Friday, March 30, 2012

Money Laundering in Jamaica - Part 2

It is important to note as a follow up to my last post that Jamaica continues to be a member of that group of "Countries of Concern" according to Volume II of  the 2012 International Narcotics Control Strategy Report Money Laundering and Financial Crimes.published this month - March 2012. As usual I am obliged to inject a dose of reality however and alert readers to the classifications and qualifications. There are three categories defined in the Report -
  1. Countries/Jurisdictions of Primary Concern or Major Money Laundering Countries. To qualify for inclusion here the country must be one where financial institutions engage in transactions that involve significant amounts of proceeds of crime. The focus here therefore is on the sheer volume of money thus it should come as no surprise that countries like the US, UK, Canada and Cayman Islands fall in this category. Some of you may be a bit shocked that Belize, Cambodia and Curacao are similarly qualified.
  2. Countries/Jurisdictions of Concern - Several factors determine whether a country might qualify here including the  financial institutions' engagement in transactions involving significant amounts of proceeds from serious crimes, the extent to which the jurisdiction is or remains vulnerable to money laundering, notwithstanding its money laundering countermeasures and "whether the jurisdiction has taken appropriate legislative actions"
  3. Other Countries/Jurisdictions Monitored share some of the factors as outlined in 2 above but not at the same level.
With respect to whether Jamaica has taken appropriate legislative actions we have already noted the Minister's plan to strengthen the POCA to bring non-financial businesses and professions into the mix. Currently lawyers are not regulated by the money laundering legislation but like any ordinary person in Jamaica they are subject to POCA to the extent that they can be found to have committed an offence if they:
(a) engage in a transaction that involves criminal property;
(b) conceal, disguise, dispose of or bring into Jamaica any such property; and
(c) convert, transfer or remove any such property from Jamaica and knows or has reasonable grounds to believe at the time he does any of the above, that the property is criminal property.

In light of the above many of the requirements and measures that already affect lawyers in other jurisdictions are not yet in place in Jamaica. Here lawyers are subject to The Legal Profession Act and the Canons of the Legal Profession but have no responsibilities specifically in respect of Anti-Money Laundering obligations. This therefore adds to the sense of vulnerability to money laundering activities and  risks presented by legal services in the Jamaican context.

The Financial Action Task Force (FATF) recommendations and  Guidance for Legal Professionals referred to previously seeks to guide legal professionals who engage in the following:
  1. Buying and selling of real estate
  2. Managing clients' money, securities or other assets
  3. Managing bank, savings or securities accounts
  4. Organizing of contributions for the creation, operation or management of companies
  5. Creating, operating or managing  legal persons or arrangements and buying and selling of business entities
The role of the real estate attorney therefore is one which will come under serious scrutiny for depending on the services he performs for his client he could be caught under more than one of the abovementioned activities. In the future, no longer will it be sufficient for lawyers to do nothing more than insist that substantial funds be paid via cheque. The risk based approach will however require that they use their judgement to determine where the risks are greatest and apply controls accordingly.

In our next post, we will look at two broad areas which are already imposed on financial institutions   and which are proposed to be extended to DNFBP (Designated Non Financial Businesses and Professions) including legal professionals. They are:
  • Know Your Customer (KYC) rules and
  • Suspicious Transaction Reporting (STR) requirements.
These measures are likely to be contemplated by the Jamaican Legislature and the Jamaica Bar Association as they consider how to improve Jamaican anti-money laundering initiatives.

Thursday, March 8, 2012

Money Laundering in Jamaica - Part 1

Since my post on What is Due Diligence, the Minister of National Security, Mr. Peter Bunting made an announcement which is of relevance to this blog and all stakeholders in real estate transactions. He indicated that the Proceeds of Crime Act (POCA) is being strengthened to facilitate the seizure of assets of facilitators of illicitly acquired gains."

This announcement has been welcomed by members of both the local and international community. Media houses, participants in social media and internet puublications such as The Jamaica Observer, LinkedIn and Insight - Organized Crime in the Americas have weighed in and anti-money laundering professionals are taking note.

The government's concern may or may not have been precipitated by the listing of Jamaica as a "Country of Concern" in the International Narcotics Volume II Money Laundering and Financial Crimes March 2011 prepared by the US Department of State, pursuant to their Foreign Assistance Act. Whatever the case, it is noteworthy that among the factors included in deciding to place our country in the jurisdiction of concern category is an assessment of the country's legal framework to combat money laundering. Further, the report highlights the fact that drug money managers are attracted to jurisdictions with varied characteristics including:

  • large black market economics,
  • limited asset seizure or confiscation authority, and
  • limited money laundering and financial crime enforcement".
As an aside let me just clarify that Jamaica is not here considered as some sort of rogue state. We are in the company of countries like Barbados, Belgium, Chile, Ireland, Malaysia, Portugal and South Africa. We like many of those countries have been cooperating in the fight against money laundering but given the complex and stealthy nature of the activities involved, our systems are still vulnerable to penetration and so we do have some way to go if we are to avoid being perceived as attractive to money launderers.

Given the Minster's other comments that,
it is clear that these professionals and their clients will have to be on their guard. Lawyers and clients in real estate transactions must be aware that they are in a high risk environment. The banks know this and the government recognizes this. Unless lawyers adopt a risk based approach to managing these transactions they could find themselves being involved (even unwittingly) in money laundering.

The Financial Action Task Force (FATF)  2008 set out Guidance for Legal Professionals which   discusses the purpose of the risk based approach. No doubt this has been scrutinized by Bar Associations worldwide and it would be useful for us also to examine same which will we do in Part 2 in general and specifically in the context of the Jamaican experience.