US concerned about money laundering, financial crimes in region


Tuesday, March 08, 2011    

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WASHINGTON, USA (CMC) — The United States has assailed a number of Caribbean countries for what it describes as their continued facilitation of money laundering and financial crimes.

In the second part of the 2011 International Narcotics Control Strategy Report (INCSR), the State Department was particularly concerned about efforts made by Antigua and Barbuda, the Cayman Islands, Belize, the British Virgin Islands and the Bahamas in addressing these crimes.

It said Antigua and Barbuda is a "significant offshore centre" that, despite recent improvements, "remains susceptible to money laundering" due to its offshore financial sector and Internet gaming industry.

"Illicit proceeds from the transshipment of narcotics and from financial crimes occurring in the US also are laundered in Antigua and Barbuda," it said.

The report said that while the Baldwin Spencer administration has taken steps to combat money laundering by passing relevant legislation that applies to both domestic and offshore financial institutions, and establishing a "thorough regulatory regime," it urged it to "implement and enforce all provisions" of its anti-money laundering laws.

"The ONDCP (Antigua and Barbuda's Office of National Drug and Money Laundering Control Policy) should be given direct access to financial institution records in order to effectively assess their (anti-money laundering laws) compliance," it said.

The State Department said the government is yet to prosecute a money laundering case, noting that there are few arrests or prosecutions.

In the Cayman Islands, it said most money laundering is primarily related to fraud and drug trafficking.

Due to its status as a zero-tax regime, the State Department said the Cayman Islands is "also considered attractive to those seeking to evade taxes in their home jurisdiction.

"While the country has increased both its regulatory and law enforcement staffing, the number of prosecutions and convictions is extremely low, given the vast scale of the country's financial sector," it said, stating that only six successful prosecutions for money laundering and only one in the last four years have taken place.

In addition, the report said the "lack of penalties" for failing to report ownership and identity information "undermines the effectiveness of these obligations.

"This is a problem in particular for an estimated 3,000 unregulated mutual funds resident in the Cayman Islands," said the INCSR, adding that there appears to be no requirements for companies, trusts and partnerships to retain records for at least five years.

It urged the Cayman Islands to continue computerising various registrations, such as those for mutual funds, adding that there is "a need to pay greater attention to the risks and proper supervision of non-profit organisations."

While not being a major regional financial centre, the State Department said Belize is an offshore financial centre that encourages the growth of offshore financial activities that are "vulnerable to money laundering, including offshore banks, insurance companies, trust service providers, mutual fund companies, and international business companies."

It said most money laundering is "largely thought to be related to proceeds from US residents participating in unlawful Internet gaming".

"There is a growing indication that money laundering proceeds are related to proceeds from the trafficking of illegal narcotics, psychotropic substances, and chemical precursors, and that they are controlled by local drug-trafficking organisations and organised criminals," the report said.

It said Belizean officials suspect that money laundering occurs primarily within the free trade zones.

"Belizean officials believe the large Corozal Commercial Free Zone (CFZ) that operates at the border with Mexico is involved in trade-based money laundering," it said.

The INCSR said that Belize lacks the resources to effectively enforce anti-money laundering rules, pointing out that Belize's Financial Intelligence Unit (FIU) has a "broad mandate" that is "severely understaffed."

"The FIU staff does not have sufficient training or experience in identifying, investigating, reviewing, and analysing evidence in money laundering cases," it said.

"Prosecutors and judges also need additional training on financial crimes, including money laundering," it added.

The State Department said while it is widely believed that abuse occurs within the offshore sector and in the free-trade zones, "no one from these organisations has been charged with a financial crime."

It, therefore, urged the Barrow administration to let the CFZs be reporting entities, and that the government becomes a party to the UN Convention against Corruption.

The State Department said the British Virgin Islands (BVI) "unique share structure" that does not require a statement of authorised capital, as well as the lack of mandatory filing of ownership, poses "significant money laundering risks."

It said the BVI remains vulnerable to money laundering practices "through its drug-trafficking trade and the exploitation of its offshore financial services".

"BVI's proximity to the US Virgin Islands and the use of the US dollar for its currency pose risk factors for money laundering," it said.

"The BVI are a major target for drug traffickers, who use the area as a gateway to the United States. Drug trafficking in general is a serious problem," it added.

It said while BVI legislation has strengthened due diligence requirements, "these laws are too new to be evaluated."

It urged the Financial Services Sector to increase its staffing "in order to meet the recommended inspection and reporting requirements, especially in light of the new entities covered under the law," adding that "there appears to be no effective mechanism to ensure compliance" with anti-money laundering laws.

The State Department said money laundering trends in the Bahamas include the purchase of real estate, large vehicles and jewellery, as well as the processing of money through a "complex web of legitimate businesses and international business companies registered in the offshore financial sector."

It said drug traffickers and other criminal organisations "take advantage of the large number of international business companies and offshore banks registered in the Bahamas to launder significant sums of money," despite strict reporting requirements.

The report urged the Hubert Ingraham administration to "provide adequate resources to its law enforcement, judicial, and prosecutorial bodies in order to enforce existing legislation and safeguard the financial system from possible abuses."





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