The battle against crime never ends for compliance officers

Compliance with national and international regulations in the fight against money laundering, financial crime and terrorism financing is an ever expanding field that constantly presents new challenges for compliance officers at Caribbean financial institutions, delegates at the 7th Global Compliance Solutions Anti-Money Laundering and White Collar Crime conference heard. 

The event, held at the Marriott Beach Resort in Grand Cayman last week, presented numerous examples of this “never ending battle”. This year’s conference theme signifies compliance work will never truly be done in order to meet regulatory expectations, international scrutiny, evolving anti-money laundering and financial crimes, as well as the cost of trying to accomplish all that, said conference host Karen O’Brien of Global Compliance Solutions. 

The three main cost drivers for regulatory compliance are transaction monitoring, the identification of politically exposed persons and sanctions 
compliance, she said. 

Various transaction monitoring and anti-money laundering systems, for instance, often do not talk to each other and connectivity solutions are expensive. In addition, investment in systems does not reduce costs because it requires more experienced and skilled staff to review the suspicious transactions detected by the systems. 

The identifications of politically exposed persons, a term used for public officials, their relatives and related persons, who may be susceptible to corruption and money laundering, is another area typically in need of IT support.  

“It is impossible to identify a PEP without some sort of database screening,” Ms O’Brien said, emphasising regulators such as the Cayman Islands Monetary Authority routinely demand to know what financial institutions are doing to identify PEPs.  

The third cost driver, sanction compliance, is a key area of focus for regulators, particularly US regulators, most concerned with anti-terrorism financing and know your customer regulations, she said. 

John Solomon of World Check argued terrorism financing is a real issue in the Caribbean region and gave several examples of how terrorist groups made use of charities to collect and launder funds. He maintained official sanction lists with the names of known terrorists and organisations affiliated with terrorist groups are necessary, but not enough by pointing to the huge discrepancy between the number of organisations named on official lists and those identified by World Check. 

Many of the terrorist groups that have been named on official lists also have simply renamed their organisation to try to avoid detection, Mr Solomon said. 

In addition to limited financial resources, Ms O’Brien said, the Caribbean faces the challenge of protecting large coastal areas in a region known as a major transshipment route in the drug trade. The large shipping industries in general are another area of concern.  

“Panama handles over four million containers a year and has a staff of five to detect counterfeit products, intellectual property violations,” she said. 

Tyrone Fitzgerald, general counsel for the Grand Bahama Port Authority, said Caribbean countries have generally been proactive in implementing good legislation to address financial crime, but judges and prosecutors do not always have the expertise or willingness to execute the laws. 

“This whole area of financial crime and money laundering and financing terrorists, financing of terrorist activity, is a very new area for them. You find a lot of the time you don’t have the expertise that’s required. You don’t have sometimes the willingness to prosecute as you should,” he said. 

Inspector Carl Berry, financial investigator/CFATF examiner with the Jamaica Constabulary Force, said the specific nature of financial crime and types of people involved make it particularly difficult to address. At best, law enforcement entities can hope to keep up with these types of criminals. 

“We are in the game. It’s difficult because it’s challenging, it’s lucrative, and surprisingly the players in the game are some of the persons who we call sirs and misters”, he said. 

Law enforcement authorities looked to compliance officers as gatekeepers, Mr. Berry added and he urged delegates to understand their role. 

Kem Warner, managing director of KAW Management Services Ltd in Antigua, presented an overview of trends in financial criminal activity. The practical aspect of financial crime such as money laundering is not just the financial crime itself, but that the money being laundered can be derived from and used for offences against humanity, such as human trafficking and terrorist activity. 

In order to launder money, criminals are exploiting technologies such as online games, mobile phones and prepaid ATM cards, staying one step ahead of authorities. 

“By the time we catch up with them – with new legislation, laws, financial institutions, all of that, software to be built – these bad guys have already moved millions and billions of dollars through our financial institutions,” he said. 

In spite of these challenges, Ms O’Brien believes, the effort by Caribbean nations to fight money laundering and financial crime often goes unrecognised. 

“I really believe that Cayman and all the other jurisdictions that are represented here are doing a really good job and nobody understands that, especially our neighbours to the north,” she told the audience of 150 delegates from Cayman, Belize, Canada, the US, Turks and Caicos, Jamaica, Barbados, the BVI and Trinidad and Tobago. 

In this context, Cayman Islands Senior Crown Counsel John Masters said it is erroneous, and amounts to a public relations smear, when people talk about “stolen assets” being hidden in Cayman’s off-shore bank accounts.  

He said it is a myth that suitcases full of money are being dropped off in Cayman – and even when that was true in the 1970s, it was not illegal according to either Cayman or US law. 

Rather than Cayman being home to “stolen assets” or “stolen property” from other countries, some Cayman accounts do have “proceeds of crime”, Mr. Masters said, adding that is an important distinction because the former terms imply fault, while the latter term does not. 

The financial institution that originally accepted the dirty money should bear the brunt of the responsibility, rather than the Cayman institution that accepts funds wired from the original institution. 

He said, “[By] describing the money as ‘stolen assets’ it shifts responsibility from the jurisdiction that was responsible for avoiding the crime to the off-shore jurisdiction. They are both literally and metaphorically ‘passing the buck’.” 

AML Crowd Cayman

Audience at the 2011 Anti-Money Laundering/Compliance & Financial Crime Conference. – Photo: Patrick Brendel

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