Is All Lost With the Non Passage of AML/CFT Bill?

I had written this a few months ago and it was published in Stabroek News

No, is the definitive answer to the question posed in the above title of this essay. However, it will require adaptive leadership on the part of government and opposition political policy makers to avoid drastic economic consequences for our country.

By adaptive leadership, I am suggesting that it would require a change and shift from the current rigid positions from both government and opposition.  This would involve engaging in discourse that leads to concessions and compromises on both sides.  Anything short of this and our country will experience material economic damage that would take a long time to recover from.

Are the consequences grave?

Since before the Bill got defeated last week Thursday, there were many who were cynical and not so convinced of the consequences of not passing the Bill. Many felt it was gross exaggeration and fear mongering by the government and the private sector to get the political opposition to sign on to the bill.  Those who hold this view are very erroneous in their contention.

One only has to take a comparative examination of the experiences of other territories that have faced such a situation.  Lets take the examples of St. Kitts and Nevis and the Cook Islands.  In 2000, both these territories were not convinced of the severity of being grey or blacklisted by the Financial Action Task Force (FATF). For them, the cost of implementing pre-emptive regulatory reforms was much greater than the not clearly defined consequences of a stated Blacklist by FATF. These countries made the assumption that a blacklisting advisory was more “bark” than “bite.” This was premise on the fact that FATF’s blacklisting creates no obligations under international law and the multilateral grouping had no authority to impose direct sanctions or legal actions. However, while that is true, they underestimated the actions that would have been taken by member and non-member states of FATF, particularly, the US, Canada and other OECD countries. For instance, the United States Financial Crimes Enforcement Network (FinCEN), which is an arm of the Treasury Department, issued advisory to its accounting, insurance, banking, and legal firms flagging both countries within one month of the blacklisting and this resulted in large financial services firms in the US withdrawing their services from these jurisdictions for fear of being tainted by association and suffer losses to their reputations and share prices. Other firms just weren’t willing to spend additional resources when it came to the extra scrutiny required to effect wire transfers through correspondent banking relationships, so they terminated those relationships. Also, the reputational damage as a result of the blacklist caused foreign investors to rethink their investment plans to both destinations as a result of the high hurdles to conduct international financial transactions, which are critical to their operations. As such new incorporations fell off significantly.

Within a few short months both countries were reeling from the economic damage caused by the blacklisting and they both recanted and came to the realization that the necessary legislative and regulatory reforms were the far more cheaper option, and thus by 2002 and 2004 respectively St Kitts and Nevis and the Cook Islands had already implemented the necessary reforms and were de-listed by FATF. The Prime Minister at the time of St. Kitts lamented the “massive threat to our economic survival” posed by blacklisting and noted that: “The impact of blacklisting goes well beyond the offshore financial sector... No foreign investor would want to invest in a hotel, manufacturing or other real sector project in a country that does not have the capacity to facilitate the payment of dividends or repatriation of capital through normal banking processes.”

Way Forward

Whether or not FATF agrees to grey-list or blacklist Guyana for not meeting the recommendation of legislating the AML/CFT, the above two examples show that the consequences while being severe, can be reversed if the affected country take the necessary steps to implement the FATF recommendations (which can be done even after a blacklist advisory is in effect). With Guyana’s example, adopting the AML/CT legislation is a critical recommendation that must be fulfilled and can be done if our political parties engage with an intention of achieving that.

In the Wednesday edition of Stabroek News (November 13), Speaker of the National                                                                     Assembly Mr. Raphael Trotman reaffirmed this when he noted that the Bill could be reintroduced if there is a pact between government and opposition parliamentarians.

The Government representatives meet at a plenary session with the Caribbean FATF authorities in the Bahamas during November 18-21 to report on progress made since the last review was done. It is expected that the government will make the case to the Caribbean FATF to put off and delay issuing an advisory that Guyana is a non-compliant country.  Similarly and commendably, our private sector is expected to aid with a petition to the CFATF authorities in the same vein.

 This is a laudable move that is worthy of a try, however, the fact will still remain that our political policy makers would have to meet and put the country’s interests first and offer concessions to arrive at a collective position.