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The money trail

by Teresa Blackman

When it comes to money laundering schemes, criminals are willing to go the extra mile in their bid to make their illegitimate practices appear legal.

Those of us familiar with such notorious money laundering cases, such as former President of the Philippines, Ferdinand Marcos; Franklin Jurado; the Bank of Credit and Commerce International and the Bank of New York scandals, as well as Pablo Escobar, to name a few, would know that these criminals and banking institutions all had one thing in common — making their dirty money appear clean.

Simply put, money laundering is the process by which illegally obtained cash is made to appear as if it has been obtained by legal means. Hence, funds are moved into valid accounts or businesses in order to hide or disguise the financial trail that leads back to the criminal activity.

And, according to the Director of the Financial Intelligence Unit, Shelley Nicholls-Hunte, money laundering is the process of making dirty money appear clean or the washing of money.

“For example, drug trafficking or some other drug-related crime, the money derived from that crime … if I was involved in such an activity it would be to make that money appear as if it didn’t originate from drug trafficking, but some legitimate business.”

There are three stages of money laundering – placement, layering and integration. Placement, as the term suggests, is the initial placing of the money into the financial system, by way of depositing it into an account, and purchasing an insurance policy. At the layering stage, a series of complex transactions are created to further disguise the initial source of the money and that might be done by perhaps buying and selling property, and passing money through one account to another.

The final stage, integration, is when money goes through the first two stages and comes back into the economic system. By the time that process is completed, it is usually very difficult to discern what is legitimate from illegitimate activity.

The FIU head also explained that Barbados is a member of several international organisations that promote anti-money laundering counter-financing terrorism measures.

One such organisation is the Caribbean Financial Action Task Force, the regional organisation which ensures that the Caribbean Basin upholds the anti-money laundering measures and counter financing terrorism measures established by the Financial Action Task Force, of which the CFATF is an associate member.

Once a country belongs to the CFATF as Barbados does, Nicholls-Hunte said it was required to abide by 49 recommendations against money laundering and terrorist financing. “As a result, countries are assessed as to their compliance with these recommendations in three areas – the legal sector, the law enforcement sector and the financial sector,” she added.

The Money Laundering and Financing of Terrorism Prevention and Control Act, passed in 2011, lists the relevant entities that must comply with obligations under the money laundering legislation. These include commercial banks, credit unions, attorneys-at-law and accountants.

Pointing out that all businesses should know their clients and keep records of transactions, Nicholls-Hunte stressed: “In other words, know that their clients, whether an individual or a legal entity, is actually who he or she says that they are or who the entity claims to be. To do that you would need certain business transaction records as defined by the money laundering legislation; not to mention business transaction records could include the date of transactions, the nature of transactions, and the description. It would also include account files and any correspondence related to transactions. So, entities are required to keep those records for a period of five years.”

Citing certain warning signs for individuals, the FIU director noted that it was up to persons to ensure that they knew what the term money laundering meant and that they didn’t perpetuate the practice willingly or unwillingly, by allowing third parties to use their accounts.

“If, for example, you are approached by someone you do not know, [who wants] to use your bank account to carry out a particular transaction, that account could be a vehicle for money laundering. However, I’m not saying that in every situation [that] it would mean the person who comes to you to use your account would be involved in illegitimate activity. But, certainly if we have an account being used that way that person cannot certainly declare ignorance or turn a blind eye to what is happening; you would have some responsibility as the account holder.”

Barbados is not deemed a money laundering haven, but over the years several persons have been prosecuted for money laundering. While Nicholls-Hunte acknowledged, however, that the island, as well as others in the Caribbean, may be used to pass money through our particular financial sector, she assured: “That is being guarded against by having our regulations and systems in place to prevent that or reduce the possibility of that happening.”

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