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Less Than 20% Of Suspicious Deals Passed To Police Force

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Despite a 46 percent surge in suspicious transactions reports (STRs) in 2017, the Financial Intelligence Unit (FIU) passed less than one in five over to the police for further investigation.

The FIU's annual report, tabled in Parliament on Wednesday, revealed that just 73 out of the 446 STRs submitted by the financial services industry were deemed worthy for the Royal Bahamas Police Force (RBPF) to probe.

Of the remaining 373, some 87 or 19.51 percent were closed by the FIU, while some 286 or 64.13 percent of the total - the majority - were placed in the "pending" category.

Reuben Smith, the FIU's director, wrote in the report: "The 446 suspicious transaction reports received in 2017 represents a 45.75 percent increase in STRs received over the same period in 2016."

Some $64.468m worth of assets were caught up in 2017 STRs submitted to the FIU, with those passed on to the police for investigation involving 39.73 percent or $25.626 million of this sum.

"The Financial Intelligence Unit did not detect any criminal activity in 75.47 percent of the suspicious transactions reports received," the FIU annual report added. "Fraud and other illicit matters were detected in 12.56 percent and 1.35 percent, respectively, of the reports received."

It is unclear whether the surge in STRs will impress international anti-money laundering/terror financing bodies who are currently assessing whether the Bahamas has addressed the weaknesses identified by the Caribbean Financial Action Task Force's (CFATF) review last year.

The CFATF reported that Bahamian financial institutions show "a lack of enthusiasm" in reporting clients' questionable transactions to the authorities, with the volume of STRs made by Bahamian financial services providers "low" when compared to the industry's size and potential risk level.

It suggested that this "may in no small measure" be caused by the Financial Intelligence Unit's (FIU) failure to report back to providers on the outcome of investigations into their filed STRs.

"The overall number of STRs filed by financial institutions and non-bank financial institutions is low, given the substantial size of the financial sector in the Bahamas, as well as the substantial presence of higher risk activities such as private banking, trust, company service providers and real estate owned by foreigners," the CFATF said.

Tribune Business sources have previously suggested that the Bahamas is weak on enforcement of its regulatory regime, with not enough prosecutions for money laundering and other financial crimes taking place. The CFATF's parent, the Financial Action Task Force (FATF), is now assessing whether these deficiencies have been addressed.

The FIU's 2017 annual report revealed that it received an average of 37 STRs per month, with an average transaction value of $144,547. The average transaction value of those reported to the police was higher at $350,901.

Domestic and international banks accounted for the vast majority of STRs, at 80.04 percent, with Bahamian and US dollar transactions involved in almost 99 percent of reports. In some 45.29 percent of STR filings institutions "did not know the nature of the offence", with fraud and "other illicit matters" accounting for 25.34 percent and 12.78 percent, respectively.

Bahamas residents accounted for almost two-thirds, or 62.11 percent, of "contract partners" whose transactions were the subject of STRs. And Bahamians accounted for 46.41 percent of transaction "beneficial owners".

"Long-standing customers of the disclosing institutions accounted for 66.14 percent of the reports received, whereas new customers accounted for 22.42 percent of the reports," the FIU report added.

The FIU received 117 requests for assistance from foreign counterparts in 2017, of which 78.63 percent were processed and another 20.51 percent being dealt with. One matter was denied.

The Bahamian unit sent 102 assistance requests of its own, with responses received in 89.22 percent of cases. Of the remaining matters, one request was withdrawn and 10 are being processed.

Domestically, the FIU sent 792 requests to Bahamian law enforcement agencies and financial institutions. Of these, almost 80 percent received replies, while the remainder are being processed. Of the 71 domestic requests for help made of the FIU, all were dealt with.

The FIU analyses STRs, and passes those requiring further investigation on to the police, but last year's CFATF report said there was "ineffective application" of such intelligence to uncover money laundering offences.

"The FIU indicated that the quality of the STRs is sometimes not satisfactory, and believes that some financial institutions can provide a better quality product," the CFATF report found.

"This should be coupled with the fact that the majority of interviewed reporting entities indicated that there was nominal feedback from the FIU on STRs filed, save for an acknowledgment of receipt of the STRs.

"There is an apparent lack of enthusiasm by reporting entities to file STRs, as they are unaware of the outcome and therefore may question the utility of the exercise," the report continued. "Giving feedback is essential to motivate the financial institutions to file better quality STRs, as well as enable financial institutions to better understand the relevance of the STRs they filed.

"This may in no small measure be contributing to the fluctuation in STRs received by the FIU during the period 2011-2014. It may also be contributing to the small number of STRs which are being filed in the Bahamas."

Still, the CFATF report praised the FIU for "having made considerable strides as an organisation in building its capacity". It added that it was "a well-structured and resourced unit", with 23 staff members who included nine analysts; four IT officers; an attorney; and an accountant.

However, it slammed the way in which the Royal Bahamas Police Force appeared to be using the intelligence gathered by the FIU.

"Generally there seems to be an ineffective application of financial intelligence and other relevant information in the development of evidence with regards to money laundering offences, and other associated predicate offences and terrorism financing, by the [RBPF]," the CFATF report said.

"This may be symptomatic of an investigative deficiency, or a deficiency in the financial intelligence. During the period under review a total of 220 STRs were disseminated to the [RBPF]. Notwithstanding this, only a total of 45 production orders were applied for, and an even more negligible number of 15 search warrants.

"It is uncertain as to whether those investigative tools were used in relation to the investigations into money laundering and other associated predicated offences. As regards terrorism financing, the FIU indicated that there was no merit in STRs filed on terrorism financing and thus they were both closed," the report continued.

It concluded: "Effectiveness is not being demonstrated with respect to the analysis and dissemination of financial intelligence. The intelligence is not being used by the RBPF to further investigations in money laundering."

Comments

bogart 2 years, 8 months ago

Bey...deys needs da govt man auditor Terrance Bastian...who been lookin in Road Traffic to helps dem find tings....or dey be needin all dem people who been asking ...."where der VAT money gone.".

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