Money laundering and our guarded banks

Feb 26, 2017 News

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By Kiana Wilburg
Confidentiality clauses—That’s the term I was constantly running into when I engaged several banking officials on the notion of publishing what they’re really doing to prevent the system from being used as a medium for money

laundering.
During my research for the past two weeks, it was nearly impossible to find publications—which the public can access—from banks in Guyana showing how they have been keeping money launders at bay.
In a discussion with officials at the Central Bank, it was made clear from the get-go that banks in Guyana are under no obligation to publish what they are doing in relation to finding money launders and preventing them from using the banking system.
I subsequently enquired whether more “sunshine clauses” could be placed into the laws so that information in this regard could be filtered out to the public. They were not exactly thrilled by the idea, but they made it pellucid that such a move would not be easy as ABC. They explained that banks are already required by law to provide such information to the Financial Intelligence Unit (FIU).
“That information is provided to the FIU. If, for example, there is an issue or there are suspicious transactions, then it is reported to the FIU, but it is for the FIU to come out and say that they have x amount of cases that they are looking at. That is the way it is supposed to be done,” one Central Bank official explained.
Another stated, “I don’t think people really understand the complexities of money laundering and best practices employed and also adherence to confidentiality. One has to be involved to know how these things emanate and how they have evolved over time.”
The official continued, “ But I think it is important to note that pension institutions or other conduits, like gambling entities, real estate companies and dealerships are also susceptible to money laundering activities, so don’t run away with the idea that it is the banking system that is exposed the most. But again there are various regulatory authorities in place.”
The banking official added, “The banks have various filters for detecting money laundering and trust me it is reported. I understand the principle of publishing which you are speaking about, but that is for the FIU to do. That is the right procedure. The law does not require us to do that. It requires us to report it to the FIU.”
Speaking with Finance Minister Winston Jordan, subsequently, he agreed that the principle of banks publishing information with regard to what they have been doing to prevent the banking system from being abused is worthy of consideration. He emphasized, however, that the ideal is one which must be taken in the context of how Guyana’s banking system operates and what are the regulations in place.
“We must ask ourselves such as where is Guyana relative to that principle of banks or banking regulators publishing such information and if we are not there then what steps can be taken to take us there? I believe that it would be good to have a viewpoint in that regard.”

TRANSPARENCY INTERNATIONAL
The notion of having banking regulators publish such data is actually not farfetched. In fact, it is something that Transparency International, the global watchdog against corruption, is currently advocating for.
Transparency International recently stated that bank regulators need to publish much more information about whether banks are doing what’s required by law to stop money laundering.
The body believes that this would ensure that citizens and businesses can be confident corrupt individuals and organizations, criminals, or terrorists are not using the global banking system.
In fact, a new report from Transparency International shows that in countries hosting the world’s biggest banks, little data on anti-money laundering prevention and enforcement is published, or is if it is published it is out-of-date.
“Mistrust of banks will continue unless people know they are working on their behalf and not for the corrupt. Corruption and money laundering undermine the basic rule of law, weaken democratic institutions, and damage economies and societies. It drives inequality and blocks efforts to stop poverty. We need to see that the people meant to stop corruption in the banking industry are doing their job,” said José Ugaz, Chair of Transparency International.
Furthermore, according to Transparency International’s study, Top Secret: Countries keep financial crime fighting data to themselves, it shows that data about authorities’ anti-money laundering efforts are only partially available across 12 countries, including Germany, Luxembourg, Switzerland, the UK and the US.
The global watchdog said that this includes data as basic as the number of times banks were sanctioned for money laundering failures in a given country, a number which is only public in four out of the 12 countries assessed – Australia, Cyprus, Italy and the US.
“There is no good reason to keep this data secret. Are they protecting us from the next financial crisis? We, the citizens, have the right to know if the financial sector is being permissive or complicit with illicit activity,” added Ugaz.
In 2013 alone, Transparency International said that developing countries lost an estimated US$1.1 trillion to illicit financial flows which describes the illegal movement of money from one country to another. The body said that effective anti-money laundering measures in both developed and developing countries are essential to end these illicit flows.
Additionally, the body said that the public needs evidence that action is being taken, not only to build trust in the institutions that hold its money, but also as a deterrent against crime by making sure bank examiners are effective.
The entity said, “Policing the financial sector requires strong, consistent and effective anti-money laundering supervision by authorities. Just like health and safety inspectors in restaurants, national financial supervisors have the power to visit and inspect banks (on-site monitoring), identify and record failings in their systems, and impose sanctions where necessary.”
Transparency International added, “Citizens have a right to know the extent to which supervisors are applying this power in practice to uphold the law in the financial sector. By increasing media and citizen oversight, making more data about these activities public would help to make anti-money laundering systems more effective.”
Furthermore, the anti-corruption body recommends that countries publish anti-money laundering oversight and enforcement statistics on a yearly basis, in a single report or data file.
The body said that the requirement to publish yearly anti-money laundering data should become a standard recommendation of international bodies, including the Financial Action Task Force (FATF) and the G20.
The anti-corruption body stressed that transparency on this important aspect of financial market enforcement is only a first, but vital, step on the long road to cleansing the global financial system of dirty money.

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