Is Your Business A Weak Fence?

The ugly truth about money laundering in our economy is that Jamaican businesses outside the regulated financial section have been found lacking. They need to be more deliberate in their Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) efforts. Why? Because in Jamaica, vast sums of cash are available from a variety of activities with the aim of eventually transferring these funds into the formal financial sector.

This issue was the essence of Finance Minister Dr Nigel Clarke’s statement to the Sunday Gleaner earlier this year. Clarke explained some of the challenges facing Jamaica, pointing specifically to the non-financial businesses, adding that there has been very limited activity in the area of AML/CFT supervision of these professions and entities.

“The non-financial businesses and professions, which represent an outer fence, are riddled with strategic weaknesses. It’s far too easy for those with ill-gotten gains to transact in real estate, acquire cars and jewellery, participate in gaming, and channel funds through unregulated moneylending institutions without any alarms being triggered,”

Minister Clarke to The Sunday Gleaner

In today’s global reality, Jamaica can ill-afford to continue to be viewed as being “soft” on Anti-Money Laundering. In fact, it’s almost a guarantee that local businesses seeking to tap into foreign markets will be met with blocks by foreign bodies. Often, international players view Jamaica’s AML/CFT framework as immature and, as a result, treat Jamaican businesses with distrust. It should be noted that with systems of checks and balances regarding AML/CFT techniques being centralised to financial institutions, other industries must move to implement sound AML strategies now as they jeopardize themselves and the regulated entities.

Currently, in Jamaica, the regulated financial sector has active mechanisms to monitor potential money laundering activities. Outside of the regulated financial sector, there are many activities that are not being rigorously probed. We have significant levels of criminal activity and are essentially a cash-based society. Recent articles on sophisticated and large-scale human trafficking and convictions of gang members alleged that such organisations have cycled through over J$400M during the last year. This only highlights the tip of the iceberg. Such significant sums of money would not have been subject to the money laundering checks and balances because the funds were not initially passed through the regulated financial sector.

AML checks and balances include cross-checking the source of the customer’s funds, verifying the business that they are involved in and that the income aligns with the business activity. Strong AML/CFT practices will also verify the individuals who are behind a company; the ones controlling and directing it.

The process of Money Laundering happens in the three phases of placement, layering and integration. Placement involves taking “dirty money” earned from illicit activities and attempting to put it into the legitimate financial system. This occurs through layering which conceals the true source of the money through whatever tricks or channels may be employed. Essentially, it involves making illegal funds difficult to detect by adding the veneer of legitimacy to it. Finally, integration occurs when funds successfully make their way into the financial system, which then makes them available for use in any legitimate purposes.

Our advice to local companies that are used to dealing with vast sums of cash is to implement procedures that capture and probe critical information about customers and their business activity. This can be achieved through detailed KYC (know your customer) procedures and enhanced due diligence in ascertaining the source of funds.

Instead of aiding and abetting money launderers through a lack of AML policies, we encourage all businesses, especially those outside the financial sector to do their due diligence. We at Symptai Consulting stand ready to deliver automated solutions to improve our clients’ AML- CFT processes. Our solutions scrutinise all customers and their transactions and identify any activity that merits further review by compliance specialists as well as facilitate automated reporting to regulators.

Source [http://jamaica-gleaner.com/article/news/20200531/far-too-easy-launder-money-real-estate-vehicles-admits-clarke-finance-minister]