Money-Laundering not in recess

Amaila Update
Late on Friday evening, Mr. Winston Brassington, the Government’s point man in the Amaila Falls Hydroelectric Project (AFHP) announced that Sithe Global was exiting the project. Later that evening the President was reported as stating his Government would continue working to bring the Project to reality. Sithe would only say that it would issue a statement on Sunday August 11.

Meanwhile I had an initial but extensive engagement on Tuesday with Mr. Brassington, his two Amaila technical advisers and Mr. Kit Nascimento, PR agent of Guyana Power & Light Inc. on the scores of concerns I have had with the project. At the end of that session we agreed to meet again and in anticipation of that further meeting I sent a number of questions to Mr. Brassington. I had given an undertaking that I would reserve further statements on the project pending the meeting with Mr. Brassington and his team. Accordingly I am withholding any comments on the announcement of Sithe’s withdrawal from the project.

The National Assembly has gone into recess leaving further consideration of the Anti-Money Laundering and Countering of Financing of Terrorism (Amendment) Bill before the Special Select Committee of the National Assembly until at least early October. The logic it seems is that if the deficiencies in the Act could have waited a year or two what harm can a couple of months do? Perhaps illogically, the answer is “a lot”. Trading blame by the various sides in the National Assembly does nothing to assuage the Caribbean Financial Action Task Force (CFATF), of which Guyana is a member, about Guyana’s consistent non-compliance with its obligations to have the appropriate legislative framework in place, supported by a strong regulatory body to oversee relevant bodies and enforce the legislation.

That the government has failed massively on each of these measures has not restrained the language used by Dr. Ashni Singh, Minister of Finance to describe the conduct of his colleagues on the opposite side in the National Assembly. In March this year, he described the AFC as “shamelessly irresponsible” accusing it of holding the nation “hostage” to derive concessions on, in his view, the small matter of the Public Procurement Commission. Of course many Guyanese regard the establishment of the Commission not only as a constitutional imperative but as a critical governance and anti-corruption matter. Now, as members of the National Assembly shut shop and head for their summer vacation their decision is being described as “unconscionable”.

Of course, as Finance Minister, Dr. Singh would naturally be very concerned at the consequences which could follow any punitive measure by the Caribbean Financial Action Task Force (CFATF), the regional anti-money laundering regulator when it meets later this year. But in order to protect its own integrity, the regional body will have to advance cogent reasons for not recommending that serious action betaken against Guyana. The reality is that money-laundering and financing terrorism have an international dimension that generates paranoia in some important countries of the world. As I noted in the Sunday Stabroek Business Page of May 12, 2013 (Playing with money laundering and terrorism legislation), which was also posted on this blog, the signal failure by Guyana has already earned it a place on CFATF expedited follow-up list. It really is therefore, hard to see how Guyana can avoid some sanction when the CFATF Plenary decides in November.

Any sanction could not possibly come at a worse time for Guyana. The exchange rate of the Guyana Dollar has recently been coming under some real pressure, helped in no small measure by the fall in gold prices, some successes against the narco-trade, sugar remaining poorly, rice seeming to bring in lower foreign exchange under the quasi-barter arrangement with Venezuela, and the expertise of the expanding Chinese community in foreign exchange dealings. On top of all of these, two mega-Yuan projects – the airport and now Amaila – are now under a serious cloud. Observers will find it fascinating to note how the Finance Minister will address these matters when he presents his 2013 mid-year, due this month-end.

Plea Bargain
But back to money-laundering. We know we have failed all but a few of the measures by which our actions to combat money-laundering and the financing of terrorism are judged. It seems that the best we can do is some kind of plea bargain and hope that our words wring with credibility and sincerity. In fact I think we need more than hope: we need to pray that the stars will be aligned in our favour and that our punishment will be mild.

In any case, it will not be the end of the world, not even a catastrophe. Trinidad and Tobago has gone through the brown-listing sanction that may likely befall us. Maybe they needed it to concentrate their minds. They did something about their plight and came out of it. At the recent not very appropriately named Investors’ Conference hosted by the ABCE countries, our key decision-makers had the opportunity to hear as clear a presentation of the Trinidad story as can be expected from anyone. That presentation was given by Ms. Sherene Murray-Bailey, Director AML/CFT Compliance Unit.

Interestingly enough, that Unit is located in the Ministry of National Security while our lame Financial Intelligence Unit is ensconced in the Ministry of Finance. It is unclear whether this is because we in Guyana think money-laundering is really an administrative matter while in Trinidad they think it comes closer to a rule of law issue.

As Ms. Murray-Bailey pointed out, the perception that a country is perceived as a haven for Money Laundering and Terrorism Financing automatically associates it with a high probability of attracting further criminal activity and a negative assessment by the international community. This in turn carries with it financial and reputational risk. Some of the direct consequences are:

– Greater scrutiny from correspondent banking relationships with increased queries regarding customer transactions and beneficial owners;
– The cost of doing business may escalate as businesses attempt to offset losses or other expenses due to the increased restrictions and delays;
– Termination of certain key correspondent banking relationships; and
– Limited means to access foreign currency or facilitate cross border payment transactions.

Not only the international Scotiabank, but indeed every other bank operating in Guyana with correspondent banking relationships in North America could be particularly hard hit. The US Regulator has the power to impose conditions and even prohibit US financial institutions from transacting with correspondents in a designated jurisdiction. With so many resident Guyanese receiving remittances from the USA, any adverse ruling will have a severe socio-economic impact on the country. If Trinidad is an accurate guide, we can expect lengthy delays in completion of foreign currency cross border payments. For businesses conducting time sensitive transactions, such delays resulted in penalties and loss of business as the sanction on the country flowed down to the businesses.

Other possibilities are a reduction in the flow of direct foreign investments into the local economy; loss of trading partners; an increase on the cost of borrowing as a result of reduced access to foreign currency; and ultimately, negative reactions by the international community have the potential to impact funding from international agencies.

At the parliamentary level we seem resigned to place our faith in the hands of the regional regulators. But here in Guyana we will still have to fix the problem or the shade will get darker and darker. I would advise that since the executive arm of the state is not in recess there is no reason why it should not be working feverishly to address not only the problems identified by the CFATF but to identify any other deficiencies in the law and its consistency with the Constitution. Some commentators argue that several provisions of the Act are vulnerable on that ground alone; others argue that the Act gives to the Attorney General powers that are only exercisable by the DPP; and that the government must shed its hubris and obstinacy and move the FIU from the Ministry of Finance, putting it within the umbrella of the Bank of Guyana which has exclusive statutory regulatory powers over financial institutions.

There is also a widespread belief that the FIU under its present head has been totally ineffective and needs to be replaced as part of the clean-up exercise. The government should state why it believes that everyone else is wrong and that it is right.

I close with a suggestion to the Government. Why not bring try to have Ms. Murray-Bailey spend our parliamentary recess in Guyana advising us on fixing our problems. She was part of the team that helped Trinidad exit out of the dark zone. She can do it here. We have a precedent for this kind of transfer. Ms. Michael Christian helped us with VAT. Let us spend the recess usefully.

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