The Tribune

More than $30bn in sanctions have been levied against financial institutions by regulators across the US, Europe, Asia and Latin America since 2008 for violations of anti-money laundering, Know Your Customer (KYC) and other laws and regulation. In the Caribbean, as recently as February 18, 2022, the Cayman Islands Monetary Authority imposed discretionary administrative fines totalling $314,496 on Lions Brokers for failing to comply with the legislative requirements of that island’s anti-money laundering rules. To succeed in today’s increasingly competitive and regulated environment, institutions must not only focus on making profits but also ensure they can identify their business partners, clients and employees correctly, and make their anti-money laundering controls effective and robust.

Some executive leaders, and risk and compliance practitioners, may argue that with an ever-changing regulatory environment that features laws, regulations, guidance notes and advisories, just to name a few, institutions that are encountering ever-greater compliance costs are sometimes handicapped when faced with completing urgent priorities. Moreover, other executives and practitioners within the financial services space may posit that ambiguity - and the apparent inconsistency in regulatory regimes within both a single jurisdiction and across multiple jurisdictions - adds several layers of complexity, especially as it relates to multinational groups.

Against this backdrop, I will address over this two-part series why The Bahamas has an effective anti-money laundering/counter-terror financing framework that not only positions our country to attract new and worthy clients, but also establishes the country as a pacesetter when compared to more developed nations such as the US.

Clarity surrounding an effective anti-money laundering/counter-terror financing/anti-proliferation financing programme

The Bahamas 2019-2020 anti-money laundering/counter-terror financing report noted that The Bahamas had developed a three-year (2017-2020) National Identified Risk Framework Strategy (NIRFS). This provided an effective system for the prevention, detection and deterrence of money laundering; terrorist financing; the financing of proliferation of weapons of mass destruction; and other identified risks”. The six strategic themes of the strategy provided clear objectives from which were born a plethora of enhancements for our anti-money laundering/counter-terror financing/anti-proliferation financing space.

And, through the new Financial Transactions Reporting Act (FTRA) 2018, applicable financial institutions received clear guidance on what was considered an effective anti-money laundering/counter-terror financing/anti-proliferation financing programme. To ensure consistency within our jurisdiction, the Securities Commission completed amendments to the Securities Industry (anti-money laundering/counter-terror financing) Rules 2015 and the Financial and Corporate Services Providers (anti-money laundering/counter-terror financing/anti-proliferation financing) Rules 2019 to incorporate various international developments and ensure compliance with the FTRA and the Proceeds of Crime Act 2018 (POCA).

All other members of the group of financial services regulators (GFSR) worked collectively to enhance The Bahamas anti-money laundering/counter-terror financing/anti-proliferation financing space. I applaud all stakeholders for their efforts.

The Bahamas’ approach is not always seen in other jurisdictions. For example, on February 14, 2022, the Wolfsberg Group, which is an association of 13 global banks founded in 2000, requested clarity from the US Financial Crimes Enforcement Network (FinCEN) on what is considered an effective anti-money laundering/counter-terror financing programme. The group admonished the US government to make two significant regulatory changes, one of which was to “establish a definition for an effective anti-money laundering/counter-terror financing programme”.

Conclusion

In short, The Bahamas’ decision to remove a siloed approach to enhancements of our anti-money laundering/counter-terror financing space by the GFSR has positioned our country well for growth and will further assist with our position as a premier financial services jurisdiction that is adaptive, responsive and suitably regulated.

NB: About Derek Smith Jr

Derek Smith Jr. has been a governance, risk and compliance professional for more than 20 years. He has held positions at a TerraLex member law firm, a Wolfsburg Group member bank and a ‘big four’ accounting firm. Mr Smith is a certified anti-money laundering specialist (CAMS), and the compliance officer and money laundering reporting officer (MLRO) for CG Atlantic’s family of companies (member of Coralisle Group) for The Bahamas and Turks & Caicos.