The Many Faces Of Money Laundering

A look at the financial vulnerability of the Caribbean and so called third world countries in general.

For some time now an emerging business in the Caribbean has assumed many faces and phases in order to exist, expand and perpetuate itself.

In the so called large countries, due to their political structure and tax rules, there is legislature in place with numerous agencies and departments set up to combat this growing and profitable business of money laundering. Yes, it is a business and a very lucrative one.

Money laundering is an ever present problem which can affect all aspects of a country’s financial transactions due to its complex and sophisticated operations. To combat this ever increasing business around the world, there need to be means of detection, investigation, and reporting with some form of prosecution. Developing countries like Guyana and even Trinidad & Tobago for reference would have a difficult time combating this growing business due to the political structure with the polarization of power and control by politicians. We sometimes find that businessmen control the politicians and in some cases the politicians themselves are in business.

As a practioner in financial services and subject to all the rules, regulations and educational requirements of money laundering, we can now have an informed discussion on the topic.

Money laundering is defined as “The process by which money that is the product of illegal activities such as drug smuggling, prostitution, theft, or other illegal enterprise is funneled through the economic system, so that it is eventually thought of as legal and lawfully acquired funds.”

When faced with this problem in the United States, Congress had to pass its first Act in 1970, the Bank Secrecy Act (BSA) and Acts continue to be introduced as needed.

The Three steps involved in Money Laundering are as follows.

1. Placement, introducing dirty money into a legitimate financial system.
2. Layering, disguising the main source of the funds by purchasing necessary products which will be discussed later.
3. Integration, the final result of the money is now cleaned and can be used for numerous criminal activities.

Now, let’s identify some money laundering opportunities within the Guyana Economy.

1. Currency Exchanges in the streets and Cambios.
2. Banking transactions in and out of the country and wire transfers.
3. Mortgage Loans.
4. Insurance policies, securities purchases, surrenders, rollovers, sales etc.
5. Real Estate purchases, construction, sales, rentals and investments. Large vacant properties or tracts of land.
6. Setting up of shadow or store front businesses.
7. Employment of workers at building sites with dummy payrolls.
8. Hotels and Casinos operations.
9. Awarding contracts and entering into agreements with local and overseas investors.
10. The list continues.

The everyday “man in the street” can play a very important role in enforcing Anti-Money Laundering (AML) policies. Guyanese need to know that they have a key role in helping to stop this dangerous threat to Guyana, its economy and in some cases lives, since they are in the placement & integration stages. Money laundering is a crime that affects all individuals, business men and responsible citizens. For instance, businesses such as Money Gram and Western Union, hotels, casinos, street vendors, car dealers, restaurants, taxi drivers and goldsmiths, need to be able to identify suspicious activities and know how to report them.

When dealing with customers, they might want to ask questions for example,

1. Do I know this customer?
2. Does this transaction make sense considering what I know about the customer and his business?
3. Why would a stranger offer to invest in my small business?
4. How can I prevent my involvement with money laundering schemes?

Education is the key to protect our National Heritage and resources.

I must mention that the money laundering opportunities are compounded due to the countries cash based system where most purchases are performed using hard currency which is difficult to trace and monitor. Receipts are seldom given for cash payments and are rarely tracked.

In order to combat money laundering much needed legislation need to be enacted. Within the last few months the Guyana Parliament has been fighting to pass and enact the necessary and appropriate acts to combat this growing business and to date has not complied with the action plan developed with the Caribbean Financial Action Task Force (CFATF).

While this delay is taking place the parallel economy as determined by our noted Economist is gaining greater foot hold in the country’s economy which would give our newly elected political parties problems in fighting this decades old activity, hence immediate action is needed in the following areas:

1. Passing Anti-Money Laundering and Combating the Financing of Terrorism Bills. (The AML/CFT Bills.)
2. Code of conduct and conflict of interest rules for parliamentarians and family.
3. Assets and business disclosure for government officials with a ten (10) year look back.
4. Setting up equipped departments with trained and educated personnel.
5. Full control of the Inland Revenue Department set up to perform audits of Banks, Businesses, Insurance Companies, Construction sites, etc.
6. Train personnel and implement a Suspicious Activity Report (SAR) process for banks, insurance companies and other financial institutions.
7. Mandatory Anti-Money Laundering (AML) training, exams, licensing and continuing education for all engaged in the financial field. Check the USA for model.
8. Penalties for violating AML rules along with the taking of bribes.
9. Setting up an anonymous reporting hotline where citizens can call and report suspicious activities.

Money laundering itself is not the end process, as the definition states, it carries other ruthless components based on the activities of the persons engaged in the arena to protect their gains. Murder, manipulations, cover-ups, control of the legal and policy making mechanism are some of the few illegal behavior associated with money laundering. The sad thing is that this illegal behavior is passed down to the society at large and practiced by persons who see it as a way to make a living.

Looking at the national and international arena we can determine that dictatorship and the seizing of power can be deemed the ultimate cover up relative to uncovering and investigating money laundering. Large international companies also take advantage and exploit the weaknesses and greed of government officials and country regulations; hence the country’s compromising of the natural resources, banking and currency exchanges, imports and export trade, all add to the break-down in the money laundering accountability tracking system.

Note: This article is for educational purposes and is not intended to give financial advice or solicit for the purchase or sale of investments and or the sale of securities.