Sunday, February 25, 2018

The FIU and FATF — a prognosis

It is welcome news that T&T has been removed by the Financial Action Task Force (FATF) from the list of countries with deficiencies in its measures to counteract money laundering and the financing of terrorist activities, also known as the dark-grey list. We were a short step away from the " black" list and the associated negative sanctions. These sanctions can be imposed on the banking sector and would have the effect of bringing international trade and associated payment flows to a standstill. Such an outcome is to be avoided at all cost as it would wreak havoc on our economy.

No administration, including the current government, has devoted sufficient effort to meeting its commitments to FATF in a timely manner. We were placed on the "dark-grey" list in late 2010 by the failure of the current administration to implement the required regulations within the promised time frame. This delay was compounded by the several snafus in appointing the head of the FIU and the difficulties in determining the independence of that body. This does not compare well to the rest of our Caribbean neighbours, small and large, who have managed to avoid such embarrassment with far less resources than we possess.

So much for the good news. But this is a temporary position only, as we have passed only one hurdle in a race that is equivalent to a steeplechase that will require ongoing compliance. The difficulties can be summed up in one word: implementation. In this regard, it is useful to look at the conclusions of the last review of our operational readiness contained in the sixth follow-up report published in May 2012. This report was prepared by an independent team as our compliance must be verified by independent invigilators.

The May 2012 report indicated (Page 2) that Trinidad and Tobago was non-compliant or partially compliant in 26 of the 40-plus nine recommendations. In particular it noted that whilst the relevant legislation had been enacted, it noted that "substantial deficiencies in one key recommendation and nine other recommendations remained to be addressed." Further, that whilst a confiscation/ forfeiture regime had been established, "there was need to demonstrate implementation." (Paragraph 7)

The report noted that there was improvement in the number of suspicious activity reports in 2011 in comparison to 2010. It also indicated that the level of reporting in 2012 suggested that the level of compliance was declining (paragraph 15). In paragraph 59 in reviewing the number of suspicious activity reports relative to the number of registered businesses, it stated that the figures were very low and "suggest that the reporting of suspicious transactions and activity by listed businesses is ineffective".

It noted also that the number of businesses registered had increased and stood at 1,560 as at January 2012. Also that the FIU had started to examine compliance programmes. Additionally, in an eight-month period the FIU had visited eight registrants and intended to increase these visits to two examinations a month in 2012 (Paragraphs 16-19). Assuming that the FIU is able to maintain this schedule, it will take 776 months or 65 years to complete its initial evaluation of registrants. In short, the report by its very factual nature has criticised without criticising.

Paragraphs 23-27 raise other issues with respect to its level of independence financially and its ability to hire staff. In particular it raises the issue of existing procedures that undermine the autonomy of the FIU's director and indicates this is not in accordance with FATF standards. It concludes that "issues of autonomy and Ergmont membership remain outstanding".

In Paragraphs 28 to 39, the report notes inconsistencies in existing pieces of legislation which limit or circumscribe the power to freeze or confiscate assets of those who may be involved in the terrorist financing or in other criminal activities. In particular, the authorities have to prove that the specific assets identified were specifically linked to the crime. In addition, in the related paragraphs 60-64, the report notes that the FIU has not extended its range of sanctions since enactment in May 2011, notwithstanding that "90 per cent of listed businesses being in violation of regulation 31(1) of the FIU regulations" (paragraph 64).

I will skip the other 58 paragraphs as enough detail has been presented to go to the report's conclusion in paragraph 123 which says that "While these measures have been put in place, some of them are problematic…" Further "there is no initiative with regard to measures for ensuring that criminal elements are not involved in the ownership or management of private members clubs which conduct casino operations"

In summary, whilst we have avoided blacklisting, there remain serious concerns about the implementation process and our capacity to deal with several thorny issues of enforcement. Deeds, not words, matter, and our track record to date is far from satisfactory. Whether we like it or not, we are part of an international trade and finance system and we have treaty obligations. We will need to be compliant on an ongoing basis. Given the foregoing, we ought not to be complacent as there are many more hurdles to come.

• Mariano Browne is a former

government minister.