The accidental money launderer

Local bankers recently got a dose of reality from Cayman Islands Crown Prosecutor John Masters, who outlined some of the compliance pitfalls members of their industry can run into while going about their daily business.

money laundering

Mr. Masters

Addressing the topic of the accidental money launderer for members of the Cayman Islands Bankers’ Association, Mr. Masters gave examples of everyday actions that could lead to a bank employee or a bank being found in breach of the law.

Using a hypothetical case ripped from the headlines in classic ‘Law and Order’ fashion, Mr. Masters described a security guard who had a bank account through which he was sending money through his account to his home country for his fellow countrymen, for which he was paid a small commission.

The bank manager noticed the wire transfers a particular client’s account and decided to call the client into his office rather than notifying the proper authorities, in this case the Financial Crimes Unit, immediately.

‘What this manager didn’t know was that this particular client had done the same thing at another bank, but the manager there had immediately reported the suspicious activity,’ he said, noting that not was the bank manager now at fault for not being up to speed on compliance procedures, he would be placed under even greater scrutiny by a jury given that the other manager had done the right thing.

‘Ignorance of the law is no excuse,’ said Mr. Masters.

Mr. Masters then detailed the possible events that could follow, noting that the manager and his employers would be judged on whether they intended to commit an act, whether or not it was illegal.

Mr. Masters said he hoped the overall message was that integrating compliance into a bank’s daily operations was the best way to avoid the possibility of prosecution for money laundering-related activities.

‘If you were looking at this from the perspective of a fire prevention strategy, the compliance regime can be likened to the internal alleviation of risk by ensuring that proper protocols are in place, sprinklers are working, extinguishers full and insurance in place,’ he said.

‘The regulator’s role of making sure that you are compliant can be likened to the local fire warden. But prosecutors are the metaphoric fire department which arrives at the scene when the worst has already happened.’

Mr. Masters also outlined the kinds of things people and organizations which are successfully prosecuted likely face, not the least of which being how the courts will determine the proceeds of crime.

‘In a case where events are occurring in contravention of the proceeds of crime law, for example, everyone who was in contact with criminal property is liable for the full amount.’

He noted assets obtained even before the offence was committed can be seized and awarded to the victims.

‘But if your procedures are robust, the likelihood is you won’t be prosecuted as a bank,’ he said.

He stressed the point that compliance should not be a chore or seen as an option only to be undertaken for fear of repercussions of breaking the law.

‘Ultimate compliance should be transparent as part of best practice,’ said Mr. Masters.

‘For example, whenever you get into your motor vehicle you never see it as an exercise in legal compliance, it is part of a project to get from point A to point B: however as far as the law is concerned it is one big exercise in legal compliance,’ said Mr. Masters.

‘The law is not concerned about your need for the journey, it is concerned that you comply with the law whilst making your journey. So if you teach a driver that they should indicate a certain distance before turning and that they should switch their lights on when vision is poor, without making any reference to a particular law, you have made them legally compliant.’