Bahamas: Public Statement On FATF ICRG Announcement

The Caribbean Financial Action Task Force (CFATF) conducted a mutual evaluation of The Bahamas during an onsite visit (November 30 2015 to December 11 2015). The Bahamas' CFATF Mutual Evaluation Report (MER) was approved at the May 2017 CFATF Plenary in Trinidad and Tobago. The report provided a summary of the AML/CFT measures in place in The Bahamas, analysis of the country's level of compliance with the FATF 40 Recommendations, the level of effectiveness of the AML/CFT regime and provided recommendations on how the regime could be strengthened.

Results of the CFATF MER reflected that the country received 'largely compliant or compliant' ratings in 18 of the 40 FATF Recommendations, while posting 'partially compliant' ratings in 21 FATF Recommendations and 'non-compliant' rating in one (1) FATF Recommendation.

Following the publication of The Bahamas' CFATF MER in July 2017, the National AML/CFT Action Task Force (Task Force) commenced an ambition plan to address all of the deficiencies noted in the 2017 MER, particularly to complete the National Risk Assessment (NRA), which examined the money laundering and terrorist financing risks in the financial services sector both domestic and international, and to gain the government's approval of same. Emanating from the NRA and the CFATF MER were gaps regarding the country's AML/CFT Framework (legal, supervisory/regulatory, and enforcement regimes). The Task Force was charged with the responsibility in developing a National Identified Risk Framework Strategy (NIRFS) inclusive of AML/CFT/PF regimes. The NRA was approved by government in December 2017 and the NIRFS was approved in April 2018.

Among the deficiencies noted also was the absence of a legal regime that was capable of addressing the identified risks which were illuminated by the NRA. In order to address this the government embarked on an ambitious legislative reform agenda.

Both internationally and regionally, The Bahamas has been praised for its significant efforts and achievements over the last 15 months to address deficiencies identified in its CFATF MER. During this period of time the Attorney-General and the Task Force he leads have attained many of the goals they established post the 2017 publication of the country's CFATF MER. Notably –

a) Since July 2017, the authorities have enacted the following legislative measures:

  1. The International Tax Cooperation Amendment Act, 2018, Automatic Exchange of Information Amendment Act, 2018 and Automatic Exchange of Information Amendment Regulations 2018 which resulted in the signing of the MCA and MCAA;.
  2. The legislative amendment of the National Constitution to create the Independent Office of the Director of Public Prosecutions.The mandate of the ODPP as an independent prosecutorial Authority is to provide efficient, effective, fair and just prosecutorial services within the Commonwealth of The Bahamas.. Noteworthy is the progress made with money laundering investigations, prosecutions and convictions - during the period July 2017 – September 2018, during which 40 money laundering prosecutions were recorded with 19 convictions compared with one (1) money laundering case recorded for the previous period;
  3. The Financial Transactions Reporting Act (FTRA), also passed in 2018 addressed technical gaps identified in the Bahamas' CFATF MER;
  4. The Proceeds of Crime Act (POCA), 2018 addressed technical gaps identified in the Bahamas' CFATF MER -with provisions such as the introduction of Unexplained Wealth Orders, Civil Forfeiture and the establishment of the Identified Risk Framework (IRF) oversight bodies – the Ministerial Council (National Identified Risk Policy Body), the Identified Risk Steering Committee (an operational IRF multi-agency body responsible for implementation and enforcement of the IRF);
  5. Anti-Terrorism Act (ATA), 2018) addressed the technical gaps identified in the CFATF MER and IO 10 and IO 11. Notable provisions address the financing of terrorism, financing of proliferation of WMD, manufacturing of WMDs, all forms of terrorism and participation in terrorist activities, identification of the competent authority dealing with terrorist issues (Attorney-General), local and international listing of terrorists and terrorist organization, and international cooperation. Attention was given to ensuring that the requirements of Recommendation 6 and 7 of the FATF 40 Recommendations and IO 10 and IO 11 were addressed; and
  6. The Travellers' Currency Declaration (Amendment) Act, 2018. The provisions of this Act mandate currency declaration at the borders by departing and arriving passengers. These provisions along with those of the Travellers' Currency Declaration Act, 2015 came into force by 1st September 2018. This legislation obligated all travellers to declare currency, negotiable instruments, precious metals and stones equal or exceeding $10,000.

The Government further enacted a number of Regulations (which have the force of Law) in order to address other noted deficiencies:

b) Regulations released by the Government include:

  1. Financial Transactions Reporting Regulations, 2018 which establishes the thresholds for customer due diligence set out in the FATF 40 recommendations, customer due diligence requirements for companies, trusts and legal persons, and establishes STR filing obligations on general insurers.
  2. Financial Transactions (Wire Transactions) Regulations, 2018 which incorporated the provisions of the 2015 Regulations and increased administrative penalties for non-compliance with the requirements of the Regulations.
  3. International Obligations (Economic & Ancillary Measures) (Implementation of United Nations Security Council Resolutions) Iraq Order, 2018, which enforces all provisions of the UN Security Council's mandated targeted sanctions on Al'Quaida, I'Sil and related entities and associated parties. Order to come into force on 11 October 2018;
  4. International Obligations (Economic & Ancillary Measures) (Implementation of United Nations Security Council Resolutions) Afghanistan Order, 2018, which enforces all provisions of the UN Security Council's mandated targeted Sanctions on Al-Quaida, I'Sil and related entities and associated parties. Order to come into force on 11 October 2018;

Additionally the Central Bank of The Bahamas and other financial sector Regulators issued the following Guidance Notes:

c) Regulatory guidance issued to the financial institutions and designated non-financial businesses and professions:

  1. As of August 2018, The Central Bank (CBB) has updated its Guidelines for Supervised Financial Institutions on the Prevention of Money Laundering and Countering the Financing of Terrorism (AML/CFT Guidelines) to align with the NIRFS and address the deficiencies highlighted in The Bahamas' Mutual Evaluation Report (MER);
  2. As of August 2018, the Group of Financial Services Regulators - CBB, Inaurance Commission Board (ICB), Securities Commission Board (SCB), Gaming Board (GB) and Compliance Commission (CC) jointly issued the following guidance notes;

    1. Guidance Note on the Sound Management of Risks Related to Financial Crime in The Bahamas; and
    2. Guidance Note on Proliferation and Proliferation Financing.
    The guidance notes provide direction to regulated entities on the identification, assessment, management and mitigation of financial crime risk and raise awareness of the risks and vulnerabilities in regards to proliferation and proliferation financing.
  3. The Compliance Commission issued revised and enhanced Codes of Practice for Lawyers, Accountants and Real Estate Brokers and Developers.

Note is made that the Insurance Commission of The Bahamas, the Gaming Board and the Securities Commission of The Bahamas have drafted updated AML/CFT Guidelines for their licensees and registrants which are due for release by month end October 2018. The guidelines are being updated to address key deficiencies noted in the MER, and to take into account the enhanced provisions contained in the FTRA 2018, POCA 2018 and ATA 2018.

d) Development and implementation of Risk Based Supervision:

  1. The Central Bank, having developed and implemented risk based supervision for its substantive licensees (banking and trust companies) in last quarter of 2009, incorporated credit unions into its risk based framework in the second quarter of 2018 and has completed the risk profiling of all 10 credit unions as of July 2018.
  2. The Securities Commission of The Bahamas, developed and implemented risk based appropriate supervision for securities licensees and registrants. The risk profiling of al licensees is ongoing. Note is made that SCB's risk based supervision has been ongoing for Financial and Corporate Service Providers since 2014.

The Compliance Document

The FATF recently listed The Bahamas in the 'Compliance Document' following its October 2018 Plenary in France, which is not a 'Black List", but a monitoring list, as the country is working to implement fully the provisions of the newly enacted POCA, 2018, FTRA, 2018, and ATA, 2018. It has been recognized even in the context of the Compliance Document, that The Bahamas has in a very short period of time since May 20017, made significant and important progress towards fully addressing all deficiencies noted in the 2017 MER.

The terms of the short "Action Plan" adopted by the FATF Plenary in Paris this month clearly indicates that all required now of The Bahamas is the production of evidence to support the effective implementation of the vigorous AML/CFT and Counter-identified risk legal framework which has now been created by the legislative framework, the NRA and subsequent AML/CFT Guidance Notes referred to above.

This task will necessarily involve the installation of case management software to better track international cooperation efforts, coupled with the installation of analytical software to improve the outcomes of the Financial Intelligence Unit in its response to both domestic and international Suspicious Transactions Reports and requests for intelligence-based assistance.

The Bahamas has formally communicated a high level of political commitment and will to address the remaining implementation issues and have noted that within the international and regional AML/CFT/PF organizations, there has been favorably noting of the tremendous effort that The Bahamas has expended to enable it to be the first of the countries (Trinidad & Tobago, Jamaica, Barbados, Antigua and Barbuda) in the Fourth Round CFATF Mutual Evaluations, to request re-rating of its legal provisions to address FATF Recommendations. Note is also made that all countries having undergone the Fourth Round CFATF Mutual Evaluations are confronting new standards on 'Effectiveness Ratings' and substantial challenges in ensuring that 'sufficient progress' is being made to comply with these newly introduced international standards. The Bahamas is committed as a member of the international financial community, to implement and maintain an appropriate, effective NIRF which incorporates its AML/CFT/PF regime.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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