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The FinCEN Files – A Caribbean Perspective

ON Sunday 20 September 2020, BBC News made public the findings of an investigation into the contents of thousands of documents which were leaked from the United States Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) to Buzzfeed News. In a matter of minutes, the story was carried by every major international news outlet.

Of particular interest were the details of over 2,100 Suspicious Activity Reports (SARS) which were filed by banks and other financial institutions and submitted to FinCEN. Buzzfeed News, in collaboration with the International Consortium of Investigative Journalists (ICIJ), analysed these documents and claim that over the period 2011 – 2017, suspicious transactions in excess of US $2.1 trillion have been transferred across the globe via financial institutions

While the CAB denounces all activity related to breaches of data and privacy, this development yet again cast the spotlight on two of the most topical concerns within the banking and financial services industry; namely money laundering and the financing of terrorism.

The details of these revelations also suggest that a higher degree of stringency is applied when assessing the effective implementation of anti-money laundering (AML) and combating the financing of terrorism (CFT) measures of smaller, non-international banks and other financial institutions vis-à-vis their larger, international counterparts.

In the context of the Caribbean, which has long been regarded as a high-risk region with purportedly weak AML and CFT legislation, the ramifications of compliance shortcomings (whether purported or true) have been swift, harsh, and injurious. An example of this came in 2016 during the peak of de-risking activity in the Caribbean (2015 – 2018); 21 of 23 banks in 18 countries within the region had lost at least one correspondent banking relationship.[1] Though there appears to have been a plateau in the termination of correspondent banking relationships, the effects of these events continue to impede the pace and ease of doing business within the industry.

Further, as may be inferred from the latest iteration of the European Commission’s list of non-cooperative jurisdictions, more commonly referred to as the “EU blacklist” the compliance-related efforts of Caribbean jurisdictions continue to be appraised as largely insufficient by the established monitoring and evaluation agencies.

The FinCEN files have once again brought to the fore, the concerns previously expressed by several Caribbean jurisdictions and nation-states within the wider developing world regarding the degree of objectivity exercised by international compliance agencies.

At this juncture, it is anticipated, that with these new revelations, compliance-related changes will be mandated. The CAB wishes to commend members and stakeholders of the region’s industry for actively pursuing efforts to achieve full conformity with international compliance standards, which include inter alia the development and implementation of Know Your Client (KYC) inclusive of Enhanced Due Diligence (EDD) measures. These efforts, while necessary, have been extremely costly to implementing institutions. Yet, despite financial constraints, banks within the region have remained resolute in their commitment to ensure that compliance obligations are met.

We therefore remain confident that the future development and advancement of the region’s industry will continue to be aligned with international best standards and practices as we continue to play our part in the preservation of high levels of integrity and transparency within the industry at all times.

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