Culture of compliance needed

The naming of this country’s largest, indigenous bank by a Miami newspaper in its Tuesday edition in connection with allegations of a scheme to defraud the US Government of millions of dollars and the laundering of that money has, once again, focused a spotlight on the robustness of the regulation and prosecution of white-collar crime in T&T.

The allegations are that a crime syndicate made bogus claims on Medicare, the US national health insurance scheme, of US$375 million, that Medicare deposited US$70 million into corporate bank accounts controlled by the syndicate and that US$31 million of that money was moved from the US to Canada to Trinidad and then to Cuba.

US prosecutors have called the defendant in this case “a financier for fraudsters and a capitalist for the Cuban banks.” In a real sense, the international community has made significant strides in seeking to mitigate the scourge of money laundering, which is the process by which the money generated by criminal acts is channelled through financial institutions in a way that hides its criminal origins and ownership.

The globalisation of the world economy and the rapid development of technology in the last two decades have allowed criminals to transfer money from one country to another easily and quickly, which means that the regulators who police money laundering must be at least on par with the criminals in order to ensure that crime does not pay.

T&T is part of the international effort to fight money laundering and the financing of terrorism that crystallised in the establishment in 1989 of the Financial Action Task Force, whose aim is to develop and provide international policies to combat money laundering and terrorist financing.

There are 187 countries and territories throughout the world which subscribe to the FATF system. These countries have agreed to a set of rules that will ensure that the international community is better able to track, detect and prosecute money launderers. On a macro level, countries agree to allow mutual evaluation of their anti-money laundering efforts, which allows for a transparent, consultative approach to the implementation of the rules.

While many countries have accepted this approach, there are some countries, like Cuba, which have chosen not to be part of the FATF system. While the Cubans, no doubt, are confident that they have the systems in place to prevent money laundering, the Cuban system is removed from the international peer review system enshrined in the FATF approach.

This must mean that T&T financial institutions operating in Cuba are exposed to a level of risk that would not exist in an FATF-compliant country. Apart from this specific risk, while T&T has in place much of the legislative and institutional infrastructure needed to fight money laundering, as Central Bank Governor Ewart Williams commented on Wednesday, “It is not the legislation or the regulations. It is the implementation and the enforcement and you only get enforcement if you have a culture of compliance.”

Building a culture of compliance in a society that is more prone to a culture of lawlessness is obviously not going to be an easy task. But the leaders in Government, the financial institutions and regulators can steer us in the right direction by ensuring that the rules governing the anti-money laundering effort are accepted and understood, that the benefits of compliance are evident and that the penalties for non-compliance are extremely rigorous.

The first line of defence to money laundering should be the tellers—those who collect the cash from customers—who must be thoroughly trained and prepared to raise a red flag at all suspicious transactions. The second line of defence would be to ensure that the institutions that police the money launderers are staffed with highly qualified, motivated and compensated employees, who are properly trained and exposed to new methods of crime detection and prosecution.

There must also be a commitment to ensure that those fighting money launderers operate in a manner that is independent of the political directorate and those who would seek to influence their reporting of suspicious transactions and the ensuing investigations.