Don't ignore money laundering 'red flags'

As families throughout the world prepare to celebrate Christmas and spend time with loved ones, remember that criminals are also preparing for the yuletide season. They understand that 2020 has disrupted the traditional controls deployed by financial institutions, designated non-financial businesses and professionals (DNFBPS), retailers, street vendors, hotels and gaming houses.

A gentle reminder: The Proceeds of Crime Act 2018 (POCA) defines “proceeds” or “proceeds of crime" as "any funds or property derived from or obtained, directly or indirectly, as a result of or in connection with the commission of any offence, including economic gains and funds or property converted or transformed, in whole in part, into other funds or property... It is immaterial who carried out the criminal conduct; who benefited from it; and whether the criminal conduct occurred before or after the passing of this Act".

Business Standard in an October 29, 2018, article noted at that time that “banks had paid $321bn in fines since 2008 for regulatory failings, money laundering, terrorist financing and market manipulation”. Therefore, against the backdrop of a COVID-19 pandemic that has lasted more than nine months and counting, several risks will arise.

In my June 2020 article, entitled, Beware of human trafficking red flags, I noted - and reiterate today - that “financial crimes professionals and other control professionals must remain vigilant”. I submit that as money changes hands, credit and debit cards are swiped and bartering occurs across various industries, there are proceeds of crime concerns that must be considered to avoid potential problems for institutions and individuals alike.

Concealment is an offence under Bahamian law. Major hotels have just reopened in The Bahamas, and the risk of money launderers testing their policies and procedures is likely. Control professionals must be aware of how their products and services can be used to launder money. In addition, the general public must be aware that a person can potentially commit an offence if he/she is acting with the knowledge, or reasonable suspicion, and attempts to conceal, disguise, convert, transfer or remove the proceeds of any crime from the Bahamas. A simple example would be if you know, or suspect, that the funds you have received are derived from money laundering, yet you use these same proceeds for Christmas shopping. You have possibly committed a money laundering offense and will be subject to penalties under Bahamian law.

The conscious avoidance of the truth, otherwise known as “willful blindness", is generally not a defense. The Proceeds of Crime Act explicitly explains that if one knows, suspects, or to have reasonably known or suspected, that he entered - or is entering - into an arrangement regarding the proceeds of crime, they may have committed a money laundering offence and be subject to penalties under Bahamian law. The age-old position of not seeking clarification when a doubt arises goes "out the window". Owners of business operations and customers alike must be aware of circumstances and remain vigilant during transactions.

While sales are important for merchants and real estate firms, remaining law-abiding is paramount. Training staff to identify so-called "red flags" will help tremendously with the early detection of potential criminal situations that could lead to the acquisition, use and possession of the proceeds of crime. Bahamian law makes it unequivocally clear that a person who acquired or is acquiring, used or is using, and possessed or possesses the proceeds of crime, has committed an offence of money laundering.

The fight against money laundering and the actions that facilitate it, such as human trafficking, sex trafficking, smurfing and others, can create real problems. Institutions and individuals alike must be aware that concealment, and arrangements concerning the acquisition, use and possession of proceeds of crime is punishable under law.

NB: Derek Smith Jr is the compliance officer and money laundering reporting officer (MLRO) at Higgs & Johnson, and a former assistant vice-president, compliance and money laundering reporting officer at an international private bank. His professional career started at a ‘Big Four’ accounting firm and has spanned over 20 years. He is also a certified anti-money laundering specialists (CAMS) and certified risk and compliance management professional (CRCMP).


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