News from the OPM

5th Annual Anti-Money Laundering/ Counter-Financing of Terrorism Conference

Address by The Most Honourable Andrew Holness

5th Annual Anti-Money Laundering/

Counter-Financing of Terrorism Conference

October 10, 2016              Jamaica Pegasus Hotel

We’re very grateful that we’ve been spared the hurricane. I had conversations with the President of Haiti and the devastation there is just simply phenomenal; it’s really sad that they have been hit twice but we should help and I’m in the company of bankers and so I make the appeal that we should help. I also spoke with the first vice president of Cuba and they too have been hard hit and again we should help. Cuba has been very good to Jamaica and so I think it is only appropriate that where we can, we should help.

 

I’m very pleased to be here with you this morning and I wish to express my sincere appreciation to the Jamaica Bankers Association, The Jamaica Institute of Financial Services and all the speakers and moderators for their willingness to share knowledge and views on this important matter.

 

The theme of this conference underscores our continuing efforts and the critical unified approach that must be taken to tackle and mitigate the threats of money laundering and financing of terrorism. I see from the agenda that the officials here and the various stakeholders will be discussing the details in relation to the current and emerging trends in the financial industry as it relates to money laundering and counter-financing of terrorism.

 

The government – and I should just say it in this way- this government is an enabler and facilitator of enterprise and we are committed to a robust system of compliance and scrutiny which will not become unnecessary impediments to the ease of doing business. We understand that individuals and businesses conducting legitimate financial transactions will consider themselves negatively impacted by measures meant to counter illegitimate financial activity. However, we also must understand that the inconvenience that new levels of compliance will bring pales in comparison to the consequences of an unfavorable global reputation or rating on Jamaican businesses and financial institutions. Our regulatory environment must meet international standards to mitigate against the loss of international reputation and doing business ratings.

 

Money laundering is a serious global problem. The extent of money laundering is estimated to be between 2-5% of global GDP which translates to between eight hundred billion to two trillion United States dollars. All I know that’s a whole heap of money. Just to remind you Jamaica’s GDP is somewhere in the region of about fourteen billion dollars; literally a drop in the bucket of the world’s output.

 

Money laundering is directly linked to crime and here I would like to say a few words on what happened over the weekend. A gruesome crime was committed. Three of Jamaica’s children were murdered in the most savage way. High powered weapons were used and then the criminals resorted to destroying property; burning down houses in which the children perished. These criminals were not throwing stones. They weren’t using knives and machetes. They were using weapons- small arms that cost a lot of money.

 

We must take the profit out of crime. Criminals must have no access to the financial system and where they operate in the informal economy and in the back waters of our country; we must find them and separate them from their illegal gains. Whilst the large majority of those who use our financial services for entirely legitimate purposes do so in good faith, there are those who try to use our financial services for criminal enterprise. The challenge for all of us whether we are in the banking system, whether we are in commerce or industry, the challenge for all of us is how to build a system that detects and deters such criminal use of our financial system.

 

Jamaica cannot afford to be seen as a weak link in the chain of international efforts to combat money laundering and terrorism financing. We must have robust anti-money laundering and counter financing of terrorism regime in place to prevent criminals from benefitting from the proceeds of their crime.

 

For an AML/CFT Regime – and I think I can say that because I’m speaking to the audience that understands this jargon – but just for clarity – for an Anti-Money Laundering Counter/Financing Terrorism Regime to be sound corporation and collaboration is not an option but a vital requirement. Having said that it is however important for me to stress that just having a comprehensive AML/CFT framework alone is not enough. What is more important is going beyond that to ensuring the effectiveness of the framework and the continual assessment of its impact in reducing money laundering and criminal activities.

 

Jamaica’s crime problem is no revelation to any of us but the white collar aspect of it is one that is less visible and more complicated. Resolving this aspect of our crime problem will be fundamental in tackling the other areas of crime whether we’re dealing with the lottery scamming, which is very confused whether or not it is a white collar crime or just a dastardly criminal act but whatever it is; it is costing Jamaica’s reputation globally.

 

There are other forms. We have extortion of businesses, fraud and Ponzi schemes, robbery and simple larceny- all of these are motivated by the ill-gotten gains from these criminal acts. We must make all forms of criminal enterprise unprofitable. We must ensure that the cash generated from criminal enterprises- we must ensure that they can’t use it.

 

Our national security policy indicates that taking the profit out crime is one of the foremost measures for the government to combat our crime problem. You will note that this is also more recently underscored by the recommendations of the Economic Growth Council and I’m sure this very literate audience which Dave assures me would’ve had your copy of the recommendations published a few weeks ago by the Economic Growth Council.

 

Indeed, an early action of this government was for Cabinet to approve the national risk assessment on money laundering and financing of terrorism in May 2016. It was important for us to consider the findings of the government’s technical officers and to assess the key risks and vulnerabilities of our AML/CFT Regime. That national risk assessment also importantly considered the issues of the potential of terrorism threats to Jamaica and our levels of preparedness. The national risk assessment coupled with the external assessment of our framework by the Caribbean Financial Action Task Force will provide a detailed road map for the government to make continuous and systematic reforms to improve our systems.

 

We live in a dynamic world and all governments have to grapple with increasingly complex types of crime. We must establish regimes for ascertaining the ultimate beneficial owners or beneficiaries of companies; regimes for protecting nonprofit organizations against the abuse by financiers of terrorism or criminal networks; and even regimes to manage the risk of the proliferation of weapons of mass destruction. Obviously some of these would not be immediate threats to Jamaica but we must consider them nonetheless and take them into account in establishing our framework so that we are in compliance with international standards.

 

Our banks and all our financial institutions must ensure that public confidence and trust in their systems is unquestionable. The role of organization such as the JBA and JIFS is to ensure that your institutions, your industries, your reputation and therefore Jamaica’s financial system is stable, secure, impenetrable and cannot be hijacked by criminals.

 

I appreciate that there are many challenges. Compliance costs are ever increasing. Banks and financial institutions have to be ever vigilant. To be found to be the financier or banker to a money launderer, a terrorist or an organized criminal network can easily spell the death knell of an institution’s reputation, its correspondent banking relationships and let me say this one clearly and ultimately its license to operate and even persons facing prosecution.

The threat of de-risking is possibly the most significant and imminent threat to the Caribbean region financial stability at this time. Jamaica respects and has been complying with financial regulatory standards and working within a rules based multilateral trade and financial system.

De-risking threatens our economies; the trend hinders our participation in the global financial system and in international trade. The government is taking every step to insulate our financial sector. Solutions are not beyond us.

The government has actively sought to highlight the concerns in all fora and engagements whether at CARICOM, the United Nations where it featured in my presentation to the United Nations General Assembly, to the World Bank or the International Monetary Fund where Minister Shaw recently attended and I’m certain that the issue was raised there as well – and we take note that the UN has made a statement on this matter that the IMF no less a person than Christine Lagarde has made a statement on the issue of de-risking. It is gaining some attention in the important circles in the international fora; it will take some time before that is translated into action.

I will continue to say that Jamaica is ensuring that our systems are compliant; that our legislation seamlessly matches the legislative framework developed globally but I can only implore those who have regulatory authority that when a country like Jamaica makes the effort and comply that we are rewarded for the compliance – That Jamaica isn’t just treated as part of a region and whatever is applicable to the region is therefore applicable to Jamaica. When countries make their individual effort to comply, their individual effort should be rewarded.

 

The government is taking every step as I’ve said to ensure that we do what is necessary to comply and we continue to encourage our international partners and we continue to encourage our sister countries within CARICOM, within the region to speed up their own compliance so that the region as a whole can be treated fairly.

 

The government in looking at the overarching objectives is moving toward more streamlined and seamless processes. I take this opportunity to highlight the National Identification System (NIDS) and that might very well be the name; it may be another name but this project will have a transformative effect on Jamaica. What is envisioned is a cradle to grave biometric identification with a unique identification number being used for every Jamaican with the appropriate anti-fraud features. This source of identification will be considered as conclusive for the purpose of customer due diligence not only for banks but for all other businesses which require customer identification and verification. This system is designed to promote financial inclusion among those who are underserved by our current range of financial products and services.

 

Since taking over the reins of government my administration has indicated to the project team that the NIDS project is a strategic priority. Since that time, the project has been considered by the Public Investment Management Secretariat and was recently approved by the Public Investment Management Committee. The policy has been fine-tuned and I can say it will be before cabinet this morning. In fact it will be the first submission that I take this morning to have it approved. I’ve given the team a role out date of January 2018. I know that given all the processes that are involved the deadline is ambitious but so am I.

 

Ladies and gentlemen we must leverage every technological resource at our disposal to meet the demands of the global business environment. Government’s use of technology in regulation and compliance must be in step with international practices and let me just share some recent experiences.

 

Recently I had an occasion for a relative of mine to open a bank account and the person was from overseas and had to go back. The identification requirement is a hassle.  But all of that could be eliminated if there were a robust national civil registry where all persons who require identification and verification could access. So the idea under the NIDS is to create this very strong national civil registry architecture that has biometric, that has demographic data stored, that is stored in one place that you can relate to through databases and computer networks. This would eliminate some of the procedural steps which would make compliance easier but inclusion greater. This is why I’ve included this as some of the things that we are doing as government to facilitate greater compliance and ensure security and inclusion at the same time.

 

The government recognizes that the appropriate legislative and regulatory framework must be in place and we are examining it with a view to strengthening it where necessary. Reforms such the Banking Services Act allow for risk based banking supervision both with respect to your institution’s financial condition but also with respect to its AML/CFT compliance. Both the Bank of Jamaica and the Financial Services Commission are strengthening their regulatory resources and re-looking at their inspection methods to better allocate regulatory resources to those areas and institutions that are at greater risk.

 

It is important to note that we are reviewing the Proceeds of Crime Act; not only to strengthen enforcement through a system of financial penalties and to resolve issues relating to the sale of seized property, but also to identify those financial transactions and situations that are considered low risk. These will attract reduced due diligence measures which should lower your compliance cost and allow these low risk transactions to be done more easily and speedily. Enforcement must be treated as a top priority.

 

Financial institutions that are in breach and who aid money launderers will be brought to book. I urge our regulators and enforcement agencies to take a zero tolerance approach. The reputational risks to our financial system are too high for regulatory forbearance in this area.

 

The Terrorism Prevention Act is also being reviewed. We have to make sure that we can take the appropriate freezing action in the unfortunate event that assets owned or controlled by terrorists are located in our financial sector.

 

We are considering whether coordination mechanisms between the law enforcement agencies involved in this critical area should be enshrined in law. The issue of dealing with the ultimate beneficial ownership of corporate bodies and the ultimate beneficiaries under trust instruments will also be addressed by the Trust and Corporate Services Provider Bill. These and other amendments and enactments will be critical to our objective of moving Jamaica towards our goal of offering premium international financial services to global investors.

 

I’m certain that the distinguished panel of speakers will go into more detail on the initiatives to be introduced to deal with the challenges before us.

 

I will say in conclusion that we have to collectively maintain our focus and continue to share ideas on the solutions to our issues. It is my hope that this conference will serve as a platform for the sharing and development of innovative solutions to our challenges. With a unified approach we will continue to protect and promote our financial resilience and stability as we safeguard our future. I wish for you a successful and productive conference as you exchange valuable ideas to propel Jamaica on its path ultimately to prosperity.