Navigating Sanctions & Compliance Trends in the Caribbean Basin

1. 4TH ANNUAL COMPLIANCE CONFERENCE - JUNE 20 2019 Understanding Sanctions National Risk Assessments within the Region AML/CFT Trends and Typologies within the Region Presenter: Calvin E J Wilson - Principal, Calvin Wilson and Associates Dummy Text

2. Topics • Understanding Sanctions • AML/CFT Trends and Typologies within the Region • NRAs within the Region  • Sanctions applicable due to Compliance Shortcomings • Need to move from Talk to Action as per Caribbean Leadership • What is the Caribbean Basin Region’s place in the world and how are we going to get there? Dummy Text

3. Introduction In the face of threats both near at home and further afield, the world is becoming an even more dangerous place. As a consequence, at all strata of society risks, threats and vulnerabilities both existing and new are being assessed and measures to mitigate these risks are being considered and implemented. For example, the Boeing 737 Max 8 and 9 have been grounded globally due to the Lion Air and Ethiopian Airlines events. In New Zealand, gun legislation is to be changed due to the killing of 50 innocent persons at prayer in two mosques. Three persons killed in Utrecht, Netherlands. Dummy Text

4. Dangers to the Caribbean Basin could be discerned in part from • REGIONAL AML/CFT TYPOLOGIES • Corruption; • Use of Lawyers, Accountants, Stockbrokers' Clients’ Accounts; • Real Estate; • Jewelry and other High Value Goods Dealers; • Prostitution, Human Trafficking; • Movement of Small Arms and Ammunition; • Tax Evasion and aggressive Tax Avoidance; • Drug Trafficking; • Charitable/Non-Profit Organisations, re: Fund and Support Terrorists Dummy Text

5. Understanding Sanctions • The orthodoxy of the FATF Recommendations and the Risk Based Approach within the context of the FATF/CFATF Mutual Evaluation Programme, sanctions are considered in the context of: • 5 - Terrorist financing offence; • 6 - Targeted financial sanctions related to terrorism & terrorist financing; • 7 - Targeted financial sanctions related to proliferation; • 35- Sanctions should be effective, proportionate and dissuasive sanctions, and should be applicable not only to financial institutions and DNFBPs, but also to their directors and senior management. Dummy Text

6. Use of Sanctions and Other Economic Weapons to Achieve Foreign Policy Goals • European Central Bank (ECB) in its annual reportnoted that the use of the euro in global foreign exchange reserves has risen at the expense of the dollar due to: • The impact of international trade tensions; • Challenges to multilateralism in world affairs; • The imposition of unilateral sanctions. • Calls for the invasion in Venezuela • Flow of refugees into Trinidad and Tobago, Columbia, Peru and Brazil • Crippling sanctions on Venezuela with a blanket prohibition on any countries providing help for Venezuela’s oil industry Dummy Text

7. Use of Sanctions and Other Economic Weapons to Achieve Foreign Policy Goals • Threats of sanctions against Turkey, a NATO ally, for its defence procurement decisions; • An application of 1990s-era Cuba legislation that is a direct threat to companies in Europe and elsewhere; • Huge tariffs on China meant to force Beijing to change its entire economic system; • A tariff threat on Mexico to change its migration policies; • Global campaign to blacklist Huawei the world’s biggest telecoms equipment-maker. Dummy Text

8. Currently, a multiplicity of initiatives from international institutions and governments in the developed world, continue to pose serious challenges to the global reputation, economic well-being, prosperity, and national security of regional jurisdictions. These eleven international initiatives are as follows: The Fourth Round of Mutual Evaluation Programme and Follow up process and the Financial Action Task Force (FATF) International Cooperation Review Group (ICRG) initiative. The Organisation for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes. Dummy Text

9. International Initiatives Continued.. The Organisation for Economic Cooperation and Development (OECD) Residence and Citizenship by Investment (CBI/RBI) schemes/Common Reporting Standards. The Organisation for Economic Cooperation and Development (OECD) Base Erosion Profit Shifting (BEPS). Action 14 peer review and monitoring process. The European Union List of Non-Cooperative Jurisdictions for tax purposes. The European Commission List on High Risk Third Countries. Dummy Text

10. International Initiatives Continued.. United States Government through its International Narcotics Control Strategy Report (INCSR). Transparency International's Corruption Perception Index. Amnesty International Report on Human Rights. The World Bank Ease of Doing Business Country Rankings. The ongoing De-Risking/Loss of correspondent banking relationships crisis. Dummy Text

11. FATF RECOMMENDATION 1 - NATIONAL RISK ASSESSMENT Before conducting an ML/TF risk assessment, it is essential that there be the political will to carry out this work and ensure that the objectives of the exercise are achieved. Identifying, assessing, and understanding ML/TF risks central to the FATF standards. Essential to implementation, development and improvement of the national (AML/CFT) regime of laws, regulations, enforcement and other measures to mitigate ML/TF risks. Dummy Text

12. FATF RECOMMENDATION 1 - NATIONAL RISK ASSESSMENT Facilitates prioritisation and allocation of resources by authorities. Provides useful information to financial institutions and designated non-financial businesses and professions (DNFBPs) to support the conduct of their own risk assessments. Assist national authorities to apply AML/CFT measures commensurate with the risks – i.e.,. the Risk-Based Approach (RBA) High Risks –Apply Enhanced Measures Low Risk- Simplified Measures Dummy Text

13. Countries should have a framework to provide appropriate information on • the results of the NRA to competent authorities, self regulatory bodies, financial • institutions and DNFBPs, to assessors in the context of an AML/CFT assessment and to the public in order to enhance the general understanding of government AML/CFT initiatives. • The actual results of a risk assessment can take different forms but the expectation is that a written report or a public document made available. • Challenges • Information within the national assessment may be derived from classified or law enforcement sensitive sources; • Could be subject to confidentiality requirements; • Solution- sanitised information or summaries. Dummy Text

14. Trinidad and Tobago as at the date of the on-site visit of January 12-23, 2015. • Key Findings: • Trinidad and Tobago is currently undertaking its National Risk Assessment (NRA). • At the time of the on-site, Trinidad and Tobago had commenced, but not completed its NRA. • Draft sector reports had been compiled and preliminary results had been communicated to the relevant sectors. • However the Authorities advised that the draft reports could not be shared with the Assessors at that time. • RATINGS: • TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT • EFFECTIVENESS -MODERATE Dummy Text

15. T and T’s National Risk Assessment undertaken during 2013 is yet to be published, has not been shared with stakeholders and is apparently awaiting Parliamentary approval. Has the information been updated to address risks as they developed over the years and as they stand currently? Onsite visit January 12-23, 2015. Dummy Text

16. Jamaica as at the date of the onsite visit of 1st – 12th June, 2015. • Key Findings: • Jamaica does not have a completed National Risk Assessment (NRA), but as a result of the National Security Policy (NSP) and subsequent work done by the National Anti-Money Laundering Committee (NAMLC). • There is a reasonable level of understanding of ML/TF risk at the country level and mitigation strategies have been put in place to address those risks. • However, greater effort needs to be made to involve all stakeholders. • RATINGS: • TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT • EFFECTIVENESS -MODERATE Dummy Text

17. The Bahamas On-site visit of November 30 to December 11, 2015- • Mutual Evaluation Report adopted in May 2017 • Key Findings: • The Bahamas is still completing its ML/TF National Risk Assessment (NRA) and has yet to develop documented national AML/CFT policies. • There is a reasonable understanding of ML/TF risks among competent authorities in the Bahamas on account of the NRA exercise there is a need for this understanding to be placed within the context of The Bahamas as an international financial centre and for it to be shared with relevant stakeholders. • Measures also need to be taken to mitigate ML/TF risks. • RATINGS: • TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT • EFFECTIVENESS – LOW Dummy Text

18. The Bahamas’ 1st Enhanced Follow-up Report (FUR) - December 2018 • Utilized the World Bank Methodology in the completion of its NRA on the December 6th, 2017. • The Bahamas has identified and assessed its ML/TF risks and has developed a risk-based approach at various levels of the financial sector and DNFBPs. • However, a risk-based approach has not been identified or adopted by the law enforcement agencies (LEAs). On this basis, The Bahamas is re-rated as largely compliant with R.1. • TECHNICAL COMPLIANCE –LARGELY COMPLIANT Dummy Text

19. Barbados as at the date of the on-site visit of 5-16th December 2016. • National Risk Assessment (NRA), dated June 30, 2016, submitted in advance of the onsite examination. • The NRA process was sub optimum. The scope and depth of analysis did not comprehensively identify the ML/TF threats and vulnerabilities to which the country was currently exposed. • There was limited analysis of terrorist financing (TF) risk, Transparency of legal persons and arrangements, Trust and Corporate Service Providers (TCSPs) Cross border cash movements. • RATINGS: • TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT • EFFECTIVENESS -LOW Dummy Text

20. Antigua and Barbuda as at the date of the on-site visit • of June 5th – 16th, 2017 • Antigua and Barbuda, with the use of the World Bank Risk Assessment Tool, had identified and assessed its ML/FT risks. • The Assessors were satisfied that there is a reasonable understanding of these risks by the jurisdiction. • It should be noted that the exercise was only concluded one month prior to onsite assessment, and at the time of the assessment the country had yet to develop a corresponding policy to address the findings and conclusions of the exercise or prioritise actions. • RATINGS: • TECHNICAL COMPLIANCE- LARGELY COMPLIANT • EFFECTIVENESS - MODERATE Dummy Text

21. The onsite visit to the Cayman Islands occurred on December 4 to 15, 2017 • In 2015, the Cayman Islands concluded its first ML/TF National Risk Assessment (NRA) which provides a fair level of understanding of its domestic ML/TF risks within the jurisdiction. • However, the NRA did not include an assessment of legal persons or arrangements, nor did it conduct sufficient analysis of the risks present in parts of the financial sector not subject to supervision (e.g. lawyers and excluded persons under the Securities Investment Business Law (SIBL). • Further, the assessment did not fully address the international components of risk faced by the jurisdiction as a significant international financial centre or provide evidence that sufficient analysis was conducted with respect to the jurisdiction’s TF risks. Dummy Text

22. This has resulted in major deficiencies that have inhibited the jurisdiction’s ability to analyse and understand its risks. • Only a high-level summary of results has been shared with the private sector and it does not contain sufficient information to enable relevant stakeholders to develop a comprehensive understanding of the ML/TF risks they face in operating within the Cayman Islands. • However, private sector participants that were involved in the NRA were given a more comprehensive insight of the risks identified in the NRA • RATINGS: • TECHNICAL COMPLIANCE- PARTIALLY COMPLIANT • EFFECTIVENESS -MODERATE Dummy Text

23. PRIORITY ACTIONS • The authorities should: • Update its ML/TF risk assessment to include: • a more thorough analysis and assessment of the specific types of legal persons and arrangements that can be misused for ML/TF. It should also conduct further analysis of how these are vulnerable and can be exploited; • analysis of substantive information relative to TF risks; • sufficient consideration to risks present in parts of the financial sector that is subject to limited supervision e.g. excluded persons under SIBL and in particular those that perform higher ML/TF risk activities of broker/dealing and portfolio management; and • an analysis of the international components of risks faced by the jurisdiction as a significant international centre. Dummy Text

24. PRIORITY ACTIONS The authorities should: Formally communicate appropriate information on the results of the NRA to FIs, DNFBPs and other relevant stakeholders. This will enable a comprehensive understanding of risks and vulnerabilities identified by the jurisdiction and allow for the implementation of appropriate risk-based mitigation measures. Review and prioritise the objectives of the national AML/CFT Strategy, taking into account the ML/TF risks identified in the NRA and develop an action plan that identifies priority actions including (but not limited to) the risk-based allocation of resources. This action plan should also include short and long-term objectives and the timelines for implementation. Dummy Text

25. Trinidad and Tobago and The Bahamas Overall Technical Compliance and Effectiveness Ratings: CFATF-Enhanced Follow Up – First/Second Enhanced Follow up Report- Not available FATF – International Cooperation Review Group – Improving Global AML/CFT Compliance: On-going Process As part of its ongoing review of compliance with the AML/CFT standards, the FATF identifies the following jurisdictions that have strategic AML/CFT deficiencies for which they have developed an action plan with the FATF……….. The FATF …….encourages its members to consider the information presented below. Dummy Text

26. FATF RECOMMENDATION 19 – HIGH RISK COUNTRIES • Financial institutions should be required to apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries for which this is called for by the FATF. • The type of enhanced due diligence measures applied should be effective and proportionate to the risks. • Countries should be able to apply appropriate countermeasures when called upon to do so by the FATF. • Countries should also be able to apply countermeasures independently of • any call by the FATF to do so. Such countermeasures should be effective • and proportionate to the risks. Dummy Text

27. The region is now four years into the Fourth Round of Mutual Evaluations. • Based on the results of the Mutual Evaluation Reports (MERs) adopted as final thus far by the CFATF, there is a strong likelihood that countries in our region will continue to be monitored through the current FATF International Cooperation Review Group (ICRG) initiative. • The mediocrity of enhanced follow up or FATF ICRG is dangerous, not acceptable, nor in our collective best interests. Dummy Text

28. Our region has a long history since 2000 of being blacklisted for being non- cooperative, having weak AML/CFT regimes and strategic deficiencies which pose threats to the global financial system. • Since 2000 the region has been beset by ongoing economic and reputational impact of negative listings due to ongoing compliance deficits. • The G20 July 2018 Communique noted as follows: “We call for full, effective and swift implementation of the FATF standards. We call on FATF to further enhance its efforts to counter proliferation financing.” • Between July4-6 2018-December 2018 CARICOM Heads were conducting their own risk assessment. Dummy Text

29. Underlined the importance of enhancing the use of Information and Communications Technology in the fight against the illicit trafficking in narcotics and firearms, trans-border criminal activities and cyber-attacks. • Underlined the importance of enhancing the use of Information and Communications Technology in the fight against the illicit trafficking in narcotics and firearms, trans-border criminal activities and cyber-attacks • Encouraged that all legal instruments required to combat crime and enhance regional security should be urgently updated. • Encouraged Member States and the CARICOM Secretariat to allocate the necessary human resource capacity at the national and regional levels about the strategic role of strengthening and improving the availability of statistics for evidence-based decision-making and endorsed the framework of a Regional Strategy for the Development of Statistics (RSDS). • The absence of reliable, accurate and up to date statistics to support policy development. Dummy Text

30. The common difficulties and serious implications that the blacklisting or negative listing of our countries as non-cooperative jurisdictions continue to have on our financial services sector, which is a critical aspect of the region’s economic stability. All of these ills had to be addressed with the penalties at the ready based a contingent decision by the Heads for the implementation of sanctions, where agreed decisions are not honoured. For Prime Minister Rowley the revitalisation of the CSME, was one of his priorities. We have to move from talk to action with a sense of urgency which was imperative, if, we are “to earn the respect of our people and be more respected by the rest of the world”. What is the Caribbean Basin Region’s place in the world and how are we going to get there? Dummy Text

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