The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The US government has urged the Bahamas to beef up its anti-money laundering safeguards ahead of this year’s impending expansion of casino and web shop gaming, describing the latter as an “illicit” industry that “flourishes” in this nation.

The comments, contained in the US State Department’s 2013 International Narcotics Control Strategy Report (INCSR), published this week, provide a stark reminder of the potential dangers the Bahamas faces if it leaves the ‘web shop’ industry status quo in place post-referendum.

Prime Minister Perry Christie previously warned that an unregulated web shop industry posed a significant money laundering risk, something the international community was likely to pick up on. The end result, he implied, could be a ‘blacklisting’ of this nation similar to that imposed by the Financial Action Task Force (FATF) in 2000.

Mr Christie’s concerns, at least when it comes to the web shop industry and its ‘unregulated’ status attracting unwanted attention from other nations, appear to have been realised based on the US State Department’s report.

The report, which has been seen by Tribune Business, describes “illegal gambling” as being one of the major sources of laundered money in the Bahamas - the other two primary origins being drug trafficking, and human smuggling.

Clearly written before the January referendum’s ‘No’ vote on the regulation and taxation of web shop gaming, the US INCSR report added: “Illicit gaming operations based on US-based lottery results and the Internet, locally known as ‘web shops’.flourish in the Bahamas.”

Noting that gaming in the Bahamas was set to expand in 2013, both via casino gaming reforms and the new Bimini Bay casino, plus potential legalisation of web shop gaming, the US State Department added: “With this expansion, the Government should ensure proper safeguards are in place, and provide additional suspicious transaction report (STR) training.”

The message from the report could not be clearer, and again highlights why the Government needs to either legalise, regulate and tax web shops, or shut the industry down, due to the wider negative consequences of the status quo continuing.

Elsewhere, the US report was largely a repetition of what it has recommended the Bahamas do, when it comes to combating money laundering and terrorism financing, in previous years.

While there was nothing new, it does raise questions about whether the Bahamas is following through on some of its commitments and legislative promises.

However, neither Michael Halkitis, minister of state for finance, nor Allyson Maynard-Gibson, the Attorney General, could be contacted for comment.

The US State Department said: “The Government of the Bahamas should further enhance its anti-money laundering/counter-terrorist financing regime by criminalising bulk cash and human smuggling; implementing the National Strategy on the Prevention of Money Laundering; ensuring full compliance with UN Security Council Resolutions 1267 and 1373; criminalising participation in an organised criminal group; establishing a currency transaction reporting system; and implementing a system to collect and analyse information on the cross-border transportation of currency.

“It also should ensure there is a public registry of the beneficial owners of all entities licensed in its offshore financial centre.”

The latter demand is likely to be shrugged off by many in the Bahamian financial services industry as unnecessary, given that all providers are required to know the beneficial owners of the entities they incorporate. Regulators are also able to access that information when required.

The two UN Security Council resolutions relate to the freezing/seizing of assets or funds belonging to alleged terrorists, and previous Caribbean Financial Action Task Force (CFATF) reports said the Anti-Terrorism Act did not implement 1267 “adequately”.

A 2010 follow-up report on the Bahamas by the CFATF said proposed legislative reforms would address these weaknesses, but it is unclear whether these have been enacted.

That 2010 report said financial regulators were finalising a report on a “fixed threshold currency reporting system”, while the currency declaration section on border entry forms was being revised.

“Money laundering trends include the purchase of real estate, large vehicles, boats, and jewellery, as well as the processing of money through a complex web of legitimate businesses and International Business Companies (IBCs) registered in the offshore financial sector,” the US State Department report said.

“Drug traffickers and other criminal organisations take advantage of the large number of IBCs and offshore banks registered in the Bahamas to launder significant sums of money, despite strict Know Your Customers and transaction reporting requirements.

“The archipelagic nature of the Bahamas and its proximity to the United States make the entire country accessible by medium-sized boats; smuggling and moving bulk cash is relatively easy.”