DESPITE Jamaica making significant strides in strengthening its Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) regime, the Financial Action Task Force (FATF) has set a new deadline for the country to demonstrate significant progress in completing its action plan, or face additional scrutiny by the international body.

The FATF is an intergovernmental organisation aimed at combating money laundering and terrorism financing. Jamaica was added to the grey list in February 2020, which the FATF defines as the country committing to “resolve swiftly the identified strategic deficiencies within agreed time frames and is subject to increased monitoring”. Jamaica made a high-level political commitment to work with the FATF and Caribbean FATF to strengthen its AML/CTF regime in the same month. The FATF extended its assessment and follow-up deadlines in April 2020 in response to the novel coronavirus pandemic.

The country remained on the list following the FATF’s most recent plenary held last week Friday. Nicaragua and Pakistan were removed from the list while Democratic Republic of Congo (DRC), Mozambique and Tanzania were added. Barbados, the Cayman Islands and Haiti are the other Caribbean nations presently on the list.

The FATF’s publication stated that it expressed concern the country had not completed its action plan which fully expired in January 2022. It has set February 2023 as the new follow-up evaluation deadline, or “the FATF will consider next steps if there is insufficient progress”. This hard deadline and urgency were also addressed to Barbados and the Cayman Islands.

Finance Minister Dr Nigel Clarke has reiterated the progress made so far by the Government and is confident that the country will leave the list once the remaining areas of concern are addressed. The country has introduced the Microcredit Act (2021), Trust and Corporate Services Providers Act, amended several pieces of existing legislation, and established an anti-money laundering and CTF department at the Companies Office of Jamaica, in recent times, to meet FATF standards.

Jamaica is currently compliant/largely compliant with 27 of the 40 FATF Recommendations, and is awaiting the result for six more recommendations on which Jamaica is seeking re-ratings.

“The Government of Jamaica (GOJ) has made good progress in delivering on its action plan to remedy the identified deficiencies in Jamaica’s AML/CTF framework. We have completed the National Risk Assessment (NRA), which has allowed us to better understand the AML/CFT risks facing Jamaica, and we have started taking the necessary measures to mitigate the identified areas of risks,” said Dr Clarke earlier this week with the Jamaica Observer.

The remaining items on the Government’s agenda include amending the Companies Act to improve the beneficial ownership regime; finalisation of charities regulations; bringing all designated non-financial businesses and professions (DNFBP’s) into the AML/CFT regime; and ensuring adequate, risk-based supervision in all sectors. A beneficial ownership registry will be created to prevent legal persons and arrangements from being misused for nefarious purposes while the implementation of charities regulations is meant to address at-risk, non-profit entities which are vulnerable to terrorism financing abuse. The amendment and finalisation of charities regulations should be brought to Parliament by March 2023.

However, the legal profession has challenged its inclusion under the proposed regime which has seen the Jamaica Bar Association, its regulator the General Legal Council (GLC), and the GOJ before the courts on the matter. There is currently a limited injunction in place by the Court of Appeal which prevent the GLC, as competent authority, from monitoring AML compliance by attorneys. Dr Clarke noted that the GOJ is awaiting the Privy Council’s decision on the matter, which is expected to be heard in late November. The Privy Council is Jamaica’s highest appellate court.

“We have met, or largely met, seven of the 13 items on our action plan agreed with the FATF and are advanced on the remaining six items that are partially met. While the GOJ previously anticipated completing all the action items by January 2022, this has not materialised. There have been delays which we will address by or before March 2023,” Clarke added.

While the country patiently awaits its removal from the grey list, financial institutions are concerned about the continued inclusion on the list and its impact on financial services with correspondent partners. Jamaica Bankers Association (JBA) President Septimus Blake noted that the enhanced scrutiny can affect financial institutions through enhanced due diligence (EDD) and additional requirements for onboarding/accessing new or additional services; higher service costs due to the cost of EDD and efforts to scrutinize transactions; and intercepting and interrogating a greater number of transactions relating to the financial institution, which may result in delayed transactions or greater processing times.

“Operating within a jurisdiction on FATF’s grey list could negatively affect how financial services providers (FSPs) are perceived by their correspondent banking partners. This is because internationally, financial institutions have some time now trended towards a risk-based approach in their governance policies and practices. In dealing with clients from a jurisdiction which is grey-listed, correspondents may understandably feel the transactions involving these jurisdictions pose a greater level of risk and so may, among other things, warrant enhanced scrutiny,” said Blake.

Jamaica’s inclusion on the FATF grey list, along with the prevalence of rising transaction fraud associated, has resulted in more international merchants flagging Jamaican debit or credit cards at the payment and processing stage. This has been compounded further with Jamaican IP (Internet Protocol) addresses being deemed high-risk and flagged by fraud prevention software after payment. Some Twitter users have cited that they have difficulties doing purchases at retailers such as PlayStation, Walmart, Best Buy, Clarks and Crocs. The only option for some shoppers is to use their US-based card or ask a friend to purchase the product.

Even another user cited how their international payment processor closed their account because of the number of attempted suspicious transactions to purchase tickets for an event. Fraudulent transactions tend to result in chargebacks to the retailer/merchant, which might make the risk of doing business in a particular jurisdiction not worth it for the entity. Some businesses have had to undergo additional scrutiny by their correspondent suppliers or companies they plan to engage with because of Jamaica’s inclusion on the grey list.

Despite the delay in getting off the FATF’s grey list, Jamaica has made strides to leave the European Union’s (EU) grey list of non-cooperative jurisdictions for tax purposes. The Special Economic Zones Act has been amended to keep shell companies at bay and ensure international compliance. The Council of the EU noted in its conclusions publication that Jamaica has committed to amend its preferential tax regimes in the scope of the Forum on Harmful Tax Practices (FHTP) by December 31.

“Dr Clarke has detailed the measures being pursued to have Jamaica removed from the grey list. Some of these have been evidenced by new legislation and changes to existing legislation. The Government and the private sector will need to persist and partner in efforts to operationalise these changes and also to collectively demonstrate the commitment that FATF is looking to see in order to take the country the rest of the way in exiting this follow-up process. We are hopeful that Jamaica will be able to demonstrate the desired levels of commitment and progress to exit the current stage of follow-ups,” said the JBA president.

“Based on the solid work that we have done, we are confident that our application will be successful, thus potentially moving our tally to 34 of 40 recommendations. We are also working to be compliant with the remaining six recommendations with which we are now partially compliant. The Government remains fully committed and laser-focused on completing the six remaining items on our action plan agreed with the FATF,” Dr Clake closed.