been labelled as having 'strategic AML/CFT deficiencies'?" he asked.

Wilson said the average level of compliance is 40 per cent. Those with high levels of compliance include Jamaica, Bermuda and The Bahamas.

Those with low compliance levels include Belize, St Lucia, Turks & Caicos, Aruba, Dominica, and St Kitts & Nevis.

"We have to work towards the development of a national culture of AML/CFT compliance," said Wilson.

"It has to involve all stakeholders, including private sector and the general public when and where relevant."

The CFATF's fourth round of assessments for compliance will begin in 2014.

Failure to comply with AML/CFT standards gives rise to reputational risks which could lead to the flight of capital and investments. It also means that international transactions may take longer and become more expensive, Wilson advised conference participants.

It can also result in limited access to international funding from multilateral institutions such as the International Monetary Fund, World Bank and the European Union, he said.