association of international banks and trusts the …€¦ · association of international banks...

ASSOCIATION OF INTERNATIONAL BANKS AND TRUSTS

THE NASSAU CONFERENCE 2019

"EVOLUTION: SUBSTANCE, TRANSPARENCY AND OPPORTUNITY".

FROM THE OUTSIDE LOOKING IN: FIGHTING FINANCIAL CRIME

A COMPARATIVE ANALYSIS OF THE BAHAMAS’ COMPLIANCE

WITH THE FATF RECOMMENDATIONS

CALVIN E J WILSON

PRINCIPAL

CALVIN WILSON AND ASSOCIATES



THE BAHAMAS CFATF MER RESULTS AND RE-Rating Exercise December 2018

1-PC-LC, 2- PC-C, 3-C-C, 4 C-C, 5 LC-LC, 6-NC-PC, 7-PC-PC, 8-PC-PC, 9-C-C, 10- PC-C

11- LC-LC, 12-PC-C, 13-C-C, 14-C-C, 15-PC-LC, 16-LC-LC, 17-PC-C, 18-PC-LC, 19- PC-PC,

20-C-C

21-C-C, 22-PC-PC, 23-PC-LC, 24-PC-PC, 25-PC-LC, 26-PC-PC, 27-PC-PC, 28-PC-PC, 29-PC-C

30-PC-C, 31-LC-LC, 32-PC-LC, 33-PC-PC, 34-LC-LC, 35-PC-LC, 36-LC-LC, 37-LC-LC, 38-LC-LC,

39-LC-LC, 40- LC-LC


TRINIDAD AND TOBAGO CFATF MER RESULTS AND RE-Rating Exercise May 2019

1-PC-LC, 2- LC-LC, 3-LC-LC, 4 LC-LC, 5 C-C, 6-PC-C, 7-NC-LC, 8-NC-PC, 9-C-C, 10- LC-C

11- C-C, 12-C-C, 13-C-C, 14-C-C, 15-C-C, 16-LC-C, 17-C-C, 18-C-C, 19- PC-C, 20-C-C

21-LC-C, 22-LC-C, 23-LC-C, 24-PC-C, 25-PC-PC, 26-PC-C, 27-LC-LC, 28-PC-PC, 29-LC-C

30-C-C, 31-LC-C, 32-PC-C, 33-PC-C, 34-C-C, 35-PC-PC, 36-LC-LC, 37-PC-C, 38-PC-PC,

39-LC-C, 40- PC-LC


ICELAND FATF MER RESULTS AND RE-Rating Exercise June 2019

1-PC-PC, 2- PC-PC, 3-C-C, 4 LC-LC, 5 LC-LC, 6-PC-PC, 7-PC-PC, 8-NC-NC, 9-LC-C, 10- PC-C

11- C-C, 12-PC-C, 13-PC-C, 14-LC-C, 15-PC-LC, 16-PC-C, 17-PC-C, 18-PC-LC, 19- PC-C,

20-LC-C,

21-C-C, 22-PC-C, 23-PC-LC, 24-PC-PC, 25-PC-PC, 26-PC-PC, 27-LC-C, 28-NC-PC, 29-LC-LC,

30-C-C,

31-C-C, 32-PC-PC, 33-LC-LC, 34-PC-PC, 35-PC-LC, 36-LC-LC, 37-LC-LC, 38-LC-LC, 39-LC-LC,

40- LC-LC


IOs Def BAHAMAS T and T ICELAND

1 Risk/Policy/

CoordinationMod Mod Low

2 Intl Coop Mod Mod Substantial

3 Supervision Mod Mod Low

4 Preventive Measures Mod Mod Low

5 Legal Persons and

ArrangementsMod Mod Low

6 Financial Intelligence Low Mod Mod

7 ML

Investigation/Prosec

utions

Low Low Mod

8 Confiscation Low Low Mod

9 TF Investigations

ProsecutionsLow Low Mod

10 TF Preventive

Measures/Financial

Sanctions

Low Low Low

11 PF Financial

SanctionsLow Low Low


Results of Fourth Mutual Evaluation Reports

Trinidad and Tobago

Technical Compliance - C-12, LC-13, PC- 13, NC-2

Effectiveness- Moderate-6 Low - 5

CFATF-Enhanced/Follow up FATF-ICRG

The Bahamas

Technical Compliance - C-8, LC-10, PC-21 , NC-1

Effectiveness- Moderate-5 Low-6

FATF-Enhanced Follow up/FATF-ICRG

Iceland

Technical Compliance - C-5, LC-13, PC-20 , NC-2

Effectiveness- Substantial-1, Moderate-4, Low-6

FATF-Enhanced Follow up


R RFR FRR December 2018

1 PC LC Risk policy and coordination

2 PC C Nat Co-op & Co-ord

7 PC PC Targ-Fin Sanc Prolif

8 PC PC Non Prof Orgs

10 PC C Cust Due Diligence

12 PC C PEPS

15 PC LC New Technologies

17 PC C Reliance on 3rd Parties

18 PC LC Int Contr-Forgn

Branches/Subsids

19 PC PC High Risk Jurisdictions


22 PC PC DNFBPs CDD

23 PC LC DNFBPs Other measures

25 PC LC Trans/ Ben Owns Leg Pers

26 PC PC Reg/Supv FIs

27 PC PC Powers Fin Supv

28 PC PC DNFBPs Reg/Supv

30 PC C Resp Law Enf/Invg Auth

32 PC LC Cash Couriers

33 PC PC Statistics

35 PC LC Sanctions


ICELAND FATF RE-Rating Exercise June 20199 – Financial institution secrecy laws from largely compliant to compliant

10 – Customer due diligence from partially compliant to compliant

12 – Politically exposed persons from partially compliant to compliant

15 – New technologies from partially compliant to largely compliant

16 – Wire transfers from partially compliant to compliant

17 – Reliance on third parties from partially compliant to compliant

19 – Higher-risk countries from partially compliant to compliant

20 – Reporting of suspicious transactions from largely compliant to compliant

22 – Designated non-financial businesses and professions (DNFBPs): customer due

diligence from partially compliant to compliant

23 – Designated non-financial businesses and professions (DNFBPs): Other

measures from partially compliant to largely compliant

27 – Powers of supervision from largely compliant to compliant

28 – Regulation and supervision of DNFBPs from non compliant to partially compliant

35 – Sanctions from partially compliant to largely compliant


TRINIDAD AND TOBAGO CFATF MER RESULTS AND RE-Rating Exercise May 2019

1-PC-LC, 2- LC-LC, 3-LC-LC, 4 LC-LC, 5 C-C, 6-PC-C, 7-NC-LC, 8-NC-PC, 9-C-C, 10- LC-C

11- C-C, 12-C-C, 13-C-C, 14-C-C, 15-C-C, 16-LC-C, 17-C-C, 18-C-C, 19- PC-C, 20-C-C

21-LC-C, 22-LC-C, 23-LC-C, 24-PC-C, 25-PC-PC, 26-PC-C, 27-LC-LC, 28-PC-PC, 29-LC-C

30-C-C, 31-LC-C, 32-PC-C, 33-PC-C, 34-C-C, 35-PC-PC, 36-LC-LC, 37-PC-C, 38-PC-PC,

39-LC-C, 40- PC-LC


ICELAND BAHAMAS T & T

9 LC-C C C Financial institution secrecy laws

10 PC-C PC-C LC-C Customer due diligence

12 PC-C PC-C C Politically exposed persons

15 PC-LC PC-LC C New technologies

16 PC-C LC LC-C Wire transfers

17 PC-C PC-C C Reliance on third parties

19 PC-C PC-PC PC-C Higher-risk countries

20 LC-C C C Reporting of suspicious transactions

22 PC-C PC-PC LC-C Designated non-financial businesses

23 PC-LC PC-LC LC-C Designated non-financial businesses and

professions (DNFBPs): Other measures

27 LC-C PC-PC LC-LC Powers of supervision

28 NC-PC PC-PC PC-PC Regulation and supervision of DNFBPs

35 PC-LC PC-LC PC-PC Regulation and supervision of DNFBPs


THE BAHAMAS

On-site visit November 30 to December 11, 2015. MER adopted July 2017. First

Enhanced Follow up (Re-Rating) Report December 2018

Entered FATF ICRG October 2018

TRINIDAD AND TOBAGO

On-site visit January 12-23, 2015. MER adopted June 2016 Third Enhanced

Follow up (Re-Rating) Report May 2019

Entered FATF ICRG October 2017

ICELAND

Onsite visit July 2017, MER adopted February 2018, First Enhanced Follow (Re-

Rating) Report September 2019


However, in June 2019 the FATF ICRG and Plenary encouraged The Bahamas

to continue working on implementing its action plan to address its strategic

deficiencies, including by:

• Enacting the Beneficial Ownership Law

• Issuing Codes of Practice for lawyers, accountants, and the real estate sector

and

• Beginning initial implementation of the recent Beneficial Ownership Law,

• Bringing the Anti-Terrorism Regulations into force.

(1) Completing the comprehensive electronic case management system for

international cooperation;

(2) Demonstrating risk-based supervision of non-bank financial institutions;

(3 Completing the process to ensure the timely access to adequate, accurate

and current basic and beneficial ownership information;

(4) Increasing the quality of the FIU’s products to assist LEAs in the

pursuance of ML/TF investigations, specifically complex ML/TF and stand-

alone ML investigations;


However, in June 2019 the FATF ICRG and Plenary encouraged The Bahamas

to continue working on implementing its action plan to address its strategic

deficiencies, including by:

(5) Demonstrating that authorities are investigating and prosecuting all types

of money laundering, including complex ML cases, stand-alone money

laundering, and cases involving proceeds of foreign offences;

(6) Increasing the identification, tracing and freezing or restraining of assets

and to present cases linked with foreign offences and standalone ML cases;

and

(7) Addressing remaining gaps in the TF and PF TFS frameworks and

demonstrating implementation.


FATF – International Cooperation Review Group – Improving Global

AML/CFT Compliance: On-going Process November 3rd 2017

Trinidad and Tobago -In October 2017, Trinidad and Tobago made a high-level

political commitment to work with the FATF and CFATF to strengthen the

effectiveness of its AML/CFT regime and address any related technical

deficiencies. Trinidad and Tobago will work to implement its action plan to

accomplish these objectives, including by:

(1) adopting and implementing the relevant measures to enhance international

cooperation;

(2) addressing measures for transparency and beneficial ownership;

(3) completing the legislative efforts to enhance the processing of ML charges

before the courts;

(4) taking measures to enhance tracing and confiscation of criminal assets;

(5) enforcing TF measures and adopting appropriate measures for NPOs;

(6) enacting the necessary amendments related to targeted financial sanctions;

and

(7) developing, adopting, and implementing the necessary framework to counter

proliferation financing


Trinidad and Tobago June 2019 ICRG

Since November 2017, when Trinidad and Tobago made a high-

level political commitment to work with the FATF and CFATF to

strengthen the effectiveness of its AML/CFT regime and address

any related technical deficiencies, Trinidad and Tobago has

taken steps towards improving its AML/CFT regime, including by

proclaiming laws on NPO supervision and civil asset recovery.

Trinidad and Tobago should continue to work on implementing its

action plan to address its strategic deficiencies, including by

implementing:

(1) the remaining measures to further enhance international

cooperation;

(2) the issues related to transparency and beneficial ownership;

and

(3) the measures to monitor NPOs on the basis of risk.


FATF RECOMMENDATION 1 NATIONAL RISK ASSESSMENT

Before conducting an ML/TF risk assessment, it is essential that there be the

political will to carry out this work and ensure that the objectives of the

exercise are achieved.

Identifying, assessing, and understanding ML/TF risks central to the FATF

standards

Essential to implementation, development and improvement of the national

(AML/CFT) regime of laws, regulations, enforcement and other measures to

mitigate ML/TF risks.

Facilitates prioritisation and allocation of resources by authorities.

Provides useful information to financial institutions and designated non-financial

businesses and professions (DNFBPs) to support the conduct of their own risk

assessments.


Assist national authorities to apply AML/CFT measures

commensurate with the risks – i.e,. the risk-based approach

(RBA)

High Risks –Apply Enhanced Measures

Low Risk- Simplified Measures

NRAs –National, supranational assessments (of a group of

countries), and sub-

national assessments (of a particular sector, region, or

operational function within a country)


Involvement of the private sector –

Risk assessments by Financial institutions and DNFBPs could be valuable

to the building a complete picture of national ML/TF risks

FIs and DNFBP Staff – best source of critical information on the structure,

organisation and size of sectors, customers, features and characteristics of

particular financial products to determine the level of risks and assist in

identifying vulnerabilities

May have commercial interests that might preclude a completely impartial

view of ML/TF risk.


Trinidad and Tobago as at the date of the on-site visit of January 12-23,

2015.

Trinidad and Tobago is currently undertaking its National Risk

Assessment (NRA

At the time of the on-site, Trinidad and Tobago had commenced, but

not completed its NRA.

Draft sector reports had been compiled and preliminary results had been

communicated to the relevant sectors,

However the Authorities advised that the draft reports could not be

shared with the Assessors at that time.

RATINGS TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT

EFFECTIVENESS -MODERATE


The Bahamas On-site visit (November 30 to December 11, 2015)- Mutual

Evaluation Report adopted in May 2017

The Bahamas is still completing its ML/TF National Risk Assessment

(NRA) and has yet to develop documented national AML/CFT

policies.

There is a reasonable understanding of ML/TF risks among competent

authorities in the Bahamas on account of the NRA exercise there is a need

for this understanding to be placed within the context of The Bahamas as

an international financial centre and for it to be shared with relevant

stakeholders.

Measures also need to be taken to mitigate ML/TF risks.

RATINGS

TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT

EFFECTIVENESS – LOW


1st Enhanced Follow-up Report (FUR). December 2018

Utilized the World Bank Methodology in the completion of its NRA on the

December 6th, 2017.

The Bahamas has identified and assessed its ML/TF risks and has

developed a risk-based approach at various levels of the financial sector

and DNFBPs.

|However, a risk-based approach has not been identified or adopted by the

law enforcement agencies (LEAs). On this basis, The Bahamas is re-rated

as largely compliant with R.1.

TECHNICAL COMPLIANCE –LARGELY COMPLIANT


Jamaica as at the date of the onsite visit (1st – 12th June, 2015).

Key Findings

Jamaica does not have a completed National Risk Assessment

(NRA),

but as a result of the National Security Policy (NSP) and subsequent

work done by the National Anti-Money Laundering Committee

(NAMLC),

There is a reasonable level of understanding of ML/TF risk at the country

level and mitigation strategies have been put in place to address those

risks.

However, greater effort needs to be made to involve all stakeholders.

RATINGS


EFFECTIVENESS -MODERATE


Antigua and Barbuda as at the date of the on-site visit June 5th – 16th,

2017

Antigua and Barbuda, with the use of the World Bank Risk Assessment

Tool,

had identified and assessed its ML/FT risks

The Assessors were satisfied that there is a reasonable understanding of

these risks by the jurisdiction.

It should be noted that the exercise was only concluded one month

prior to onsite assessment,

and at the time of the assessment the country had yet to develop a

corresponding policy to address the findings and conclusions of the

exercise or prioritise actions.

RATINGS

TECHNICAL COMPLIANCE- LARGELY COMPLIANT

EFFECTIVENESS - MODERATE


Barbados as at the date of the on-site visit 5-16th December 2016. National

Risk Assessment (NRA), dated June 30, 2016, submitted in advance of

the onsite examination.

The NRA process was sub optimum. The scope and depth of analysis did

not comprehensively identify the ML/TF threats and vulnerabilities to

which the country was currently exposed.

There was limited analysis of terrorist financing (TF) risk, Transparency of

legal

persons and arrangements, Trust and Corporate Service Providers (TCSPs)

Cross border cash movements.

RATINGS


EFFECTIVENESS -LOW


United Kingdom- National Risk Assessments in 2015 and

2017 (Published)

Onsite visit- March 5-23 2018

Ratings

Technical Compliance – Largely Compliant

Effectiveness- High


The region is now four years into the Fourth Round of Mutual Evaluations and based

on the results of the Mutual Evaluation Reports (MERs) adopted as final thus far by

the CFATF, there is a strong likelihood that countries in our region will continue to

be monitored through the current FATF International Cooperation Review Group

(ICRG) initiative.

The mediocrity of enhanced follow up or FATF ICRG is dangerous, not acceptable,

nor in our collective best interests


The G20 July 2018 Communique noted as follows: We call for

full, effective and swift implementation of the FATF standards.

We call on FATF to further enhance its efforts to counter

proliferation financing.

Our region’ has a long history since 2000 of being blacklisted for

being non cooperative, having weak AML/CFT regimes and

strategic deficiencies which pose threats to the global financial

system.


In response to the G20 July 2018 call for full, swift and effective compliance with

the FATF standards, similar sentiments were voiced by The Honourable Carl

Wiltshire Bethel, Attorney General of the Commonwealth of the Bahamas, in an

article appearing in the Bahamas Investor of July –December 2018, under the

theme, “Adapting to Changing Times.” which have been echoed in one form or

another by other political leaders in the region;

• “the Bahamas like so many international financial centres, stands at a

crossroads. We can do nothing and become the maudlin old man of the

Caribbean, tearfully muttering the words of ‘Auld Lang Syne’ to an empty cup,

or we can embrace change, make it our own and rise to the challenges posed.

Irresolution, foot dragging, and delay are not options; well enough is no longer good enough.

• The very real threats of blacklisting, consequent reputational damage and the

loss of correspondent relations through the de-risking initiatives pose clear and

present dangers.

• The government is therefore determined to make all changes necessary to

dramatically improve the ‘Ease of Doing Business’, to remove any clouds of

regulatory uncertainty, and to restore to our jurisdiction the primacy and


The government is therefore determined to make all changes necessary to dramatically

improve the ‘Ease of Doing Business’, to remove any clouds of regulatory uncertainty,

and to restore to our jurisdiction the primacy and prestige it once enjoyed in financial

circles and so richly deserved.

The creation of a new architecture of legal supervision and compliance is a time

consuming and onerous task, which must be undertaken and driven to completion, after

due consultation and with the consent and involvement of all industry players and civil

society.

These steps are necessary, not only to meet global expectations, but also to do everything

necessary to ensure that the Bahamas itself is safe from the perils of terrorism, money

laundering and other serious criminal activities.

The Bahamas is committed at the highest political level, to taking all reasonable and

necessary steps to modernize our jurisdiction, and to achieve necessary full compliance

with international best practices in the provision of financial services.


Currently, a multiplicity of initiatives from international institutions and governments in the

developed world, continue to pose serious challenges to the global reputation, economic

well-being, prosperity, and national security of regional jurisdictions

These eleven international initiatives are as follows;

The Fourth Round of Mutual Evaluation Programme and Follow up process and the

Financial Action Task Force (FATF) International Cooperation Review Group

(ICRG) initiative.

The Organisation for Economic Cooperation and Development (OECD) Global

Forum on

Transparency and Exchange of Information for Tax Purposes.

The Organisation for Economic Cooperation and Development (OECD) Residence

and Citizenship by Investment (CBI/RBI) schemes/Common Reporting Standards.

The Organisation for Economic Cooperation and Development (OECD) Base Erosion

Profit Shifting (BEPS). Action 14 peer review and monitoring process.

es.


The European Union List of Non Co-operative Jurisdictions for

tax purposes

The European Commission List on High Risk Third Countries.

United States Government through its International Narcotics

Control Strategy Report (INCSR).

Transparency International's Corruption Perception Index.

Amnesty International Report on Human Rights.

The World Bank Ease of Doing Business Country Rankings.

The ongoing De-Risking/Loss of correspondent banking

relationships crisis.


FATF RECOMMENDATION 19 – HIGH RISK COUNTRIES

Financial institutions should be required to apply enhanced due diligence

measures to business relationships and transactions with natural and

legal persons, and financial institutions, from countries for which this is

called for by the FATF.

The type of enhanced due diligence measures applied should be effective

and proportionate to the risks.

Countries should be able to apply appropriate countermeasures when called

upon to do so by the FATF.

Countries should also be able to apply countermeasures independently of

any call by the FATF to do so. Such countermeasures should be effective

and proportionate to the risks.


Thank You

Questions and Answers

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