Playing with money laundering and terrorism legislation

Introduction
Guyana joined the Caribbean Financial Action Task Force (CFATF) in 2002, twelve years after it was established in May 1990. The CFATF is an associate member of the Financial Action Task Force (FATF), the international body established in 1989 charged with examining countries’ money laundering techniques and trends, reviewing the actions which they had already taken, and setting out the measures that still needed to be taken to combat money laundering. Following the terrorist attacks of September 11, 2001, the FATF added terrorist financing to its mandate.

By 2002, Guyana had already passed the Money Laundering (Prevention) Act 2000 which granted to the Minister of Finance the discretion to appoint the Bank of Guyana or some fit and proper person as the Supervisory Authority for the Act. Favouring the latter course, some time in 2005 the Minister of Finance handpicked Mr Paul Geer to head a Financial Intelligence Unit located in the Ministry of Finance. Mr Geer’s experience included five years as head of the Guyana Bank of Trade and Industry, which he left abruptly – officially for personal reasons ‒ in a golden parachute and after a meeting of the bank’s Board of Directors.

Despite the allocation by the National Assembly for the FIU of more than two hundred and seventy-five million dollars since Mr Geer took up the position, the unit has had virtually no success in pursuing even the limited objectives of the 2000 Act. Not surprisingly then, Guyana’s reputation as a prosecutor of money-laundering has no gloss. Some have blamed the deficiencies of the Act but Mr Geer did not help the government’s case by his unavailability to meet the press or unwillingness to answer questions about the FIU.

Following some critical reviews of the by then limited 2000 Act and the country’s anti-money laundering efforts, the government introduced the Anti-Money Laundering and Countering the Finance of Terrorism Bill on June 4, 2007. After nearly two years and fifteen sittings of a Select Committee the National Assembly on April 30, 2009 passed the Bill. Reinforcing the perception that he was never serious about pursuing crime and its proceeds, then President Jagdeo took one hundred and seven days before he assented to the Bill on August 14, 2009. And then it took another 87 days before the publication of Order # 22 of 2009 to bring the Act into force.

The later Act was equally poorly administered prompting President Jagdeo some time in 2011 to publicly castigate the unit for its inability to meet even basic annual reporting obligations to the National Assembly. Put bluntly, the FIU of the 2009 Act and its predecessor Supervisory Authority under the 2000 Act have been disastrous failures, so much so that we probably could have done without them, without noticing their absence.

Continue reading Playing with money laundering and terrorism legislation

Another try at preventing money-laundering

Introduction

The current select committee review of Bill No 18 of 2007 Anti-Money Laundering and Countering the Financing of Terrorism Bill 2007 took me back to the Hansard report of the debate on The Money Laundering (Prevention) Bill 1998 which was piloted by then Attorney General Charles Ramson when he famously announced how proud he was to be associated with a government that had “zero tolerance for corruption.”

On that occasion the government rejected pleas by the parliamentary opposition to refer the bill to a select committee and seemed to have paid little attention to the submission of the Guyana Association of Bankers (GAB) on the bill. To read Mr Ramson extolling the bill’s virtues, strengths and capacity to solve what had become a scourge that distorted every single measure of the economy was like celebrating the discovery of sliced bread. He said for example that the new law if given scope could exorcise the much wider range of illegal schemes which can be “disruptive of the conventional economic matrix.” He did not explain what constituted that matrix.

Ten years on a select committee of the National Assembly is meeting to bury that bill which has really never seen much light or action, although there is a Financial Intelligence Unit (FIU) that was set up not within the Bank of Guyana as recommended by the GAB, but essentially as a one-man operation within the Ministry of Finance and which never published a single report on its activities.

The 1998 bill became law and is still on the statute books as The Money Laundering (Prevention) Act 2000, but for the near-life of the act (an SN editorial to mark the third anniversary of its enactment described it as a “bear in hibernation”) it has been more words than action.

The list of persons who pronounced on the act at various stages included then Finance Minister Sasenarine Kowlessar who after the act’s assent announced that no decision had been made as to who would supervise the act; President Jagdeo, who one year after the act was passed said no funds had been budgeted for its implementation; then Director of Budget Dr Ashni Singh who pronounced that “money-laundering could have significant influence on currencies, market prices and financial stability”; Home Affairs Minister Gajraj who in discussing money-laundering spoke of non-working millionaires and the “Siamese twins of the narcotics scourge”; his successor Ms Gail Texeira who called on consumers to boycott drug lords’ businesses and Commissioner General Kurshid Sattaur who announced that GRA’s software would pinpoint money launderers.

But perhaps the most striking non-action was the establishment in 2001 of a special task force under Dr Roger Luncheon to oversee the implementation of the act – that too never got anywhere. Significantly, never a word from the Director of the FIU.

History favours pessimists

History is not therefore on the side of the optimists. Between then and now money laundering has earned itself – helped by the inaction of the politicians and technocrats – to become one of the most significant segments in the economy although the Bank of Guyana hardly thinks it worthy of comment in its just released report for 2007. The non-bank cambios, almost all controlled by individuals, have become lawful vehicles for the pursuit of unlawful activities. Someone needs to explain why we would not allow insurance companies and commercial banks to operate as sole traders but would do so for the non-bank cambios, with little reporting obligations and no audit requirements.

To argue that we need the cambios because of the fear of driving foreign currency transactions underground is to admit that there is something wrong with the market and the regime for foreign exchange, including the exchange rate. As currently operated the cambios have legal cover to transact transactions, a number of which involve laundering.

A more ambitious task

What is different this time? The 2000 act had the modest objective of “the prevention of money laundering and for matters connected therewith,” and had a total of twenty-nine (29) sections. The new bill is far more comprehensive and now extends to the prevention of the financing of terrorism, a consequence of the attack of September 11, 2001, that allowed US President Bush to reorganise the priorities of all regulators in a one-size-fits-all solution. The bill now extends to “politically exposed persons,” and I hope that the lawyer/politicians now reviewing the bill will cover all the bases and not leave any technical loopholes to be exploited by their political parties, particularly at elections time.

The bill, an immensely complex piece of legislation covering some one hundred and fifteen (115) sections, will require several pieces of supplementary legislation to support it and confers both powers and duties, some of which are mandatory and others discretionary. Even if only some of these were to be carried out with minimum efficiency, it would require a significant bureaucracy and budget which the government may be unwilling or unable to finance, and external financing may be required for its viability. In fact we will probably hear, as we did with its predecessor, that there is no money to operationalise it.

The bill optimistically assumes that a politically appointed director supported by an attorney-at-law and an accountant with personnel trained in financial investigation or other employees (s. 9) will be able to administer this legislation that would include both domestic and cross-border transactions. The same structure and person could not enforce the 2000 act, and never prepared a report or analysis to indicate the favourable features and its weaknesses, so it must therefore be wishful thinking to believe that a similarly structured FIU could administer a more complex piece of legislation.

Look out

I believe it would be helpful if various options across similar jurisdictions with similar legislation were explored. Data suggest that while FIUs appear to be the most common form in the Caribbean, these are not uniformly staffed and that there is no single, uniform structure. As drafted, there is no parliamentary oversight and the minister is not required to table the annual report of the FIU in the National Assembly.  In Barbados the FIU comes under the Anti-Money Laundering Authority that has wide professional membership including the Commissioner of Police, the Comptroller of Customs, the Commissioner of Inland Revenue, the Supervisor of Insurance, the Registrar of Corporate Affairs and Intellectual Property and representatives of the Governor of the Central Bank and the Solicitor General.

Look at

Despite some serious lapses that have eroded public confidence, the bill presupposes adequate regulatory mechanisms, the existence of a capacity and independence within the police force and Office of Director of Public Prosecutions to investigate and prosecute suspected wrongdoers, and a court that is attuned to the many forms of money-laundering. Will the court under the new law allow a major public company to refuse to divulge to its regulator the identity of the individuals behind major blocks of trustee-held shares?

Ministerial authority for the legislation is split between the Ministers for Legal Affairs and Finance. Yet the Ministry of Legal Affairs has taken a secondary role at the select committee level, and one wonders whether this will be another example of one thinking the other will act and both ending up doing nothing. The other main legislation where there is such joint responsibility is the Companies Act 1991, which has not been very successfully implemented and which cries out for amendments. It must be over one year ago that I made detailed representation to the Minister of Finance on some necessary amendments to the Companies Act but all I have heard is that the recommendations are engaging the attention of the Ministry of Legal Affairs.

Having had the opportunity to appear before the select committee I was struck by the exuberance of some of the members about the expected effectiveness of the bill which is largely an imported piece of legislation. Its origin is the international Financial Action Task Force set up by western governments, but even that body recognises in the Glossary to its 40 Recommendations and 9 Special Recommendations that “countries have diverse legal and financial systems and so all cannot take identical measures to achieve the common objective.” There is little evidence, however, that this bill has been sufficiently localized, and it does not identify the necessary consequential amendments to a number of other statutes, including the Bank of Guyana Act. Unless this is done, we can expect some lawyers having a real field day as they draw attention not only to the conflicts with other laws but also with the constitution which is the supreme law.

Gail’s barons

Apart from the laundering associated with the drug barons, the fuel smugglers and those who are called businesspersons, money-laundering is also related to tax evasion for which we already have many laws and other arrangements which are seldom invoked. We clearly need to develop capacity in the Guyana Revenue Authority to deal with rampant tax evasion, the proceeds of which must themselves be laundered, and I can only wonder why better use is not made of the Property Tax Act and the exchange of information provisions under the Double Taxation Treaties with Canada, the UK and Caricom states and the Income Tax (Exchange of Information) USA Order.

There is in fact a raft of other legislation that can help to ferret out money-laundering, with the Integrity Commission Act coming to mind, but what about the Companies Act itself, section 496, which allows for the Minister of Finance “on his own motion” and for the protection of the public to appoint inspectors to look into the affairs of a company. Certainly one prominent company comes to mind, but is there the will?

Conclusion

The real test of this bill is in the detailed provisions as well as the subsidiary legislation to follow. These should ensure a balance between dealing with money laundering and the financing of terrorism and the pursuit of legitimate business. But in the final analysis it will be in how serious the government is in stamping out money-laundering or whether this bill will be simply as ineffective as its predecessor.

Compensation for lives and properties

Introduction

It took the January 26 massacre in Lusignan to bring home to the government that it had to confront the situation on the lower East Coast. Typically, one of its responses was to react to the calls by residents to “deal with” the Buxton crisis that has been festering for years. Despite an army presence over a couple of years the solution to what the government sees as the criminal dimension to Buxton seems as far away as when Shaka Blair was killed by the police in 2002.

Last weekend I again visited Lusignan meeting with relatives of the victims whose hopes for improvements in their daily lives are rapidly receding. The wish of many is to pack up and get out, not only from the community but from the country. All these persons claim to have been lifelong supporters of the PPP/C – and indeed the results from successive general elections would support this. As a community they feel deserted, with very little interest shown by officialdom after the initial public intervention.

Hopelessness

And over at Buxton, which I also visited, the situation is both different and similar. Hopelessness envelops a once glorious village and poverty is all around. This too is a village that except at one election has given its full support to the PNCR for which it seems to have received little in return. It is a broken community where, like Lusignan, any semblance of participatory democracy vanished decades ago. This is despite the fact that we now have three experienced ministers with relevant experience in the Ministry of Local Government – another example of a waste of taxpayers’ money and the creation of state jobs for party persons.

In their desperation, these communities now alternate between a dream that their political leaders will represent them and anger at themselves for even thinking this will ever happen. Yes the government went in the early days in Lusignan and in their typically imaginative manner even opened an account with one of the shops in the area where those who suffered direct losses could get some material assistance. And in Buxton the leaders of the PNCR have been visiting almost daily to meet with the residents including those who operate farms, but who are now subject to formidable restrictions on access to their farms.

Police capacity

While the government appears to have back-pedalled from the initial decision to clear all the farms in the backlands to improve security, it appears that there is still considerable clearing being done and that the police have been assigned responsibility for assessing and paying. It has been a long time since the government has shown such confidence in the police!

I am not convinced that the police under the Police Act have the authority or the capacity to assess and make compensation payments in what is a very complex technical issue. In fact every Commissioner of Police I have spoken to since 1993 has admitted that the force does not have the capacity to investigate more than basic fraud cases. How it will move from that level of incapacity to being able to assess losses and award compensation beyond the kind we had in the 2005 floods is to be seen. We recall that in 2005, surveys and data bases were conducted at some cost, which should mean that records are available to make some advances to those who suffer losses while their claims are prepared and submitted and for examination and payment.

Before President Jagdeo set up the Commission of Enquiry into the allegations against then Home Affairs Minister Gajraj, it had been suggested that a wider commission should be appointed to look into the matters concerning the East Coast. There can be no better time for that than now with the question of compensation high on its terms of reference. Despite our experiences with the flood we have no legislation or regulations governing the payment of compensation and instead the government relies on benevolence and ‘ad hocism’ to guide policy in this critical area.

Compensating agriculture

Despite the agricultural base of our economy we do not have a Compensation Fund or national insurance system for the sector. Agriculture, even in the best of circumstances is typified by persistent, high and a wide range of risks which could come from rain, sun, drainage and irrigation issues, pests, El Nino and La Nina, poor farming practices and good old government incompetence. Our present Minister of Agriculture holds an MBA, and while this may not have been in agriculture it should allow him to formulate a suitable compensation scheme for “his farmers.”

The Minister would find compensation schemes for agriculture as recent and as close as in Jamaica in August 2007, in South America, in Canada and the US, Europe and Asia. The one model that I especially like is that of Vietnam, setting out in considerable detail the basis for entitlement of compensation arising out of a 2003 resettlement scheme which had as its focus health care.

Constitutional guarantees

Given our own experiences, Guyanese would of course be cynical about whether what is set out in theory and law does in fact operate in practice. Usually it does if the citizens and their leaders hold the government accountable. Our constitution and the Investment Act 2004 guarantee citizens adequate and timely compensation, but for all practical purposes those guarantees seem to have been suspended when it comes to Buxton. The farmers who are suffering losses as a result of what Dr Luncheon calls the ‘line of sight’ initiative would certainly be affected, but when a people feels as deserted and dis-empowered as those communities do, constitutional rights are a useless luxury.

In the case of Vietnam, at the very early stages of project preparation, local authorities and leaders of different administrative levels in each of the communities affected were consulted and participated in the project design, while affected persons were informed on an individual household basis. The scheme provided for compensation for assets, income and businesses at full replacement cost with compensation for land regardless of the nature of ownership, while investments made on trees and crops are compensated at full replacement costs at current market prices. The headings under which compensation arose are: agricultural land; temporary loss of agricultural land; secondary affected persons; loss of structure; loss of business and income; loss of crops; and allowance during the transition period.

Guyana and Guyanese have the capacity to rise to this level of thinking rather than some mistaken belief or indeed strategy that we strengthen our own position when we fail to empower others. In fact all we do is push them towards the poverty mill from which the only escape route is out.

What about Lusignan?

This community has lost property and lives, but except in the most objective and impersonal way, it would be impossible to place a value on the lost lives. Yet, is it asking too much that even as it considers compensating the people of Buxton for their crops, that the government go beyond items from a friendly hardware shop and assist the residents of Lusignan who must now look only to private initiatives such as the one by Kaieteur News.

There is nothing revolutionary about victim compensation programmes to provide financial compensation for victims of violent crime. Such programmes are found around the world and in 2000 neighbouring Trinidad and Tobago proclaimed The Criminal Injuries Compensation Act, although I have been unable to ascertain whether the board to administer it has yet been brought into existence.

A typical financial compensation programme provides compensation of defined amounts to victims of reported violent crime who suffer serious injuries, dependants of deceased victims and scholarships for bereaved children. Injuries are not confined to physical or fatal injuries, but may be a medically recognised psychiatric or psychological illness. The schemes are generally statutory and there is no question of benevolence or handouts by politicians. Victims receive these as of right.

Conclusion

The festering problem of Buxton and the massacre in Lusignan must surely wake up the country to the backward state of our laws and management of the country. The absence of local democracy is exacerbating an already fragile national democracy. There is no logical, fair and timely system of compensation for our farmers arising out of natural disasters; databases created one year are destroyed the next. In matters of policing and security, there is an increasing tendency by the state to delegate security to the citizens by way of community policing, while victims are often left to fend for themselves. The knee-jerk reaction to clear the backlands, its almost daily modification and amendment and a display of the most incompetent judgment as to who should evaluate and manage an agricultural compensation programme are as clear signs as we can get that those with the duty to protect our communities have little idea how to do so.

It is time that there was a Commission of Enquiry to look at the whole of the East Coast, including Buxton and Lusignan, and that this be as wide-ranging as possible. We can then have a thorough examination of the root causes of the problems we are facing, no doubt including pitiable pay to the police, local government and economic issues, and consider sensible ways to compensate communities. Since Lusignan, such rational questions have been pushed off the bus.