The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The US government yesterday urged The Bahamas to place “greater focus” on combating financial crime conducted via online gaming and money transmission services providers.

The Biden administration, in the just-released International Narcotics Control Strategy Report (INCSR), identified both these sectors as “vulnerabilities” when it came to countering money laundering and the financing of terrorism. And it also called on The Bahamas to “follow through” on passing and implementing anti-corruption legislation.

“As an international financial centre, the country is vulnerable to money laundering in financial services, real estate, online gaming/casinos and money transmissions,” the US report said. “Greater focus on small money transfers and online gaming sector vulnerabilities is needed.”

Drawing on what it said was data provided by the Central Bank, the report added: “The Bahamas faces money laundering challenges in its casinos and online gaming industries.

“The Central Bank reports that, from January to September 2021, casinos generated $856m in sales and $131m in gross revenues. Online gaming, which ostensibly is restricted to citizens and residents, generated $3.2bn in sales and $136m in gross revenues in a country with a population of less than 400,000.”

Some will likely question these figures, especially for “online gaming”, at a time when The Bahamas and its tourism economy were still emerging from the devastation of the COVID-19 pandemic. However, gaming was not the only area of concern identified in the INCSR.

“The Bahamas identifies its real estate sector, valued at $1.65bn in 2020, as highly vulnerable given the high demand by foreigners and large sums associated with the market,” the US federal government’s report said.

“Less anti-money laundering focus is given to the smaller money transmission sector, which remains vulnerable given the large number of transactions, high numbers of one-off and non-resident customers, and usage by undocumented migrants.”

Turning to the bank and trust company sector, the document added that it “has over $442bn in assets and $11trn in cross-border flows, while the domestic banking sector has $18bn in assets and $70bn in deposit flows.

“Banks and trust companies face money laundering risks as they conduct a high volume of transactions, handle significant wealth, utilise wire transfers and provide banking services through channels that vary in anonymity and complexity. Trust companies, in particular, may be used to conceal beneficial ownership,” the report continued.

It is unclear what the INCSR assessment meant in relation to trusts and “beneficial ownership”. It is possible that the latter term may have been confused with trust “beneficiaries”, who typically have no control or say over a trust’s assets or how they are managed.

The Bahamas also appeared to get little credit for passing, and implementing, multiple legal reforms to strengthen its anti-financial crime defences over the past four years with only a brief mention made of its 13 new laws. These enabled it to escape the Financial Action Task Force’s (FATF) enhanced surveillance list and, more recently, the European Union’s (EU) anti-money laundering blacklist.

And Senator Ryan Pinder, the attorney general, told Tribune Business earlier this year that The Bahamas is aiming to be “40 out of 40” and achieve near-total compliance with global anti-financial crime standards this year.

He added that the jurisdiction was aiming to “take the last strides” to meet the FATF’s so-called ‘40 recommendations’ after its regional affiliate found The Bahamas was either largely or fully compliant with 38 of the standards in a December 27, 2021, report.

Elsewhere, the US called on The Bahamas to improve governance via transparency and accountability-related reforms. The Davis administration had promised to pass anti-corruption legislation during its first 100 days in office, including the Integrity Commission and Ombudsman Bills that stalled under its predecessor, but that period has past with little visible progress made.

“Since 2017, The Bahamas has enacted, but not fully brought into force, a range of laws to fight official corruption. Draft laws presented by the prior administration to establish an ombudsman’s office and an anti-corruption agency, focused on public corruption, had not yet been taken up in October by the new administration,” the US report said.

“In May 2021, the first information commissioner and deputy commissioner were appointed under the Freedom of Information Act to support public access to government records. Parliament has not yet brought into force clauses of the same Act, however, that define a process for the public to obtain information.

“It is important The Bahamas follow through with plans to fully bring into force transparency and accountability legislation to prevent and address corruption, and preserve public confidence.”

The US government report, meanwhile, again repeated criticism from previous years that the number of suspicious transactions reports submitted to the Financial Intelligence Unit (FIU) “is low compared to the size and scope of the financial sector”.

“Technology improvements were introduced in June 2019 allowing STRs to be filed electronically with the Financial Intelligence Unit. The FIU attributes timelier STR reporting to these improvements. As of October 20, 2021, the FIU received 593 STRs for sectors with $442bn in assets, up 29 percent from 461 STRs in 2020,” the report added.

“To enhance the due diligence for politically exposed persons (PEPs), the Government implemented a searchable database of legal entities registered or resident in The Bahamas, and accessible by law enforcement and regulatory agencies.”

It continued: “The Bahamas appointed five new magistrate judges, and four new Supreme Court justices, in May 2021 to help address deficiencies in the anti-money laundering/counter-terror financing regime. The Government is also investing in improved court infrastructure and IT (information technology) systems.

“In 2021, there were 20 money laundering charges and four convictions, representing 20 and 60 percent decreases, respectively, from 2020.”