Speaking at the Second Annual Global Compliance Conference held last week at the Westin Casuarina, Lindsey Cacho, Financial Reporting Authority Director, gave a detailed presentation on the functions and workings of the organisation and revealed interesting statistics in the process.
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Mr. Cacho said that the total number of suspicious activity reports (SARs) for the 2005-06 financial year had dropped 9.4 per cent on the previous financial year.
In 2005-06 there were 221 SARs filed with the Authority, in comparison to 244 in the 2004-05 financial year. SARs are the disclosures that financial institutions make to the FRA, with severe penalties for failure to disclose knowledge or suspicion of money laundering, as this is an offence under the Proceeds of Criminal Conduct Law (Cayman’s primary legislation governing the proceeds of criminal conduct, including money laundering offences).
Mr. Cacho said it is difficult to pinpoint a single reason for the decline but suggested that it may due in part to better risk management/compliance programmes within the jurisdiction overall, as the Cayman Islands continues to do its part in the fight against global financial crime.
Mr. Cacho cautioned, however, that government and financial service providers need to remain diligent in monitoring suspicious financial transactions.
The Cayman Islands financial services industry is one of the cleanest in the world when it comes to money laundering, according to Fred Heard, Senior Accountant with the FRA.
Mr. Heard stated that Cayman had endured unfair criticism when it came to anti-money laundering procedures, saying that Cayman was singled out, while in reality, money laundering is a global activity, not something that can be pinned on a single country.
When questioned as to whether the scope of the money laundering problem was any greater in Cayman than elsewhere, Mr. Heard said, ‘It is estimated in international publications that money laundering accounts for around eight to 12 per cent of the world’s total economy. It is the challenge faced by organisations such as the FRA to ascertain the specific percentage of this type of crime that is endured by a jurisdiction’s economy.’
In response to this question, Mr. Cacho said, ‘The FRA is a member of the Egmont Group, the international group of financial intelligence units, and actively participates in the Working Group meetings as well as the Annual Plenary meeting. Analysis is enhanced by access to the Egmont Group members.’
Mr. Cacho also said that only one of the Authority’s investigations had led the FRA to implement a freezing order on the assets. When questioned on this at the conference, Mr. Heard said that freezing of assets is really a last ditch attempt by the authorities if they are fearful that the loss of the funds is imminent.
Mr. Heard explained that the FRA would usually prefer to monitor the bank accounts while the legal process was given time to address the funds through the courts.
He said, ‘We often work with foreign Financial Intelligence Units to follow the trail of the funds because this can often lead to valuable sources of information and information as to whether the funds are the proceeds of crime. Sometimes these accounts are watched for years and there may well be three or four countries involved.’
Mr. Cacho added that the monitoring of such accounts is done with the co-operation of the financial services institution where the accounts are held.
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