Business Page – Curbing money laundering

Sunday, April 9th, 2006

Introduction:

The Government is about to repeal the Money Laundering Prevention Act even before it became fully operable. That act first saw the light of day when it came in a bill form on October 10, 1998 as one of theraft of business-related legislation introduced at the behest of the International Financial Institutions.

Perhaps as a sign of things to come it took some fourteen months before the bill was finally passed on February 10, 2000, assented to one month later and became law on publication in the Official Gazette on March 29 of the same year.

In the more than six years in which the act was in force, not once did the Minister of Finance make any regulations or amend any of the schedules to the act which would have given him the flexibility and the authority to respond to changing circumstances and make the act truly effective. Now we are told that the act with its 29 sections which have never been properly put to work is now to be replaced by an act which is exactly four times as long, which seeks to bring into law matters dealing with the financing of terrorism, and assigns as the principal supervisory authority for the prevention of money-laundering the Financial Intel-ligence Unit (FIU) to be set up within the Ministry of Finance.

Unrealistic optimism:

If the optimists have reasons to believe that the new law would be more successful than its predecessor, then the realists would be four times as justified that we are about to embark on another expensive and cosmetic exercise with a low prospect of success. Having failed to manage an act whose modest and sole objective was the "prevention of money laundering," we now replace it with a law whose ambitious purposes are "the establishment and management of a Financial Intelligence Unit; to provide for unlawful proceeds of all serious offences to be identified, traced, frozen, seized, and eventually forfeited; to provide for comprehensive powers for the prosecution of money laundering, terrorist financing and other financial crimes; and the forfeiture of the proceeds of crime and terrorist property; to require reporting entities to take preventive measures to help combat money laundering and terrorist financing; to provide for civil forfeiture of assests and to provide for matters connected therewith."

One can already see the new breed of lawyers wringing their hands in glee at the prospect of defending those whose activities combine to destabilise the economy, and cover their track of illegal activities ranging from narco-trading, fuel smuggling, tax evasion and currency transfers. In fact one recent ruling in Japan where the court decided against a prosecution, has led to certain sections of the press in that country claiming that Japan will now become a money-laundering tax haven.

Public interest v individual rights:

By its nature, legislation dealing with offences of the kind referred to above places the interest of society as a whole (the public interest) on a potential collision course with the interests of individuals. In fact section 3 of the draft bill which deals with the offence of money laundering, provides for a person to be guilty of money laundering if the person knowing or having reasonable grounds to believe that property in whole or in part directly or indirectly represent any person's proceeds of crime a) converts or transfers property knowing or having reason to believe that such property is the proceeds of crime; b) conceals or disguises the true nature, origin, location, etc, of that property; c) acquires, possesses or uses that property; or acts as an accessory to commit, attempts to commit and aids and abets, counsels or procures and facilitates any of a) to c).

Under the law it is not necessary for it to be proved which serious offence has been committed or for a person to be convicted of a serious offence to prove that property is the proceeds of crime and that knowledge, intent or purpose may be inferred from the facts.

The fines on conviction range from one million dollars to one hundred million dollars or to imprisonment of up to seven years. For a company the fine ranges from $200 million to $500 million. The law may not always seem logical and appears to advise that if you plan on money-laundering, do it as an individual.

The scope of the draft bill is quite wide and designates as reporting entities persons and professions set out in the law and includes financial institutions, cambios, pawnbrokers, real estate, casinos, credit unions, safe-custody services, used car dealers, directors and secretaries of companies, partners in a partnership, lawyers, notaries and accountants when they prepare for, engage in or carry out certain specified activities.

Types of offences:

The law focuses on three types of offence - serious offence, money laundering and terrorist acts - all of which are defined in the draft which makes a distinction between the supervisory authority and any regulatory or competent authority. It includes among the supervisory authorities the Bank of Guyana, the Commissioner General and the Commissioner of In-surance which are generally referred to in popular usage as 'regulators.'

One of the major weaknesses in the proposed law is the location of the Financial Intelligence Unit in the Ministry of Finance under a director to be appointed by the President, not only endowed with certain immunities but with quite considerable powers.

The Bank of Guyana, however, seems to be a more appropriate institution under which to include the unit given the bank's existing roles of a regulator of financial institutions.

The draft law gives the director exclusive control of the funds and resources made available to the unit. It seems that this position has already been filled without any advertisement, which is hardly the way to inspire confidence and public support. The staff which shall include an accountant and an attorney-at-law are to be appointed by the Minister of Finance and other personnel although it is unclear who appoints these persons. This seems to make these persons public servants subject to public service rules and salaries and therefore easy prey for corruption.

Rendition:

The law as drafted will allow the FIU to enter into agreements with foreign governments for the exchange of information in relation to investigations into money laundering and terrorist financing offences.

The supervisory authority is given wide powers including the issue of warnings, the imposition of fines and prohibiting convicted persons from obtaining employment in the sector. The Securities Council must be smiling to know that it will not be the only public body that lawyers might seek to cripple in the execution of their statutory functions. It would be useful if the Guyana Bar Association would offer its comments on the draft law rather than do nothing and see the law challenged in its operation later on.

The law will allow a police officer with a proper warrant, to enter upon land or premises, (what about aircraft, vessels?) and to seize documents found in the course of the search and believed to be relevant in relation to serious offence, money laundering or terrorist financing.

This section will also apply where a foreign state requests the Guyana authority for assistance to locate or seize tainted property. To facilitate cooperation between states the law will make money laundering and terrorist financing offences to which laws relating to extradition or the rendition of fugitive offenders will apply.

Those interested in the constitutional provisions regarding receipts of moneys by the state will find the law's proposal for a Confiscated and Forfeited Assets Fund and the purposes for which the moneys might be used quite interesting and possibly in contravention of the constitution. Less controversially the law also allows for the freezing of assets on an application by the Director of Public Prosecutions who is also the authority for an order for forfeiture.

Conclusion:

From all appearances the law is a generic international law no doubt suitable for societies with a general respect for the rule of law, a strong court system which is capable of balancing the rights of the individual with the public interest, an effective office of Director of Public Prosecu-tions, a courageous revenue authority and law enforcement agencies which enjoy the public confidence and trust.

These are in short supply in Guyana and no matter how desperately we need this kind of legislation, it is hard to see it being successful in the short to medium term.

The draft clearly needs a lot of work, not only cosmetic but substantial, to ensure that it will not end up like the one it is designed to replace.

There is no indication whether and if it will be put out for public discussion or the proposed timetable for its tabling in the National Assembly made available. Meanwhile laundry services of the financial types will have a field day, establishing their laundries and setting up an unfathomable network that no untrained, under-resourced and scared body will be able to penetrate.