In its 2013 International Narcotics Control Strategy Report (INCSR), the US Department of State recognised the efforts being made in cleaning up the region’s financial services and offshore sectors, but it urged the Caribbean to be more robust in its initiatives.
The State Department said the ‘major sources of laundered proceeds’ in the Bahamas stem from drug trafficking, human smuggling and illegal gambling.
It said there is a “significant black market” for smuggled cigarettes and guns, and that money laundering trends include the purchase of real estate, large vehicles, boats and jewellery, as well as the processing of money through a “complex web of legitimate businesses and international business companies (IBCs) registered in the offshore financial sector”.
The report said drug traffickers and other criminal organizations “take advantage of the large number of offshore banks registered in the Bahamas to launder significant sums of money, despite strict know-your-customer and transaction reporting requirements”.
It said the archipelagic nature of the Bahamas and its proximity to the United States “make the entire country accessible by medium-sized boats,” adding that smuggling and moving bulk cash is relatively easy.
The report said that illicit gaming operations, based on US-based lottery results and the Internet, locally known as “web shops,” flourish in the Bahamas and urged the government to provide “adequate resources” to its law enforcement, judicial, and prosecutorial bodies in order to enforce existing legislation and to safeguard the financial system from possible abuses.
The report noted that gaming in the Bahamas will expand in 2013, from the growth of casino gaming and possibly from the legalization of web shop gaming.
“With this expansion, the government should ensure proper safeguards are in place, and provide additional suspicious transaction report (STR) training,” it said, urging the Financial Intelligence Unit (FIU) to continue its outreach, training and coordination with the Royal Bahamas Police Force financial investigators.
The report further urged the Bahamas to enhance its anti-money laundering/counter-terrorist financing regime by, among other things, criminalizing bulk cash and human smuggling; implementing the National Strategy on the Prevention of Money Laundering; criminalizing participation in an organized criminal group; establishing a currency transaction reporting system; and implementing a system to collect and analyze information on the cross-border transportation of currency.
In addition, the report called for a “public registry of the beneficial owners of all entities licensed in its offshore financial center”
In an attempt to diversify Belize’s economic activities, the State Department said the government of that Caribbean Community (CARICOM) country “encouraged 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”.
But it said “some money laundering is believed to be related to proceeds from US residents participating in unlawful Internet gaming” and that Belizean officials suspect “here is money laundering activity in their two free trade zones,” known as Commercial Free Zones (CFZs).
The largest, the Corozal Commercial Free Zone, is located on the border with Mexico, and the smaller one, the Benque Viejo Free Zone, recently started operating on the western border with Guatemala.
The report said the Corozal Free Zone was designed to attract Mexicans for duty free shopping, but it said Belizean authorities believe it is heavily involved in trade-based money laundering and the illicit importation of duty free products.
“As Belize is a trans-shipment point for marijuana and cocaine, there are strong indications that money laundering proceeds are increasingly related to local drug trafficking organizations and organized criminal groups involved in the trafficking of illegal narcotics, psychotropic substances, and chemical precursors.”
Washington urged the Belizean government to provide additional resources to “effectively enforce AML (anti-money laundering) regulations,” adding that the responsibility for enforcement and implementation of all financially-related regulations, as well as international sanctions lists, domestic tax evasion, and all money laundering investigations, lies with the FIU.
It lamented that there is “limited assistance” from other law enforcement agencies, governmental departments, and regulatory bodies, stating that the FIU has a broad mandate and a small staff, and does not have sufficient training or experience in identifying, investigating, reviewing, and analyzing evidence in money laundering cases.
In addition, the State Department called for more training for prosecutors and judges on financial crimes, including money laundering, to increase prosecutions.
“The GOB (Government of Belize) should increase monitoring and control of the offshore financial sector and CFZs. It is widely believed there is illicit financial activity in both sectors, although no one has been charged with a financial crime. Belize should require the CFZs to be reporting entities.”
With regards to Haiti, the State Department said “criminal gangs are engaged in international drug trafficking and other criminal and fraudulent activity but do not, at this time, appear to be involved in terrorist financing”.
It said while Haiti itself is not a major financial center, regional money laundering enterprises utilize Haitian couriers, especially via air hub routes to Central America and that much of the drug trafficking in Haiti, as well as the related money laundering, is connected to the United States.
Further, the report said most of the identified money laundering schemes involve “significant amounts of US currency,” adding that all property confiscations involve significant drug traffickers convicted in the United States.
The report said the weakness of the Haitian judicial system and prosecutorial mechanism continues to leave the country vulnerable to corruption and money laundering, despite improving financial intelligence and enforcement capacity.
Washington urged the Haitian government to continue to devote resources to building an “effective anti-money laundering/counter-terrorism financing regime, to include continued support to units to investigate financial crimes and the development of an information technology system.?
It said the government remains hampered by “ineffective and outdated criminal and criminal procedural codes, and by the inability of judges and courts to address cases referred for prosecution”, adding that new criminal and criminal procedural codes that address these problems are currently pending in the Council of Ministers.
Despite recent improvements as a “significant” offshore center, Washington said Antigua and Barbuda “remains susceptible” to money laundering, stating that its status stems from its offshore financial sector and Internet gaming industry.
“Illicit proceeds from the trans-shipment of narcotics and from financial crimes occurring in the United States are laundered in Antigua and Barbuda,”.
During the past year, it said the Office of National Drug Control and Money Laundering Policy (ONDCP) compiled evidence that money laundering related to drug trafficking takes place through local financial institutions.
According to the State Department, the ONDCP’s analysis shows both that “criminals abuse the system and financial institutions, in some instances, fail to apply sufficiently rigorous due diligence in relation to transactions that should be seen as questionable”.
The report said the funds involved include Eastern Caribbean dollars “traced to the sale of local property by at least one person US authorities identified as trafficking drugs through Antigua and Barbuda to US territory”.
The State Department said most money laundering that occurs in the Cayman Islands, a United Kingdom (UK) Caribbean overseas territory, is “primarily related to fraud and drug trafficking.
“Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdictions,” it said.
The report said a 2002 request for extension of the International Convention for the Suppression of the Financing of Terrorism to the Cayman Islands has not been finalized by the UK, although the provisions of the Convention also are implemented by domestic laws.
The State Department said Curacao, an autonomous entity within the Kingdom of the Netherlands (KON), is a regional financial center and a trans-shipment point for drugs from South America bound for the United States and Europe.
“Curacao should work to fully develop its capacity to investigate and prosecute money laundering and terrorist financing cases.”
The State Department said drug trafficking is an ‘ongoing concern” for St. Maarten, an autonomous entity within the KON and that “bulk cash smuggling and trade-based money laundering may be problems due to the close proximity of other Caribbean islands and Saint Martin, the French part of the shared island, which is also a free trade zone”.
CMC/nk/ir/2013