The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE US government has identified “gaming” as a popular money laundering mechanism in the Bahamas, urging this nation to “emphasise enforcement” in its fight against financial crime.

The concerns, raised in the US State Department’s annual International Narcotics Control Strategy (INCSR) report, did not specify precisely how drug dealers and other criminals are laundering money through “gaming”, or the type of “gaming” involved, but called for the “full implementation of appropriate safeguards” on the sector.

However, many observers are likely to blame the now-legalised web shop industry, which the just-published US government report described as “flourishing”.

“The primary sources of illicit funds in the Bahamas are trafficking in narcotics and weapons and human smuggling,” the US State Department said. “Despite increasingly stringent reporting requirements, drug traffickers and other criminal organisations take advantage of the cash-based economy to launder money.

“Money is laundered through the purchase of property, businesses created for money laundering purposes, and gaming...... The Bahamas has three large casinos, including the Caribbean’s largest casino (the $3.5 billion Chinese Export-Import Bank-funded Baha Mar mega resort) which partially opened in April 2017. Gaming operations based on US lottery results, locally known as ‘web shops’, flourish.”

No evidence was supplied to support the US government’s assertion about the gaming industry’s abuse by money launderers, and the report acknowledged the strict regulatory requirements imposed on both hotel casinos and web shops to counter such crimes.

“Casinos and web shops are licensed by the Gaming Board, and are required to maintain strict internal controls and accounting, comply with AML/CFT (anti-money laundering/counter terror financing) requirements, and submit STRs (suspicious transactions reports),” the US government report said.

“Geo-fencing protections built into gaming software ensure online gaming activities are inaccessible outside the country. The Gaming Board vets all online gaming platforms (software) and retains the ability to log into the programs remotely to observe operations in real time.”

Dionisio D’Aguilar, the Cabinet minister responsible for gaming, generated significant controversy and web shop ‘push back’ last year when he suggested the industry was vulnerable to money laundering, and could damage the Bahamas’ reputation, by allowing its accounts to be used for money transfer purposes.

He argued that the industry was not verifying the source of customers’ funds, but the web shops hit back by arguing they had implemented stricter anti-money laundering (AML) regulations and standards than ‘mainstream’ financial services providers. Island Luck, recognised as the market leader, moved to close down accounts not being used for gaming purposes.

The US government, meanwhile, in an echo of the Caribbean Financial Action Task Force (CFATF) report that found numerous deficiencies in the Bahamas’ financial crime defences, urged this nation to focus on enforcing the laws and regulations.

“The Bahamas has the requisite AML institutional and legal framework but needs to emphasise enforcement,” the US government said. “The Government should continue to provide resources and training to its law enforcement, judicial and prosecutorial bodies to increase their effectiveness.

“The Bahamas should ensure full implementation of appropriate safeguards on the gaming industry. The Financial Intelligence Unit (FIU), in co-operation with the Royal Bahamas Police Force, should continue its outreach to the banking and non-banking sectors.

“The FIU reported one prosecution and conviction for fraud and money laundering in 2017, and there were two money laundering cases under investigation. The newly-elected government appears to be prioritising anti-corruption and transparency across its agenda. These efforts should lead to greater transparency in government and financial dealings.”

The US called for the Bahamas to release information on the number of STRs, prosecutions and convictions “to better gauge the effectiveness of the Government’s AML programmes, and demanded that this nation “criminalise bulk cash smuggling”.

“The Bahamas does not maintain official records of company beneficial ownership, or require resident paying agents to tell the domestic tax authorities about payments to non-residents,” the US State Department said.

“It should collect complete, quality and up-to-date information on the beneficial owners of all entities licensed or formed in the country or its offshore centre in line with international standards.... The National Anti-Money Laundering Task Force should seek to promote an AML culture in the Bahamas.”