St. Vincent and the Grenadines
Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism

St. Vincent and the Grenadines (SVG) is exposed to money laundering (ML) and financing of terrorism (FT) risk related to drug trafficking and international criminal groups. The financing of terrorism has also been criminalized and is largely in conformity with the Suppression of the Financing of Terrorism (SFT) Convention. The legal and institutional framework regarding the cross-border transportation of cash and bearer instruments is largely in place. The preventive measures regime covers most of the financial and designated nonfinancial businesses and professions (DNFBP) sectors as required under the Financial Action Task Force (FATF) Recommendations.

Abstract

St. Vincent and the Grenadines (SVG) is exposed to money laundering (ML) and financing of terrorism (FT) risk related to drug trafficking and international criminal groups. The financing of terrorism has also been criminalized and is largely in conformity with the Suppression of the Financing of Terrorism (SFT) Convention. The legal and institutional framework regarding the cross-border transportation of cash and bearer instruments is largely in place. The preventive measures regime covers most of the financial and designated nonfinancial businesses and professions (DNFBP) sectors as required under the Financial Action Task Force (FATF) Recommendations.

1. GENERAL

1.1. General Information on SVG

History, System of Government, Laws and Institutions

30. SVG is a multi-island State situated in the Eastern Caribbean. It is part of the Windward Islands in island chain called the Lesser Antilles, and is located approximately 1600 miles southeast of Miami and 100 miles from Barbados. SVG comprises mainland St. Vincent, which is the largest geographically, and 31other islands and cays, seven of which are inhabited, namely Bequia, Mustique, Union Island, Canouan, Petit St. Vincent, Palm Island and Mayreau. SVG has a combined land mass of 389 sq km.

31. The population of SVG is estimated at 118,432 (July 2008 est. Source: The CIA World Factbook) with the majority of people living and working in St. Vincent, which is the hub of most of SVG’s economic and business activity. The official language is English.

32. SVG gained its full independence from the United Kingdom in 1979. It is a common law jurisdiction operating under a democratic system of Government with a unicameral legislature (House of Assembly). General elections are held every five years. SVG has a written Constitution, which provides for the separation of powers among the Governor General, the Parliament/legislature, Executive, Judiciary, and the public service. The tenure and powers of the DPP are enshrined in the Constitution.

33. The Chief of State is Queen Elizabeth II who appoints and is represented by the Governor General. The Head of Government is the Prime Minister who is also the Minister of Finance, Minister of Legal Affairs and Minister of National Security. Cabinet is appointed by the Governor General on the advice of the Prime Minister. SVG is a member of the British Commonwealth, the UN, the Organization of American States, the International Labor Organization, the Caribbean Community (CARICOM) and the Organization of Eastern Caribbean States (OECS). SVG is also a member country of the CFATF.

34. SVG is a member of the regional Eastern Caribbean Supreme Court which is based on Saint Lucia. It is also a member of the ECCU sharing a common currency (EC Dollar: US$1 = EC$2.70) and central bank (St. Kitts-based ECCB) with five other independent countries and two United Kingdom Overseas Territories.

Legal and Judicial System

35. As mentioned above, SVG’s legal system is based on English common law with the English Privy Council being the final court of appeal. The legal system has a three-tiered structure set out in hierarchal order as follows: (i) the Eastern Caribbean Court of Appeal; (ii) the Supreme Court of Judicature or the High Court; and (iii) the Magistrates’ Courts or the lower courts. The judiciary is within the Saint Lucia-based Eastern Caribbean Supreme Court of which two judges, not citizens of SVG, reside in SVG. One of the judges has jurisdiction over criminal matters and the other presides over civil matters.

36. SVG also has four Magistrates and one visiting Master of the Court. Two Magistrates’ Courts are based in the capital Kingstown and the other two Magistrates’ Courts are rotated in the outlying districts of SVG, including in the Grenadines. A Serious Offenses Court forms one of the two courts in Kingstown, presided over by the Chief Magistrate. This court was established to ensure that there is consistency in the adjudication and sentencing of serious crimes at the magisterial level. The Master of the Court deals with civil matters before the High Court, so as to curtail the amount of time which the High Court Judge spends dealing with applications which are incidental to the main issues before the Court.

37. Both the Court of Appeal and the Court of Criminal Assizes sit three times per year while the High Court in its civil jurisdiction and the lower courts sit throughout the year. The average session of each sitting of the Court of Criminal Assizes is three months whereby 35 cases on average are adjudicated at each sitting. According to the authorities, access to justice is unimpeded as systems exist for the laying of charges and the filing of civil suits by any member of the public.

38. Law enforcement is carried out by the DPP and the Royal St. Vincent and the Grenadines Police Force (RSVGPF) supported by the Coast Guard. The FIU was established in May 2002 and is the national centralized agency for receiving, analyzing, investigating and disseminating suspicious activity information to relevant authorities in and out of SVG. As such it has investigative powers with respect to ML and relevant offenses under POCA. The FIU is a mixed or ‘hybrid’ FIU that carries out administrative, investigative and prosecutorial functions. The latter functions are carried out under the authorization of the DPP.

39. The authorities claim that they strive to maintain high ethical and professional standards for police officers, prosecutors, judges and other persons involved in the justice system. Disciplinary proceedings are available for police officers and prosecutors as a result of legislation and practice ((the Police Act, CAP 280 and the Eastern Caribbean Supreme Court (St Vincent and the Grenadines) Act, CAP 18 respectively)). A Police Service Commission also exists which has responsibility for disciplinary proceedings against police officers. The Bar Association can recommend disciplinary proceedings and/or disbarment of lawyers to the High Court. The transparency and efficacy of disciplinary procedures available in SVG pertaining to lawyers is illustrated by the disbarment in 2007, of a local Queen’s Counsel and former OECS judge, for unethical and dishonest practices. The said Queen’s Counsel’s appeal against his disbarment was recently declined by the Court of Appeal. No disciplinary and similar action has been taken by the authorities or industry groups/SROs against accountants and RAs.

Economy

40. The production of bananas and other agricultural products remain the staple of SVG’s economy. However, the country has sought to diversify its economic base away from agriculture by increasing investment in other sectors such as tourism, agro-processing, information communications technology and light manufacturing. Economic growth strengthened in recent years, with GDP growth averaging about 6.0 percent per annum during the period 2004-2007. Domestic demand has been one of the key drivers of this growth reflecting robust private consumption and investment spending. Preliminary government data indicate that economic activity increased by 7.0 percent in 2007, following a 7.6 percent growth in 2006.

41. The construction sector remained the major driver of economic activity in 2007 with the sector’s share of real GDP rising to 11.0 percent from 10.3 percent in 2006, and fuelled by both public and private sector projects. Public sector projects centered on infrastructure, including a new international airport that is expected to be completed in 2011. Private sector development activity focused on residential housing, hotels and resorts. Tourist arrivals in 2007 totaled more than 200,000 tourists mostly to the Grenadines. The increase in residential housing activity was evidenced by an expansion of 18.6 percent in commercial bank credit for home construction and renovation, well above the 3.2 percent rate of increase recorded in 2006.

42. The banking and insurance sector grew by 5.4 percent. Saint Vincent also has an offshore sector mainly comprising banking, insurance, mutual funds, trusts and company services.

1.2. General Situation of Money Laundering and Financing of Terrorism

Money Laundering

43. The principal predicate offenses which have generated illegal proceeds that are laundered include drug offenses, burglary, theft, and unlawful possession. A portion of the drug offenses relate to activities involving other jurisdictions. There are no estimates for the proceeds of crime or of the amount laundered in or from within SVG annually. The authorities maintain that ML methods used in SVG have remained relatively consistent over the years. This includes smuggling of monies into the country through the official ports of entry, and by sea through its many islands and cays. Other methods include use of money remittance business, nominees or third parties to hold assets. Cash intensive front business such a boutiques and car rental companies are also used for reinvestment and distribution of illicit drugs. (Source: mutual evaluation questionnaire (MEQ)). No concrete information was provided with respect to the use or potential use of domestic or international (offshore) FIs for ML and FT purposes, namely banks mutual funds, insurance companies, trusts/trustees, international business companies, or through other professional services providers such lawyers and accountants.

44. The authorities state that the majority of the predicate offenses do not constitute a serious ML problem citing drug offenses that often involve possession of relatively small quantities of marijuana. They also claim that a similar situation exists with respect to burglary and theft which are often committed by petty criminals. There has been moderate decline over the last four years in the number of predicate offenses committed, except for drug trafficking.

45. The following table provides summary statistics on the predicate offenses:

Table 1:

Crimes committed during 2004-2008

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Table 2:

Selected crimes against property for years 2004-2008

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46. During the last four years the FIU, in conjunction with other law enforcement authorities, investigated 41 domestic ML cases. Of the 41 money laundering cases, the predicate offenses are 38 drug trafficking, 2 thefts, 1 fraud. The amounted forfeited was ECD$124,591.60. Thus far the investigations have resulted in three successful money laundering convictions involving two individuals. In one instance, the defendant challenged his conviction and sentence in the Court of Appeal and both the conviction but these were upheld. The FIU’s legal team undertook the prosecution and subsequent confiscation hearings of these ML cases in conjunction with and on behalf of the Office of the DPP. These three matters resulted in forfeiture of cash in one instance and confiscation in the others. See chart at c. 2.5, below.

47. Other ML cases dealt with over this time period are as follows:

  • 1 confiscation hearing was successfully completed against a subject convicted of theft.

  • 1 ongoing confiscation hearing against a person convicted of drug possession, who is an associate of a person of major interest.

  • 2 pending money laundering cases before the court, both relating to drug trafficking.

  • 1 prosecution of a person operating a car dealership business for failing to implement an effective compliance system. It involved 2 counts were for failing to keep proper records of transactions and failing to comply with a production order for relevant information.

  • 18 successful cash forfeiture applications by the FIU on behalf of the DPP in the civil jurisdiction of the Magistrate’s Court.

  • 51 cases of seizures and detention of cash by the FIU in conjunction with other law enforcement agencies under the POCA.

48. According to the authorities, while both banks and money remitters may be used to launder money, it is becoming increasingly difficult for money launderers to use domestic banks due to compliance requirements and supervision of such entities. Money remitters have filed the highest number of SARs to the FIU, but a number of these appear to be either defensive or de facto threshold cash transaction reports. A money remitter has cooperated with the FIU in the investigation of a possible ML offence.

49. The authorities state that enhanced AML efforts by the NAMLC, the FIU, law enforcement and other authorities may prompt money launderers to search for more vulnerable areas in the financial system to manage their illegal proceeds. These could be the less tightly regulated domestic and offshore FIs, and DNFBPs. The authorities do not perceive or anticipate changes in the threat of ML.

50. Assessors acknowledge that while the scale of predicate crimes committed and originating in SVG may not pose a growing ML threat if the size of international financial sector remains the same, decreases or if there is little interaction between the international and domestic sectors. (See discussion above with respect to the filing of SARs by money remittance businesses. Also note that money remittance and some international services providers use the domestic banking sector which can create a contagion risk for the banks.) There is, nonetheless, a threat of ML in the international financial sectors arising from crimes committed abroad. Except for the number of offshore banks which has declined in recent years, the other international sectors have grown moderately in the past few years including e.g. mutual funds, trusts and company services, and the insurance sectors. There is also a potential for ML in the growing tourism sector e.g. through real estate transactions and other related businesses such as hotels, restaurants, jewelers, and other support services. By extension, the FIs that deal with such businesses could also be exposed to ML risk.

51. The information provided by the authorities, particularly in the MEQ, focuses mainly on predicate offenses committed locally, and the potential for ML connected with such offenses. At the time of the mission, there was no information available on ML/FT related to crimes committed in other countries. Increased focus on ML connected with crimes committed abroad would enhance the scope of attention to such threats and form a more comprehensive basis for developing a national AML/CFT strategy. Post mission the authorities provided examples of specific cases where they became aware or were involved in cross-border cooperation and investigations.

52. The authorities are of the view that the mere fact that SVG has an international financial services industry does not make it vulnerable to ML or FT. They maintain that the international financial services sector is small and well-regulated, and that the ML/FT the risks have been mitigated by strong legislative and administrative measures. There has been a sharp decrease in the number of offshore banks from about 41 in 2000 to six at present, influenced in partly by the need to be removed from the FATF Non-Cooperative Countries and Territories (NCCT) list (delisted in 2003). (Soon after the mission, the number of offshore banks reduced to four. One bank was closed because of suspected of involvement in fraudulent activities while another went into liquidation for prudential reasons.) During this period, legislation was updated, off-site and on-site monitoring of offshore entities was undertaken by the regulatory authority, and training was provided by the FIU. The authorities state that a thorough due diligence review of the principals of regulated entities, save unlicensed international business companies, was undertaken which helped foster a culture of compliance with the AML/CFT laws and regulations. Nonetheless, the IFSA (the offshore regulator) has limited supervisory staff capacity (four at the time of the mission) and about 120 licensees subject to its supervision, excluding the IBC and trust registration and related functions.

Financing of Terrorism

53. The authorities have not identified FT through financial institutions, and do not anticipate a change in this situation. They consider banks and money remittance services to be the most likely vehicles for FT using techniques that closely resemble ML activity, requiring close scrutiny of suspicious activity reported to the authorities. The FIU states that it has undertaken training and awareness raising programs to assist the regulated sectors learn more about FT in an effort to contain this risk.

1.3. Overview of the Financial Sector

54. The domestic financial sectors comprises of: 6 banks; 1 building society; 9 credit unions; 23 insurance companies; 101 insurance intermediaries (brokers, agents and sales representatives); and 4 money transfer service providers.3 There are some (two known) lending businesses that are technically covered by the AML/CFT legislation but which are not subject to a compliance oversight regime. The same applies to the building society which is registered with the Registrar of the High Court but not subject to ongoing supervision at the time of the mission. Post mission, the authorities indicated that a Building Society Amendment Act 1 of 2009 was passed to allow the Ministry of Finance to regulate and supervise these entities. The authorities also indicated supervision of this entity has commenced.

55. The international financial services sector comprises: 6 offshore banks (post mission reduced to 4); thirteen (13) international insurance companies; 3 insurance managers/brokers; 45 mutual funds; 30 mutual fund and managers/administrators. Post mission the authorities informed that there are no known mutual fund underwriters subject to the mutual funds law operating in or from within SVG. In addition, there are 28 licensed RAs/Trustees; 123 registered trusts; and 9,584 international business companies.

56. The ECCB regulates all domestic banks while the IFSA is the regulatory body for the international financial services sector. The domestic insurance sector and money remitters are supervised by the SRD of the Ministry of Finance while credit unions are supervised by the Registrar of Co-operatives. Later in 2009, the SRD will assume supervision of credit unions and building societies. At the time of the mission, the SRD had only 2 supervisors/examiners on its staff.

57. The following table shows the composition of the domestic and international financial sectors in SVG:

Table 3:

Financial Institutions

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Mutual funds: 38 public, 5 private, 2 accredited. Mutual fund services providers: 4 managers/administrators, 22 managers, 4 administrators.

Table 4:

Types of FIs authorized to carry out financial activities listed in the glossary of the FATF 40 recommendations

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1.4. Overview of the DNFBP Sector

58. DNFBPs subject to preventive measures in SVG are casinos, lottery agents, lawyers, notaries, accountants, RAs and trustees, real estate agents, and jewelers. Car dealers, while not DNFBPs under FATF definitions, are included subject to the same AML/CFT requirements as jewelers and are included in the discussion of DNFBPs.

Casinos

59. Two casinos operate in SVG, one being a small, local club in Saint Vincent with a limited number of regular patrons, the other being a relatively new operation in a large upscale resort on Canouan Island. The casino in St. Vincent consists of three card tables, two roulette wheels, and about eight electronic slot machines. Players would number around 30 on a busy weekend, and between 10 and 12 on a week day. Stakes are relatively low, with chip purchases of EC$3,000 being exceptional, occurring approximately once every two months. Credit may be extended to known customers during play with settlement in cash, or on approval, by check, at check-out. Some credits carry over for later settlement. Credit cards are not accepted. There are no wire facilities. A succession of operators has managed the club, with the current manager in place for about four years.

60. Little information was available in SVG about the casino at the resort on Canouan Island. Resort facilities are very high end and the island is an international port of entry, with scheduled flights to Barbados and Puerto Rico, as well as charter and private jet services. By reputation, the casino caters to international junkets.

61. While the casino sector is nominally subject to licensing and to AML/CFT requirements, little or no regulation is applied, and scant information was readily available in the authorities’ files. Money laundering risk at the casino in St. Vincent appeared to be low while the situation at Canouan was undetermined.

RAs and Licensed Trustees

62. SVG has a small international financial sector, offering international business companies, ITRs, international mutual funds, and allowing for establishment of international banks and international insurance. Licensing is required in order to offer company formation and management services or to act as a trustee. There are 28 firms licensed as registered agents (RAs), all of which are also licensed as trustees. Most RAs are small firms headed by a lawyer or an accountant. The principle office is required to be in SVG but a couple of firms have overseas offices, and in the case of one of the largest RAs, most of its business originates and is organized and managed by its European office.

63. Company formation is the most active line of business for RAs, with a total of 9,466 companies registered as of the end of 2008. At the same time there were 1,059 registered trusts (statistics updated as of June 2009). No information is available on total amount assets under trust administration. RAs tend to rely on established overseas business relationships for referral of new business, although a small amount of business may be attracted as a result of advertising. The active ship registry business in SVG is another channel generating demand for IBCs. Traditionally, RAs have generated most of their business from European clientele although recently business from Asia has increased and is being actively pursued. Organizing and managing mutual funds is an increasing activity of this sector, as is international insurance. The international banking sector has contracted significantly in recent years.

64. SVG RAs offer the full range of services expected of trust and CSPs, including company formation, acting as director or secretary, providing a registered office and business address, acting as a nominee shareholder or trustee, or arranging for others to do so. It appears that, in most cases, day-to-day administration and management are left to others. Although bearer share companies are allowed, since 2002 procedures have been in place for immobilization of bearer shares. RAs are to be the custodians for immobilized bearer shares or arrange for other approved persons to be the custodians. Amendments to the Companies Act in 2007 tightened requirements for approving custodians of bearer shares.

Lawyers

65. The legal profession in SVG consists of barristers and solicitors who have been called to the bar by the Judiciary and admitted to practice. Although there is a Bar Association, there is no legal practices law in SVG and membership in the Bar is not required to be admitted to practice. At the time of the assessment mission there were approximately 94 lawyers admitted to practice in SVG. The Bar Association does not have legal standing or an enforceable code of practice, nor powers to discipline members. Solicitors represent and act for their clients in a wide range of commercial activities. All real estate transaction involves the participation of lawyers in drawing the agreement, arranging for funds transfers, and processing settlement and registration.

66. Notaries are experienced lawyers whose function involves authentication of the contents, completeness and accuracy of documents, as well as authentication of CDD documentation.

Accountants

67. The accounting profession in SVG consists of both accountants and auditors. No legislation in SVG regulates their activities but most accountants are members of chartered accountants association in another jurisdiction, primarily Canada, the UK or another Commonwealth jurisdiction. As of the time of the mission there were approximately 24 qualified accountants practicing in SVG. Two of the international Big Four accounting firms are represented in SVG and they handle most of the audit work for the SVG offices of international firms. A second tier of well-staffed firms is also active in audit and advisory work with SVG clients. A third tier, consisting mainly of one-two person practices, provides accountancy and tax services to local clients. Three RAs are headed by accountants.

Real Estate Agents

68. The real estate agent business is not specifically regulated and there is no association of real estate agents. As of the time of the mission, the authorities estimated that there were 41 firms offering real estate agency services in SVG. This number includes individuals conducting occasional transactions as well as firms with multiple offices in SVG.

69. Identification generally is applied to the vendor but not the buyer. Buyer identification generally is treated as the responsibility of the lawyer who draws up the contract and attends to the settlement. For sales to non-residents, extensive due diligence on the buyer is carried out by the authorities under the provisions of the Alien Land Registration Act. FIU involvement in CDD compliance is too limited to test the effectiveness of implementation of FATF Recommendation (R) 5 requirements by Real Estate Agents.

Table 5:

Designated Non Financial Businesses and Professions (DNFBPs)

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Table 6:

Number of DNFBPs

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Table 7:

Authority responsible for registration and supervisory of AML/CFT

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Table 8:

Registrant Authority/Supervisory Authority for DNFBPs & NPOs

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1.5. Overview of commercial laws and mechanisms governing legal persons and arrangements, and Non-Profit Organizations (NPOs)

70. A ‘person’ includes any company or association or body of persons incorporate or unincorporate. The main types of legal persons and arrangements used in SVG to own property, hold bank accounts, own shares or conduct financial transactions are:

  • Local Companies

  • International Business Companies (IBC’s)

  • Trusts

Local Companies

71. The Companies Act provides the legal mandate in relation to the incorporation of companies and contains provisions that deal with corporate capacity and powers, ownership, management, administration, winding up and dissolution. Different types of companies exist such as “for profit” companies and non-profit companies. A “for profit” company is incorporated by filing the following documents:

  • Articles of Incorporation

  • Statutory Declaration

  • Notice of Directors

  • Notice of Address

  • Request for Name Search and Reservation

72. A non-profit company is incorporated by filing the above documents however the approval of AG is also required for incorporation. In order to qualify for the approval of the AG, a non-profit company must restrict its business to a patriotic, religious, philanthropic, charitable, educational, scientific, literary, historical, artistic, social, professional, fraternal, sporting or athletic nature, or to the promotion of some other useful object.

73. All companies are required to disclose their registered office address. Information concerning local companies is a matter of public record and is available for inspection by any member of the general public. Pursuant to Sections 123 and 124 of the Companies Act a local company is required to prepare a list of its shareholders which may be examined by any of its members.

74. According to the authorities, companies are the main vehicle in SVG used to conduct commercial activities, although partnerships governed by the Partnership Act, CAP 109, are also used.

International Business Companies (IBCs)

75. IBCs are established under the International Business Companies (Amendment and Consolidation) Act, 2007 and its Regulations, SRO No. 6 of 2008, which set out the requirements for incorporation. The Act makes specific provision for several types of companies namely: companies limited by shares, companies limited by guarantee (whether or not authorized to issue shares), and unlimited companies. Specific provision is made for limited duration companies and segregated cell companies (SCC). This latter type of company is attractive to the mutual fund and captive insurance sectors of the international financial services industry.

76. The Act establishes rules on corporate governance, financial reporting, fundamental changes and amendments, civil remedies, offenses and penalties, winding up and dissolution provisions. The Registrar of International Business Companies (administratively under IFSA) is responsible for the administration of this Act and maintains a register of IBCs which is open to public inspection.

77. IBCs may only be incorporated through the services of a SVG-licensed RA. Disclosure of information concerning ownership and control (shareholders and directors) is not mandatory and the company can elect to register its directors.

78. IBCs cannot conduct or engage in business locally and must have an international element. Corporate documents are kept at the office of the RA and records of minutes of meetings and resolutions of members are maintained by the company. They are used in the international financial services sector and are useful for carrying out specific investment activities and attract tax advantages under the Act. IBCs are the most popular form of carrying out commercial activities in SVG’s international financial services sector.

Trusts

79. Trusts can be either local or international. A local trust is governed by the Public Trustees Act, CAP 382 and the Trustees Act, CAP 383 of the Laws of St. Vincent Revised Edition 1990, respectively. ITRs must be registered by the Registrar of ITRs who is currently also the Executive Director of IFSA. The Registrar has the power to obtain information and reports, and to require the production of documents by notice in writing served on the registered trustee. ITRs are governed by the ITR Act 1996 and its Regulations, SRO No. 34 of 1996. IBCs can engage in ITR business and are also governed by the International Business Companies (Amendment and Consolidation) Act.

80. The Trustees Act governs the duties, powers, liabilities of the trustee and powers of the Court relating to the administration of trusts in terms of the trust instrument. There must be an instrument creating the trust. ITRs are created by written instrument which satisfies the formal requirements for a deed or settlement under the proper law of the trust, and which is signed by the settlor and Trustee who must be a licensed RA in SVG. Property is vested in the Trustee upon trust for named beneficiary beneficiaries. The law makes provision for the appointment of a protector and retention of control by the settlor. The trustee can either be a person or a legal entity.

81. Property of any sort can be held in trust and the uses of trusts are varied. Trusts can be created during a person’s life (usually by a trust instrument referred to above) or after death in a will. Types of trusts which are available include spendthrift or protective trusts, charitable trusts, and purpose trusts which are irrevocable with a limited duration of 120 years. The ITRs Act states the conditions which may constitute the termination, failure or cancellation of a trust, liability for breaches, the proper law and effect of foreign law and powers of the court.

82. The ITR Register is not open to public inspection except by the protector, trustee or a person authorized in writing by the protector. An ITR must have a registered office, which is the office of the Registered Trustee/RA.

Non-Profit Organizations (NPO)

83. NPOs are required to register under the Companies Act. The primary purpose of registration is to verify that the organization is eligible for exemption from taxation because it is a not-for-profit organization operating with a charitable or public purpose. Although the registration formalities are streamlined, each NPO must be approved by the AG before being accepted for registration. Once registered, oversight is generally limited to following up if annual financial statements are not filed or in response to complaints. There has been no systematic review of the FT vulnerability of the NPO sector in SVG.

Table 9:

Numbers of NPOs

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1.6. Overview of strategy to prevent money laundering and terrorist financing

AML/CFT Strategies and Priorities

84. According to the authorities, the Government of SVG has been and is committed to establishing the necessary infrastructure, both legislative and administrative in order to ensure it has a strong AML/CFT regime. In the last seven years, the Government passed legislation to combat money laundering and the FT, including:

  • POCA 2001 and amendments thereto;

  • POCA Regulations 2002 and amendment thereto;

  • FIU Act 2001 and amendments thereto;

  • Exchange of Information Act 2002 (repealed the Confidentiality (Preservation of Relationships) Act, recently replaced by the Exchange of Information Act 2008;

  • International Banks Act 2004;

  • International Business Companies (Consolidation and Amendment) Act 2007;

  • UN Anti Terrorism Measures Act 2002 and amendment thereto.

85. Money Laundering Prevention Guidance Notes to the regulated sector were first issued in 2003 and amended thereafter in 2004 and 2006.

86. The authorities have not as yet issued a formal AML/CFT policy and strategy to help prioritize its AML/CFT efforts and resources. In practice, the NAMLC provides a forum for coordinating AML/CFT activities among its representative agencies, and is the de facto policy making body. According to the authorities, it regularly meets with the key AML/CFT stakeholders of SVG and has focused on implementing the applicable legislation. The main agencies are described below in the context of the institutional arrangements for AML/CFT.

The Institutional Framework for Combating Money Laundering and Terrorist Financing

87. The NAMLC provides the main AML/CFT forum for national cooperation and coordination in SVG. It is a national body created pursuant to the provisions of POCA, consisting of the following members:

  • the AG;

  • the DPP;

  • the Director General, Ministry of Finance and Planning;

  • Director of the FIU;

  • Comptroller of Customs;

  • Representative of the ECCB;

  • Commissioner of Police;

  • Chairman and Executive Director, IFSA.

88. The SRD of the Ministry of Finance is not a statutory member but has been invited to attend meetings by the Director General of the Ministry of Finance who is the Chairman of the NAMLC.

89. As mentioned above, the NAMLC is the umbrella body which coordinates governmental action in relation to AML/CFT. It makes recommendations to the Minister of Finance and AG for the strengthening of the AML/CFT regime including recommendations pertaining to legislative and administrative changes. Meetings of the NAMLC are held every quarter and convened more regularly if required.

90. SVG’s Minister of Finance has certain responsibilities under various pieces of AML/CFT legislation. He is, for example, the Minister:

  • to whom the NAMLC reports under POCA;

  • to whom the FIU reports; and

  • that gives final approval for the licensing of a banks and mutual funds.

91. The Minister of Finance’s role is the AML/CFT regime is also important from the point of view of resource allocation based on his responsibility for the country’s budget. The Minister of Finance in SVG is also the Minister of Legal Affairs, the Minister of National Security and the Prime Minister.

92. The AG plays an important role in SVG’s AML/CFT regime in two respects:

  • (i) responsibility for proposing legislation to Parliament; and

  • (ii) as the central authority for international cooperation. The AG has played a leading role in enacting AML/CFT legislation since 2001. Together with the Office of the DPP, who is the competent authority under the MLA in Criminal Matter Act 1993, the AG receives requests under this Act and other international requests by letters rogatory or through diplomatic channels. Requests made through diplomatic channels are received by the MFA and forwarded to the AG. The main role of the MFA is therefore receiving international requests for cooperation and forwarding them for processing by the relevant authorities in SVG. The AG has authorized the FIU to process all international requests which the office receives either directly, or through the MFA. The execution of these requests by the FIU has proven to be the most efficient way of processing international requests for assistance. The AG is also the competent authority under the US Treaty for MLA in Criminal Matters between SVG and the USA.

93. The FIU also plays a key role in the AML/CFT regime. In addition to its core FIU functions, it has also engaged in awareness raising and training activities for the regulated sectors with respect to their obligations under POCA. It has also established relationships locally and internationally in order to carry out its duties more effectively and to be able to foster greater information sharing. The FIU has entered into nine MOUs with counterparts in other jurisdictions and has provided assistance regularly to such counterparts.

94. The DPP is responsible for the prosecution of all criminal matters in SVG. It works closely with FIU whereby certain applications under POCA, as well as prosecutions, are undertaken by the FIU under the authority of the DPP. The FIU prosecutes ML cases and its functions include obtaining production orders, search warrants, restraint orders, confiscation applications, and cash detention orders. Although under the Constitution the power to prosecute lies solely with the DPP, prosecutions may be delegated to others, including the FIU or independent counsel. The DPP’s staff is not involved in day-to-day ML prosecutions, and the institutional knowledge is largely within the FIU legal staff. To the extent that more prosecutions are being developed, the balance of work between the FIU and DPP should be revisited, and appropriate staffing enhancements should be considered. While the FIU and DPP have informed the mission that the case-by-case delegation by the DPP has been effective, a formal, open-ended delegation would facilitate the FIU’s work in this regard.

95. In SVG, the law enforcement agencies are composed of different departments or branches within the RSVGPF. The latter specializes in certain crime fighting areas and has formed specialized units such as the White Collar Crimes Unit, a Criminal Investigation Department, a Rapid Response Unit, a Narcotics Unit, and a Major Crimes Unit.

96. The main financial sector bodies in SVG with responsibility for authorizing and supervising FIs are the ECCB, IFSA, the Ministry of Finance and its SRD, the Registrar of Cooperatives Department and the Commerce and Intellectual Property Office (CIPO). As the regulator of domestic banks, the ECCB has been involved in the examination of domestic banks but onsite examinations have not been conducted regularly for some banks and do not seem to adhere to its stated risk-based approach with respect to AML/CFT. Prior AML/CFT reviews appear to be more compliance-based focusing on the existence and adequacy of internal policies, procedures and controls.

97. IFSA is a single regulator for the international (offshore) financial services sector responsible for the supervision all of the international financial services providers authorized in SVG including:

  • International Banks;

  • International Mutual Funds;

  • International Insurance;

  • RAs and Trustees;

  • Registration of International Business Companies; and

  • Registration of ITRs.

98. Supervision by IFSA consists of offsite monitoring and onsite examinations. It has limited supervisory capacity (4 examiners including the Executive Director). Onsite examinations for AML/CFT have only recently been conducted for most sectors, and are still evolving in dept and scope. Special attention has been give to the international banks by virtue of their inherent risks. To complement its staff resources, IFSA has in the past utilized the services of an outside consultant for onsite inspections, financed through the Caribbean Regional Technical Assistance Center (CARTAC).

99. Domestic insurance and money remitters are subject to the supervision of the Ministry of Finance–SRD, while credit unions are supervised by the Registrar of Co-operatives. At the time of the mission, an amendment to the Building Societies Act was being made to grant regulatory responsibility for building societies, which have not been supervised, to the Ministry of Finance. There were also plans to transfer responsibility for credit unions from the Registrar to the Ministry of Finance. The establishment of the SRD in SVG is part of an ECCU wide initiative to set up a Single Regulatory Unit in each member State to supervise those FIs not subject to the supervision of the ECCB and IFSA. A MOU for the Single Regulatory Units in the region is being developed to facilitate regional cooperation among the various units.

100. The Commerce and Intellectual Property Office (CIPO) has responsibility for the incorporation of companies and maintaining a register of companies. Non-profit organizations are also registered by CIPO.

101. Casinos are licensed by the Gaming Commission and subject to the joint supervision of the Commission and the FIU. There are only two licensed casinos.

102. The Bar Association does not have self-regulatory authority. As a result, there is no legal framework for supervising lawyers for AML/CFT compliance.

103. Except for the trust and CSPs that are supervised by IFSA, all other DNFBPs fall under the legal jurisdiction of the FIU for AML/CFT legal compliance supervision.

Approach Concerning Risk

104. There is no formal policy or procedures for applying a risk-based approach to compliance and supervision, and no assessment has been conducted of ML and FT threats and vulnerabilities in the system to inform policy making and implementation of countermeasures. The authorities nonetheless maintain that risk is assessed at the national level by the NAMLC, with important input from the FIU, and that priority is placed on commercial and international banks, money remitters and cash businesses. Priority is given to these entities due to the high volume of transactions, the trend of suspicious activity reporting, intelligence results, and the fact that worldwide these institutions are recognized as being more susceptible to ML and FT. However, this “assessment” has not translated into the formulation of a national policy, strategy, and the application of supervisory resources, especially with respect to the international sectors.

105. The list of regulated entities covered under the POCA No. 39 of 2001 is relatively broad containing most activities required under the FATF Recommendations. It does not appear to be risk-based and includes some activities that are not currently in operation in SVG. Some existing activities, however, should be explicitly listed such as insurance agents and brokers, mutual fund administrators/managers and underwriters, etc.

106. It is also noted that the POCA Regulations and Guidance Notes provide certain exemptions for the verification of client identity e.g. with respect to introduced business and other non-face to face activities. Both types of business are more common in the international (offshore) sectors and are inherently more vulnerable to ML/FT risks arising from cross-border activities. This would not be consistent with a risk-based approach.

107. While the authorities maintain that a risk-based approach has been implemented to supervision for compliance with the AML/CFT requirements, the practice suggests that this has not been fully developed. For instance, supervision of money remitters (a high risk sector as e.g. reflected by SAR reporting), investment-linked insurance activities, and the international financial and trust and company services sectors, have not attracted the level of supervision and resources that would be commensurate with their inherent risks. The casinos and other DNFBPs have also not been subject to an effective AML/CFT oversight regime.

108. The authorities maintain that both the domestic and international financial sectors of SVG are relatively modest and that it would be somewhat impracticable to develop an elaborate risk-rating system. They note that while there are differences in the quality of banks, there is no pressing need to develop or adopt an elaborate risk-based methodology that would allow for variations in approach.

Progress since the Last Mutual Evaluation

109. The last evaluation of SVG’s AML/CFT regime was undertaken by the CFATF in October 2003. SVG responded to the large majority of the recommendations made by embarking upon both legislative and administrative changes. The two prominent criticisms of SVG’s AML/CFT regime in the CFATF mutual evaluation report were weaknesses of its Customs and Excise Department and the restrictive effect of Section 5 of the Exchange of Information Act 2002, with respect to international regulatory co-operation and exchange of information. Both deficiencies have been addressed by changes in the Customs and Excise Department and by repeal and replacement of the Exchange of Information Act. Some concerns remain with restrictive information exchange language in sectoral laws.

110. While progress has been made since the 2003 CFATF mutual evaluation, the regime has some key legal and institutional weaknesses left to address. Specifically, there are limitations in the legal framework for FT investigations and prosecutions. The recommendations of the CFATF and the status of these recommendations, whether implemented or not, are outlined in the following table.

Table 10:

Action Since Last Assessment

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2. LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES

2.1. Criminalization of Money Laundering (R.1 & 2)

2.1.1. Description and Analysis

111. Legal Framework: The POCA, No. 39 of 2001, as amended by Act No. 25 of 2002 and Act No. 8 of 2005 (collectively, POCA) is the main piece of AML legislation in SVG.

Criminalization of Money Laundering (c. 1.1—Physical and Material Elements of the Offence):

112. ML is criminalized in Sections 41 – 43 of POCA which criminalize a broad range of offenses generally consistent with the Vienna and Palermo Conventions, including concealing or disguising proceeds of criminal conduct (Section 41(a)), converting or transferring such property (Section 41(b)), retention or control of such property by or on behalf of another person (Section 42(1)), and acquiring, using or possessing such property (Section 43(1)). However, the offenses set forth in Section 41 are not consistent with Article 3(1)(b)(i) and (ii) of the Vienna Convention, nor with Article 6(1)(a) of the Palermo Convention, which state that the criminal conduct must be “for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offence or offences to evade the legal consequences of his actions.” (emphasis added). The POCA offenses in Section 41 simply contain one leg of the required purposes, as follows: “for the purpose of avoiding prosecution for a drug trafficking or relevant offence or the making or enforcement in his case of a confiscation order.”

The Laundered Property (c. 1.2):

113. Under the definition of ‘property’ in Section 2(1) of POCA, all types of property are covered in a manner consistent with the Vienna and Palermo Conventions, including “real or personal property, whether inside or outside St. Vincent and the Grenadines and includes money and all other property, moveable or immovable . . . .” However, the definition does not include “legal documents or instruments evidencing title to, or interest in, such assets” as required by Article 1(q) of the Vienna Convention and Article 2(d) of the Palermo Convention.

Proving Property is the Proceeds of Crime (c. 1.2.1):

114. Under POCA, when proving that property is the proceeds of crime, there is no requirement that the accused be convicted of a predicate offense. According to the authorities, courts in SVG have required a linkage of the proceeds to a criminal offense, but not proof of or conviction for the predicate offense. See LGQM [2004] EWCA Crim 1579. The Scope of the Predicate Offenses (c. 1.3): SVG uses an “all crimes” approach to predicate crimes. Under Sections 41–43 of POCA, the money laundering offenses are based on proceeds of criminal conduct. The definition of criminal conduct under Section 2(1) means any “drug trafficking or any relevant offense.” The term “any relevant offense” is defined as: any indictable or summary offence; any offence triable both summarily or on indictment in SVG from which a person has benefited, other than a drug trafficking offence; an offence under the Acts listed in Schedule 2; and any act or omission which, had it occurred in St. Vincent and the Grenadines, would have constituted any of the aforementioned offenses. The offenses listed in Schedule 2 include non-criminal or administrative violations of regulatory or other laws. However, with respect to designated categories of offenses, the offenses of racketeering, human trafficking and migrant smuggling are not covered as predicate offenses since they are not found in domestic legislation.

Threshold Approach for Predicate Offenses (c. 1.4):

115. N/A

Extraterritorially Committed Predicate Offenses (c. 1.5):

116. Predicate offenses extend to offenses committed extraterritorially, based on the definition of ‘relevant offence’ as set out in Section 2(1) of the POCA which includes “any act or omission which, had it occurred in St. Vincent and the Grenadines, would have constituted an offence [in SVG] . . . .”

Laundering One’s Own Illicit Funds (c. 1.6):

117. Pursuant to Section 41(1) of POCA, a person commits an offence if he conceals or disguises any property which represents his proceeds of criminal conduct or converts or transfers that property, brings it into or removes it from SVG. Possession of the criminal’s own proceeds is not currently covered; according to the authorities, a proposed amendment to POCA will be considered.

Ancillary Offenses (c. 1.7):

118. Section 42 of POCA provides that the arrangement with another to retain the proceeds of criminal conduct is an offence. While there are no statutory provisions in POCA, the CC provides for conspiracy, attempt, aiding and abetting, facilitating and counseling the commission of any crime, including money laundering. CC, CAP 124 (1990), Section 20(b) aiding, (c) aids or abets, (d) counsels; Section 315, attempt; and Section 310, conspiracy.

Additional Element—If an overseas act which does not constitute an offence overseas, but would be a predicate offence if occurred domestically, lead to an offence of ML (c. 1.8):

119. Yes, based on the definition of ‘relevant offence’ in Section 2(1) of the POCA which includes “any act or omission which, had it occurred in St. Vincent and the Grenadines, would have constituted an offence [in SVG] . . . .”

Liability of Natural Persons (c. 2.1):

120. The ML offence extends to natural persons who knowingly engage in money laundering activity as set forth in Sections 41–43 of POCA.

The Mental Element of the ML Offence (c. 2.2):

121. Under Sections 42–44 of POCA (as amended by the 2005 Amendments), a person must “know, suspect or have reasonable grounds to suspect …” and therefore the intentional element of the offense may be inferred from objective factual circumstances. The authorities have also cited relevant English case law such as Regina v. Montila, [2004] 1 WLR 3141, at 10, para. 43, which states that “…the evidence which goes to prove knowledge or reasonable grounds to suspect … will often be sufficient to justify the inference that the origin of the property was coincident with that state of mind.”

Liability of Legal Persons (c. 2.3):

122. Criminal liability extends to legal persons under Section 57 of POCA, which states; “Where a body corporate commits an offence under this Act and the offence is proved to have been committed with the consent or connivance of any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity, he, as well as the body corporate, commits that offence and is liable to be proceeded against and punished accordingly.” In addition, under Section 3(1) of the Interpretation and General Provisions Act, CAP. 10, the definition of ‘person’ includes any company, association, or body, corporate or unincorporated.

Liability of Legal Persons should not preclude possible parallel criminal, civil or administrative proceedings (c. 2.4):

123. According to the authorities, parallel proceedings are implicitly provided for in POCA and therefore two or more civil, criminal or administrative procedures may be brought against a corporation at the same time although this has never occurred in SVG. According to the authorities, parallel proceedings may be brought against a corporation or natural person, where simultaneously a criminal, administrative and civil proceeding may proceed from the same facts or incident. To date, this has not occurred in SVG.

Sanctions for ML (c. 2.5):

124. Section 47 of POCA sets out the penalties for the money laundering offenses set out in Sections 41–43 of the Act. A person committing an offence under any of these Sections faces imprisonment for 5 years or a fine of up to EC$500,000 on summary conviction, and imprisonment for 20 years or an unlimited fine or both.

Table 11:

ML Prosecutions and Convictions, 2005 – 2008

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Effectiveness of Implementation

125. While the SVG legal framework is generally compliant with relevant Conventions and FATF Recommendations 1 and 2, the low number of prosecutions and convictions in the last four years, six and four, respectively, raise questions about the effective implementation of the criminalization provisions. While it is not possible to reach any definitive conclusions about the pattern of prosecutions and convictions in the last four years, the overall numbers appear to be low given the extent of drug trafficking believed to be taking place in or through SVG (e.g. the authorities acknowledged that the identities of the largest traffickers were known to them) and the inherent ML and FT risks in the cross-border international (offshore) business sectors.

2.1.2. Recommendations and Comments

126. Relevant laws should be strengthened to provide that:

  • The references to the purpose of the offenses set forth in Section 41 are consistent with the Vienna and Palermo Conventions.

  • The definition of property in POCA includes a reference to legal documents or instruments evidencing title in a manner consistent with the Vienna and Palermo Conventions.

  • Self-laundering by way of simple possession of proceeds is criminalized.9

  • Racketeering, human trafficking and migrant smuggling are enacted into law as criminal offenses and covered by POCA as predicate offenses.

  • In addition, efforts should be made by competent authorities to increase the number of convictions for ML and related predicate crimes.

2.1.3. Compliance with Recommendations 1 & 2

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2.2. Criminalization of Terrorist Financing (SR.II)

2.2.1. Description and Analysis

Legal Framework:

127. The United Nations (Anti-Terrorism Measures) Act, No. 34 of 2002, as amended in 2006 by Act No. 13 of 2006 (UNATMA) was enacted to implement the International Convention for the Suppression of the FT, 1999 and to provide measures to combat terrorism. The criminalization of FT under UNATMA is generally compliant with the SFT Convention except as noted below.

Criminalization of FT (c. II.1):

128. FT is criminalized by Sections 3–6 of UNATMA, which covers terrorist acts, terrorist groups, and, in most instances, individual terrorists and is generally consistent with the relevant offenses set forth in the SFT Convention. However, Schedule II to UNATMA, which lists the relevant terrorism conventions, omits two conventions that are listed in the annex to the SFT Convention, as follows: The Convention on the Physical Protection of Nuclear Material (1980) and the International Convention for the Suppression of Terrorist Bombings (1997). One of the conventions listed in UNATMA, on the safety of maritime navigation, has not been signed and ratified. In addition, one convention not listed in UNATMA, the convention on terrorist bombings, has been acceded to but not ratified, and one not listed, on nuclear materials, has not been signed or ratified. Conduct covered by the listed conventions is criminalised by UNATMA. Finally, under UNATMA, terrorist financing offenses extend to any funds as defined in the SFT Convention.

Predicate Offence for Money Laundering (c. II.2):

129. Offenses under UNATMA are captured by the definition of ‘relevant offence’ in Section (2)(1) of POCA in two ways: First, under Section 7 of UNATMA, offenses are both summary and indictable, therefore covered under the first part of the definition, and second, under an amendment to UNATMA, Act No. 8 of 2005, Schedule 2, amending Schedule 2 of POCA, offenses under UNATMA are listed, thereby establishing such offenses as predicate offenses for money laundering.

Jurisdiction for Terrorist Financing Offence (c. II.3):

130. Under Section 9 of UNATMA, terrorist acts committed outside SVG by citizens of SVG and “stateless persons” resident in SVG (e.g. resident aliens) constitute offenses under UNATMA.

The Mental Element of the TF Offence (applying c. 2.2 in R.2 for c. II.4):

131. See discussion at c. 2.2.

Liability of Legal Persons (applying c. 2.3 & c. 2.4 in R.2 for c. II.4):

132. Under Section 3(1) of the Interpretation and General Provisions Act, CAP. 10, the definition of ‘person’ includes any company, association, or body, corporate or unincorporated. The possibility of parallel criminal or civil liability is not prohibited.

Sanctions for FT (applying c. 2.5 in R.2 for c. II.4):

133. Sanctions, as set forth under Section 7 of UNATMA, provide that: “A person guilty of an offence under sections 3, 4, 5 or 6 of [UNATMA] shall be liable- (a) on conviction on indictment, to imprisonment for a term not exceeding twenty years, to an unlimited fine or both; or (b) on summary conviction, to imprisonment for a term not exceeding five years, to a fine not exceeding EC$500,000 or both.”

Effectiveness of Implementation

134. There are no known instances of FT in SVG, no SARs for FT have been filed nor have there been any investigations, prosecutions or convictions under UNATMA since its implementation. Hence effectiveness is difficult to gauge. However, the authorities maintain that SVG is a jurisdiction which is low risk for FT and has had no instances of FT being identified in or passing through the jurisdiction and that this is borne out by the fact that there are no domestic or international matters which involve FT which have been brought to light by foreign or international authorities.

2.2.2. Comments

The laws of SVG should be strengthened as follows:

  • Schedule II to UNATMA, which lists the relevant terrorism conventions, omits two conventions that are listed in the annex to the SFT Convention, as follows: The Convention on the Physical Protection of Nuclear Material (1980) and the International Convention for the Suppression of Terrorist Bombings (1997);

  • Section 3(4) of UNATMA should be amended to apply to individual terrorists, and not just terrorist acts and terrorist groups; and

  • The POCA Regulations should be amended to cover FT offenses.

2.2.3. Compliance with Special Recommendation II

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2.3. Confiscation, freezing and seizing of proceeds of crime (R.3)

2.3.1. Description and Analysis

Legal Framework

135. Part II, Sections 6–22 of POCA relate to confiscation orders which may be made during the sentencing of the defendant if the Court is satisfied that a defendant has benefited from either drug trafficking or relevant offenses and is based on the Court’s assessment of the value of the defendant’s proceeds of criminal conduct under Section 13 of POCA. Section 26 of POCA provides for the making of restraint orders which prohibit any person from dealing with any realizable property. Further, Sections 49 and 50 of POCA provide for the seizing, detaining and forfeiture of cash which is reasonably suspected of directly or indirectly representing any person’s proceeds of criminal conduct or of being intended by any person for use in criminal conduct.

Confiscation of Property related to ML, FT or other predicate offenses including property of corresponding value (c. 3.1):

136. Sections 6-8 of POCA provide for the confiscation of the proceeds from the commission of any crime, including drug trafficking, money laundering, terrorist financing and other predicate offenses, as well as property of corresponding value if the proceeds themselves are not available. The confiscation order can be applied for at the time of conviction but before sentencing once the Court is satisfied that the defendant has benefited from the offence and has or may have ‘realisable property’ as defined by POCA. The value of such proceeds is determined by the Court and is not limited to the actual amount of proceeds seized from or relating to the defendant.

137. Under Section 51A of POCA, instrumentalities used or intended to be used to commit any offence may also be forfeited, including property under the defendant’s possession or control which has been used for the purpose of committing or facilitating the criminal conduct, or was intended to be used to commit the criminal conduct. In addition, the Drugs (Prevention of Misuse) Act, CAP 219, Section 28, includes all conveyances for drugs and drug trafficking, subjecting those to forfeiture as well.

138. Questions of fact to be decided by a Court in proceedings under POCA including seizures or forfeitures are subject to a civil standard of proof, i.e. “the balance of probabilities,” under Section 63 of POCA.

Confiscation of Property Derived from Proceeds of Crime (c. 3.1.1 applying c. 3.1):

139. (a) Indirect proceeds of crime: Although there is no explicit provision that applies to indirect proceeds of crime, including income, profits or other benefits, the authorities are of the view that the confiscation provisions of POCA would apply to such indirect proceeds, since, under Section 7(3)(a) “a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of any property so obtained; and (b) if he derives a pecuniary advantage as a result of or in connection with the commission of an offence, he is to be treated as if he obtained instead a sum of money equal to the value of his pecuniary advantage.” Further, they cite the English Court of Appeal case of Regina v. Causey (18 October 1999, at 6, which stated that “if one penny or one penny’s worth of the property dealt with is the proceeds of criminal conduct” then the property is obtained partly in connection with the commission of an offence. This interpretation appears to be a reasonable one in light of the statutory reference to the defendant having derived a “pecuniary advantage.”

c.3.1.1 Property held by third parties:

140. With respect to confiscation of property held by a third party, subject to Section 14 of POCA, which provides for protection of the property rights of third parties (see c. 3.5 below), the definition in Section 2 of ‘realisable property’ applies to “any property held by the defendant” and “any property held by a person to whom the defendant has, directly or indirectly, made a gift caught by this Act.” Under Section 3(4)(a), which covers gifts caught under POCA, “the circumstances in which the defendant is to be treated as making a gift include those where he transfers property to another person, directly or indirectly, for a consideration the value of which is significantly less than the value of the consideration provided by the defendant.” Such property is subject to confiscation only if the consideration for the gift is “significantly less” than the value of the property. Finally, POCA applies to all property, whether in the hands of the defendant or of a third party, and including proceeds of criminal conduct as well as instrumentalities. See also c. 3.1(b) above.

Provisional Measures to Prevent Dealing in Property subject to Confiscation (c. 3.2):
Two provisions of POCA relate to provisional measures:

141. Section 26 authorizes the court to make restraint orders to prohibit persons from dealing with, transferring or disposing of any realizable property that is or may become subject to confiscation. According to the authorities, this typically occurs during the investigation of a ML case as well as prior to or during the prosecution but prior to the completion of the case. The evidentiary standard is the same civil standard as applies generally under POCA. In addition, Section 49 permits the seizure of cash and monetary instruments anywhere in the country “if the [police or customs] officer has reasonable grounds for suspecting that it directly or indirectly represents any person’s proceeds of criminal conduct or is intended by any person for use in any criminal conduct”

Ex Parte Application for Provisional Measures (c. 3.3):

142. Under Section 26(4)(b) of POCA, a restraint order may be made on an ex parte application to a Judge in chambers. Prior notice is therefore not necessary According to the authorities, once an ex parte application has been granted by the court, notice is subsequently provided to the affected parties within a reasonable time. This is usually from immediately up to seven days. Notice is given to all affected parties; affected parties are usually listed in the Order and may include FIs, corporate bodies or individuals.

Identification and Tracing of Property subject to Confiscation (c. 3.4):

143. The laws of SVG provide for a number of legal powers to identify and trace property that is or may become subject to confiscation or is suspected of being the proceeds of crime, including the following:

  • Under Section 4(2)(b) of the FIU Act, the Director of the FIU “…may require the production of such information (excluding information subject to legal professional privilege) from FIs or a person engaged in a relevant business activity that the FIU considers necessary for the purpose of investigating the relevant offence” where it appears to the Director that there are reasonable grounds to suspect that a relevant offence has been committed;

  • Under Section 35(1) of POCA, the DPP as well as a police officer may apply to the Court for a production order for the purpose of an investigation in or outside SVG into (i) any offence, (ii) ascertaining whether any person has benefited from criminal conduct or (iii) ascertaining the whereabouts of any proceeds of criminal conduct, if there are reasonable grounds for suspecting that a specified person has carried on drug trafficking or has benefited from criminal conduct (Section 35(4)). According to the authorities, the term “specified person” is wide enough to include any person who has possession or control of such proceeds;

  • Under Section 37 of POCA, a police officer may apply for a search warrant for the purpose of an investigation into any offence if the Court is satisfied, inter alia, that a production order has not been complied with and that there are reasonable grounds for suspecting that material pertaining to a specified person who is suspected to have benefited from criminal conduct is located on the premises;

  • Section 38 of POCA also provides for the making of an order to compel disclosure of information held by Government Departments;

  • Section 39 of POCA provides for the making of monitoring orders directing a financial institution to give to a police officer information obtained by the institution about transactions conducted by a particular person with that institution.

Protection of Bona Fide Third Parties (c. 3.5):

144. Section 14 of POCA provides for the protection of bona fide third party rights in a manner consistent with the Palermo Convention. This section provides that a person asserting interest in property subject to confiscation the opportunity to apply to the court and prove that he was not in any way involved in the defendant’s criminal conduct, that he acquired the interest in the property for sufficient consideration, without knowing of the criminal conduct and in circumstances that he would not have formed a reasonable suspicion, that the property was, at the time he acquired it, property that was involved in or was the proceeds of criminal conduct.

Power to Void Actions (c. 3.6):

145. There is no explicit power in the laws of SVG to void contracts, and no legal basis for doing so otherwise. The authorities have cited three cases that contracts against public policy will not be enforced, as follows:

“Contractual freedom must be fostered but any contract that tends to prejudice the social or economic interest of the community must be forbidden. The contract is not unlawful in the sense that it is criminal or would give any cause of action to a third person injured by its operation, but it is unlawful in the sense that the law will not enforce it. North-Western Salt Co v. Electrolytic Alkali Co (1912) 107 LT 439. A contract is illegal and void if its object, direct or indirect, is the commission of a crime or tort, is an agreement made with the object of defrauding or deceiving a third party, or one which amounts to a criminal conspiracy. No person is allowed to benefit from his own crime, Cleaver v. Mutual Reserve Fund Life Association [1892] 1 QB 147. The rule that the court will not assist a person to recover the fruits of his crime applies equally to his representatives, Beresford v. Royal Insurance Co Ltd [1937] 2 KB 197.

Additional Elements (Rec. 3)—Provision for:
(a) Confiscation of assets from organizations principally criminal in nature:

146. While there is no explicit provision for confiscation of assets from criminal organizations, under Section 57 of POCA, corporate bodies are subject to prosecution and hence their assets are subject to confiscation.

(b) Civil forfeiture:

147. Cash and negotiable instruments only may be seized, detained and confiscated without criminal conviction under Sections 49 and 50 of POCA.

(c) Confiscation of Property which Reverses Burden of Proof (c. 3.7):

148. While there is no provision of law providing for civil forfeiture of property prior to conviction other than cash and negotiable instruments, Section 11 of POCA provides that the Court may require the defendant to indicate the extent to which he accepts any allegation provided by the DPP to the Court in relation to his benefit and assessing the value of his proceeds of drug trafficking or benefit from any relevant offenses. As a result, the defendant is provided with the opportunity to demonstrate the lawful origin of his property by negating any such allegations put forward by the DPP. Sections 8 and 10 of POCA do not apply to seizures or forfeitures of cash under Sections 49 and 50 of POCA but do allow for post-conviction confiscations or forfeitures of non-cash property. According to the authorities, orders made under Sections 8 and 10 for non-cash property may take into consideration all benefits derived from the underlying criminal activity for the period over which such activity was undertaken, normally limited to six years from the date of the charge for the relevant offence.

Effectiveness of Implementation

149. While it is not possible to reach any definitive conclusions about the pattern of confiscations and forfeitures in the last four years, the overall numbers appear to be low given the extent of drug trafficking believed to be taking place in or through SVG (e.g. the authorities acknowledged that the identities of the largest traffickers were known to them) and the inherent ML and FT risks in the cross-border international (offshore) business sectors.

Table 12:

Cash Forfeitures under POCA, 2004 – 200810

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Note: No cash forfeitures occurred in 2005.EC$: Eastern Caribbean Dollar; BD$: Barbadian Dollar; £: Pound Sterling; €: Euro
Table 13:

Confiscation of Property, 2004 – 2008

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NB: There is currently one confiscation hearing involving twelve motor vehicles pending in the High Court of SVG.

The catamaran confiscated in 2005 was done in conjunction with the US and the proceeds were shared.

2.3.2. Recommendations and Comments

  • The relevant laws should be strengthened to provide for an explicit provision to allow competent authorities to take steps to prevent or void actions, whether contractual or otherwise, where, as a result of the actions of third parties, the authorities would be prejudiced in their ability to recover property subject to confiscation.

  • In addition, given that drug trafficking is a serious concern in SVG, and continues to flourish despite the efforts of law enforcement, the competent authorities should assess the extent of possible predicate offenses and related ML conducted in or through SVG, to determine whether there is a reasonable correlation with the amount of cash forfeitures and confiscations of property.

  • Finally, consideration should be given to amending POCA to provide for: (i) civil forfeiture of all property, not just currency; the authorities have indicated that a bill to accomplish this is currently being considered by parliament but has not yet been enacted; (ii) in Section 3(4) of POCA for gifts that represent a value that is less than the value of the property, rather than “significantly less” as provided under current law, to be subject to confiscation; and (iii) an explicit provision subjecting to confiscation of indirect proceeds of crime, including income, profits or other benefits.

2.3.3. Compliance with Recommendation 3

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2.4. Freezing of funds used for terrorist financing (SR.III)

2.4.1. Description and Analysis

Legal Framework:

150. Although UNATMA implements the SFT Convention, there is no explicit statutory authority in SVG to implement UNSCRs relating to FT. Hence, the designation by relevant UNSCRs or committees established pursuant to such UNSCRs of terrorists or terrorist organizations would not have the effect of permitting the authorities to take certain actions to freeze the assets of such terrorists and terrorist organizations.

Freezing Assets under S/Res/1267 (c. III.1):

151. While there is no explicit authority under the laws of SVG to implement the UNSCRs, Section 17 of UNATMA provides in relevant part as follows:

  • 17. (1) The High Court may make a restraint order to prohibit persons from dealing with funds and other financial assets or economic resources of:

    • (a) persons who commit, or attempt to commit, a terrorist act or participate in or facilitate the commission of a terrorist act;

    • (b) entities owned or controlled directly or indirectly by persons referred to at (a) above;

    • (c) persons and entities acting on behalf of, or at the direction of persons referred to at (a) above or entities referred to at (b) above.

  • (2) The High Court may also make a restraint order to prohibit persons from dealing with funds derived or generated from property owned or controlled directly or indirectly by persons referred to in sub-Section (1)(a) above or their associated persons and entities.

  • (3) A restraint order:

    • (a) may be made only on an application by the AG or the Director of Public Prosecutions;

    • (b) may be made on an ex parte application to a Judge in chambers; and

    • (c) shall provide for notice to be given to persons affected by the order.

152. In addition, with respect to cash only, Section 13(2) of UNATMA provides that any police, customs or immigration officer “may seize and detain any cash to which this section applies if he has reasonable grounds for suspecting that-it is intended to be used for the purposes of a terrorist act, or (b) it is terrorist property …”

Freezing Assets under S/Res/1373 (c. III.2):

153. See c. III.1 above.

Freezing Actions Taken by Other Countries (c. III.3):

154. See c. III.1 above.

Extension of c. III.1-III.3 to funds or assets controlled by designated persons (c. III.4):

155. See c. III.1 above.

Communication to the Financial Sector (c. III.5):

156. No such communications systems are in place.

Guidance to Financial Institutions (c. III.6):

157. No such guidance has been issued.

De-Listing Requests and Unfreezing Funds of De-Listed Persons (c. III.7):

158. There are no publicly-known procedures for considering delisting requests.

Unfreezing Procedures of Funds of Persons Inadvertently Affected by Freezing Mechanism (c. III.8):

159. There are no procedures for unfreezing funds.

Access to frozen funds for expenses and other purposes (c. III.9):

160. There are no procedures for authorizing access to funds frozen pursuant to relevant UNSCRs.

Review of Freezing Decisions (c. III.10):

161. There are no procedures to allow those with funds frozen pursuant to relevant UNSCRs to challenge those measures.

Freezing, Seizing and Confiscation in Other Circumstances (applying c. 3.1-3.4 and 3.6 in R.3, c. III.11):

162. Sections 7 and 8 of POCA apply to all relevant offenses, including FT. See responses to c. 3.1 and c. 3.1.1 above.

Protection of Rights of Third Parties (c. III.12):
While there are no provisions explicitly relating to the UNSCRs, Section 8(2) of UNATMA provides for the protection of the rights of bona fide third parties as follows:

163. “Where a person other than a convicted person claims to be the owner of or otherwise interested in any money or property which can be forfeited by an order under this section, the court shall give him an opportunity to be heard before making an order.” See also the response to c. 3.5 above, since POCA covers all predicate crimes, including FT.

Enforcing the Obligations under SR.III (c. III.13):

164. No such measures or sanctions relating to the implementation of the relevant UNSCRs are in place.

Additional Element (SR.III)—Implementation of Measures in Best Practices Paper for SR.III (c. III.14):

165. No such measures have been implemented.

Additional Element (SR.III)—Implementation of Procedures to Access Frozen Funds (c. III.15):

166. No such procedures have been implemented.

2.4.2. Recommendations and Comments

  • The authorities in SVG should take immediate action to implement the relevant UNSCRs, including, but not limited to UNSCRs 1267, 1373 and 1455, and any such provision of law should be sufficiently flexible so as to apply as well to similar designations by other states as well as any future UNSCRs that require UN member states to freeze, seize and confiscate the assets of designated terrorists and terrorist organizations, as well as such designations by other member states in the future.

2.4.3. Compliance with Special Recommendation III

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2.5. The FIU and its Functions (R.26)

2.5.1. Description and Analysis

Legal Framework:

167. The FIU Act 2001, Act No. 38 of 2002, was signed into law on December 18, 2001. In addition to the organizational provisions and authority in the FIU Act, the FIU exercises specified functions pursuant to POCA and UNATMA, both as are conferred directly upon the FIU as an institution. It also engages in law enforcement functions though the legal authority of police and customs officers assigned to it. The FIU Act establishes the FIU, and mandates the composition of its personnel that include the director, an attorney, and a public accountant, all appointed by the Minister, as well as assigned police officers and customs officers, who are appointed by the Minister on the recommendation, respectively, of the Police and Customs Commissioners. The FIU Act authorizes the FIU to receive all STRs required to be reported under POCA. The FIU is legally an administrative FIU, insofar as it is not under the direct authority of either the police, prosecutor or bank supervisory body. The FIU reports directly to the Minister of Finance. Nevertheless, in its operations the FIU is a hybrid-administrative FIU because of the regular use of the investigative powers of police and customs officers. It also prosecutes specified cases in collaboration with the DPP. . Information gathering activities under authority conferred on the DPP, under Section35 of POCA, is carried out by FIU personnel, on the basis of specific delegations by the DPP rather than through any institutional authority conferred on the FIU itself. Similarly, authority conferred by POCA to police officers to obtain search warrants is carried out by police officers assigned to the FIU. Hence, the FIU personnel directly conducts poliece investigatory functions under POCA Sections 25-27, 35, 37, and 49.

Establishment of FIU as National Centre (c. 26.1):

168. The FIU was established in May 2002 in accordance with the FIU Act 2001. The FIU is the agency responsible for receiving, analyzing, obtaining and disseminating information which relates to or may relate to the proceeds of offenses created by POCA and UNATMA. The FIU reports to the Minister of Finance. The FIU’s dissemination authority includes competent authorities, the Royal St. Vincent and the Grenadines Police Force and the DPP. The FIU in addition to serving as the national centralized agency responsible for receiving SARs, also carries out proactive ML and predicate offense investigations and intelligence gathering to develop ML cases. The explicit source of authority to conduct such proactive investigations is not clear within the FIU Act. Rather, the powers of the police personnel transferred to the FIU are the basis for the FIU’s conducting such proactive investigations. This arrangement is not uncommon in the Caribbean region.

FIU structure and functions.

169. Pursuant to the FIU Act, Section3, the FIU is comprised of:

  • a Director appointed by the Minister of Finance;

  • an attorney appointed by the Minister of Finance;

  • public accountant appointed in writing by the Minister of Finance;

  • such number of police officers assigned from the RSVG Police Force (recommended by the Commissioner of Police and appointed by the Minister of Finance);

  • such number of customs officers assigned from the Customs Service (recommended by the Comptroller of Customs and appointed by the Minister of Finance);

  • such other personnel as the Minister of Finance considers necessary.

170. There are currently 16 employees in the FIU, including a Director, 2 Lawyers, the Chief Investigator and 3 Financial Investigators who are police officers and 2 Customs Officers. Currently, there is one customs vacancy and at least one police vacancy. In addition, the FIU has requested the NAMLC and Commissioner of Police 4-5 additional police officers. The request is expected to be granted.

171. The FIU’s hybrid function provides some distinct advantages but also poses some challenges. On the one hand, the direct capacity of the FIU to undertake investigations and conduct prosecutions under the authority of the DPP allows for great consistency and potential efficiencies in these functions. The FIU’s core staff includes experienced police officers and qualified lawyers to manage the AML/CFT. The output in terms of the number of production orders issued, cash detentions and seizures indicate a reasonable level of effectiveness in its operations. On the other hand, the FIU’s core function to analyze financial intelligence, in particular information obtained through SARs, has apparently not been given operational priority. In practice, the FIU does not draw a distinction between its analysis and investigatory functions, which may not facilitate prioritization of cases for investigation. This negatively impacts on operational effectiveness and reduces the value added of the FIU’s statutory role to analyze information originating from SARs.

Guidelines to Financial Institutions on Reporting STR (c. 26.2):

172. Pursuant to POCA, the NAMLC has issued guidance (the GNs) in 2002, which were last updated in December 2004, for FIs that includes, inter alia, specific guidance for the detection and reporting of suspicious transactions in SARs. [The FIU Director is a member of the NAMLC.] The GNs also contain the SAR form that is expected to be filed along with brief instructions. The FIU does not have separate, legal authority to issue guidance to reporting entities on SAR filings. Nevertheless, the FIU has taken a leading role in informing reporting entities of their obligations in other forms in order to elaborate on the guidelines issued by the NAMLC. Under the FIU Act, Section 4(2)(g), the FIU shall inform financial and business institutions of their obligations under measures that have been or might have been taken to detect, prevent and deter the commission of offenses under POCA. The FIU has used this broad authority to issue letters and newsletters to reporting entities concerning their obligations. In addition, the FIU has also relied on this section of the FIU Act to conduct extensive training of FIs and other businesses engaged in relevant financial activities that would be required to report, as well as to provide AML/CFT specific training to judges, magistrates, and law enforcement officials within SVG.

173. There is a need for updating of guidance on the content for SAR filing; the last update was in 2004 and new typologies and risks should be addressed in the specific, written guidance issued directly to reporting entities. In addition, the SAR form itself should be updated and tailored. In addition, consideration should be given to updating the MLR to authorize the FIU to issue specific, enforceable guidance on SAR filings, including with respect to new typologies. This should be supplemented by detailed instructions to reporting entities on how to complete SARs to help improve their quality, accuracy and consistency, which is issued to the reporting entities and available on the FIU website when it becomes live. (Post mission in February 2010, the authorities provided updated SAR forms with respect to banks, insurance companies and money services businesses.)

Access to Information on Timely Basis by FIU (c. 26.3):

174. Under the FIU Act, Section 4(1) the FIU is the agency responsible for “obtaining” information that relates to or may relate to the proceeds of the offenses created by POCA and UNATMA. The FIU, AG and DPP assert that this general language of itself suffices to obtain, directly and indirectly and on a timely basis, the financial, administrative, and law enforcement information that it requires to properly undertake its functions. For this purpose, the FIU mainly relies on information that is available from police and customs databases, which are accessible by the police and customs officers who are assigned to the FIU. Additional specific legal authority of the FIU as an organ is required to obtain necessary is warranted to ensure that the FIU’s general access to information for both intelligence (FIU) purposes and investigations is not compromised. Specifically, it should also have explicit legal access, directly or indirectly, to other sources of information such as administrative databases e.g. corporate, property and trust registries, tax, supervisory information databases, etc.

175. The FIU has concluded bilateral MOUs with the Police and Customs authorities. These memoranda are needed to ensure that the FIU has timely access to information through these bodies. The law does not vest the FIU with its own specific right to obtain information, and does not define the types of information or its scope for fulfilling its core functions. A specific MOU with Inland Revenue to obtain non-public tax information would be helpful to clarify the scope of tax information required for the FIU to properly analyze and investigate matters.

Additional Information from Reporting Parties (c. 26.4):

176. Pursuant to the FIU Act Sec.(4)(2)(b), where there are reasonable grounds to suspect that a relevant offense (as defined in the FIU Act to include POCA and UNATMA offenses) has been committed, the FIU may require the production of such information (excluding information subjected to legal professional privilege) from FIs or persons engaged in a relevant business activity that the FIU considers necessary for the purpose of investigating the relevant offense. While this authority is sufficiently broad to allow the FIU to obtain information from other reporting entities from the one that filed the SAR, the legislation contains a two-part requirement to exercise this authority. First, the FIU needs reasonable grounds to suspect that a relevant offense has been committed, and second, the information that is sought must be necessary for the purpose of investigating the relevant offense. It is the mission’s view that, at most, only one threshold should apply as a basis for the FIU to obtain information from other reporting parties. Of the two, only the first requirement should apply as the latter requires the FIU to move entirely to investigating an offense rather than conducting intelligence analysis of the information obtained. However, even this lesser threshold may be too high to obtain information relevant to carrying out the statutory function to support the analysis of financial intelligence information obtained from SARs. In addition, the FIU should have specific legal authority to go back to the reporting party filing the SAR for any reason connected to that filing without qualification. It should be noted that in practice, the FIU finds that approximately 25 percent of SARs filed require additional information to complete the filing in accordance with the SAR filing requirements and reports that in all requests information has been provided to the FIU.

Dissemination of Information (c. 26.5):

177. The FIU is required to provide information subject to any conditions specified by the Minister of Finance, to the Commissioner of Police where the information may relate to the commission of an offense. In practice, there is less need to disseminate information outside the FIU to other police officers and the DPP is because the FIU houses police and customs officers who conduct investigatory functions. The expected finalization of MOUs with the Commissioner of Police, Customs, and Immigration will clarify the basis for dissemination from the FIU to these agencies. (Post mission, the authorities informed that MOUs have been signed by the FIU with the Police and Immigration Departments but that the MOU with the Customs Department was still pending.) In addition, the specific authorizations granted by the DPP to conduct functions under POCA and UNATMA reduce the use of and need for formal dissemination processes.

Operational Independence (c. 26.6):

178. The FIU reports to the Minister of Finance, who is also the Prime Minister, the Minister of Legal Affairs, and Minister of National Security. This raises an issue of whether the FIU can operate independently without undue influence. The Director General of the Ministry of Finance, who is the second in command of the ministry, is the Chair of the NAMLC, and also reports to the Minister of Finance. The NAMLC itself also reports to the Minister of Finance.. In practice, FIU officials indicate that their work at the operational level is conducted in accordance with the strategic plan developed by the FIU’s director in consultation with specific members of the NAMLC (including the DPP and Commissioner of Police). In addition, the Director of the FIU appears to exercise independent authority to hire and fire FIU staff, with what is described by the FIU personnel as perfunctory approval of the Minister upon the recommendation of the Director of the FIU. The mission was not aware of instances of undue influence or interference from other persons or parties.

Protection of Information Held by FIU (c. 26.7):

179. The FIU has a secure computer database system and informs that SARs themselves are not disseminated beyond the FIU premises. The premises of the FIU are protected by electronic entry locking systems and surveillance cameras, and remote monitoring by a security firm 24 hours per day. The reception desk at the FIU entrance is staffed by two administrative officers, who may be assisted by an office attendant, with the objective that during operational hours that one person is constantly monitoring visitor entry. Persons entering the FIU premises, they are required to identify themselves via intercom to administrative staff before access is granted.

180. Despite these measures, additional security measures to protect the physical access to the FIU could be implemented. At the initial entry, the wall separating the FIU from the rest of the building premises is wooden, which could be vulnerable. In addition, the premises are frequently accessed by messengers and reporting entities’ employees or agents that deliver SARs to the FIU which should call for stricter confidentiality/security safeguards in the receipt of SARs and other confidential information. SARs are delivered in hard copies rather than electronically, and the number of persons entering the FIU premises can be quite high. So long as SARs are delivered manually in hard copy, and FIU’s acknowledgements of receipt are delivered in a similar manner, there will be a risk of potential in transit loss or interception of confidential information. In this respect, an electronic SAR filing and acknowledgment system should be considered as a more secure alternative.

Publication of Annual Reports (c. 26.8):

181. Section 8(1)(b) FIU Act requires filing of an annual report with the Minister of Finance for purposes of reviewing the work of the FIU. This report is not published but the FIU Act Section 8(2) requires that the annual report be submitted to the House of Assembly for its review, but this report itself is not published or disseminated in the public domain. While there are quarterly and other periodic disclosures through newsletters and to the media, the issuance of annual reports on the FIU’s activities would be useful to raising the FIU’s profile and engaging public awareness. Nevertheless, the FIU has sent out to reporting entities and other stakeholders (including law enforcement) some sanitized information on typologies and trends, through its periodic newsletters.

Membership of Egmont Group (c. 26.9):

182. The FIU became a member of the Egmont Group in July 2003.

Egmont Principles of Exchange of Information Among FIUs (c. 26.10):

183. The FIU has adopted Egmont’s Principles of Exchange of Information Among FIUs. Moreover, the FIU Act Section 4(2)(f) allows it to enter into any agreement or arrangement in writing with a foreign FIU, which the Minister considers necessary for the discharge of its functions. To date, 9MOUs have been executed. Furthermore, through the Egmont secure website, the FIU regularly responds to requests from other FIUs. The FIU has adopted a specific and clearly-defined standard operating procedure for the provision of assistance to foreign FIUs and foreign law enforcement agencies. Further consideration should be given to providing a specific legal basis for direct FIU to foreign law enforcement assistance. The authorities inform that nearly all law enforcement requests, in practice, are channeled through their FIUs.

Effectiveness of Implementation

184. The FIU is at the forefront of AML/CFT efforts in SVG, and is the single most developed AML/CFT institution in the country. It leads operational implementation of the authority under POCA and UNATMA and is the primary contact for reporting entities and the public on AML/CFT issues. In this regard, the quality and professionalism of its staff is considered to be high, as has shown concrete operational results through its competency in a number of legal actions, such as the number of cash detention and forfeiture orders, production orders and search warrants, in the context of ML and predicate offense investigations and prosecutions. Their participation in investigations has resulted in successful prosecutions, convictions and forfeitures. As noted by the authorities, the FIU is one of few in the region to have fully developed successful ML prosecutions. The FIU’s level of cooperation and assistance with foreign counterparts also supports the effectiveness of its operations. In this connection, however, it should seek to enter into MOUs with other countries where SVG registered FIs and entities operate or are managed, e.g. with Liechtenstein.

185. However, weakness in effectiveness was noted in a few key areas. First, the FIU seems to emphasize its law enforcement and prosecutorial activities more than its analytical function. This has the effect of limiting its analysis and financial intelligence outputs for the law enforcement purposes. The composition of the FIU staff, which is predominantly law enforcement and prosecutorial in nature, (at the time of the mission its core professional staff consisted of only two analysts as compared to five police and customs investigators, and three lawyers out of 14 professionals) may partly explain this tendency. There has also been a decline in the analysis of SARs in the last four years: in 2005 and 2006, 100 percent of the 108 and 118 SARs received were analyzed, respectively; in 2007, 150 out of 190; and in 2008, 101 out of 489 (see box, Analysis, para. 424). Second, in over six years of operation, the FIU has not developed a single prosecution domestically of an ML or predicate offense arising directly from the intelligence analysis of SARs originated information. The centerpiece of the FIU’s key outputs – i.e., the number of investigations and prosecutions of ML and predicate offenses – are not a product of its primary statutory function but arise more from the ancillary authority of police and investigators who are assigned to and housed in the FIU. Thus, its statutory role as the national central authority to receive, analyze and disseminate financial intelligence submitted in SARs is not yet operationally its centerpiece function, and is not fully effective. This statutory analytical role needs to be strengthened and prioritized both to provide value added to the efforts of reporting entities and to complement preventive measures, and to provide a more useful input to the investigation function of the FIU. The FIU’s effectiveness in receiving useful SAR information analyzing its contents is at risk of becoming entirely subsumed within the investigative function, as it currently so operates. In this regard, the FIU should revise its operational procedures to ensure that it provides adequate weight and attention to the analysis of the financial intelligence obtained from SARs, even if law enforcement personnel are primarily responsible for this analysis. Moreover, the authority of the FIU to obtain information from other governmental bodies needs to be strengthened through more formal means, including finalizing MOUs. Greater consideration should be given to including other staff, e.g. legal and accounting/forensic accounting, at the analytical level. Second, the structure, composition of its personnel and its reporting lines could compromise the independence of the FIU operationally. Clarifying the FIU’s independence would also serve to strengthen the control mechanisms for dissemination of confidential SAR information; while the FIU states that the SARs remain within the FIU premises, as required under penalty of law, the existing reporting structure does not legally ensure that dissemination of actionable intelligence is controlled.

2.5.2. Recommendations and Comments

  • The FIU should strengthen its analytical function including through enhanced staff capacity.

  • The FIU Act should provide broad based authority to obtain information from other governmental authorities to conduct analysis for financial intelligence purposes.

  • The FIU should issue additional and comprehensive guidance to reporting parties on SAR filings to increase the quality and consistency of reports.

  • The FIU should publish an annual report on it operations. In this regard, sanitized information on trends and typologies should be regularly included in a public document. The FIU should consider creating a website with information on its operations, SAR forms and instructions for reporting entities, and information for requesting authorities on the FIUs exchange of information procedures.

  • The FIU should consider entering into MOUs with counterparts in other countries, especially where SVG registered institutions and entities operate.

2.5.3. Compliance with Recommendation 26

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2.6. Law enforcement, prosecution and other competent authorities—the framework for the investigation and prosecution of offenses, and for confiscation and freezing (R.27, & 28)

2.6.1. Description and Analysis

Legal Framework:

186. Both POCA and UNATMA specify authority of law enforcement, prosecution and other competent authorities for investigation, prosecution and for confiscation and freezing. Under POCA Section 35, either the police or DPP may apply to the Court for a production order related to a relevant offense. In addition to the powers specified for ML and FT offenses, similar designations of powers are provided in the DTOA No. 45 of 1993. The CC Cap. 124 authorizes the police officers to search persons and premises for information.

Designation of Authorities ML/FT Investigations (c. 27.1):

187. (See Rec. 26 above.) The FIU is the principal body undertaking ML investigations and prosecutions, as well as seizure and forfeiture of cash and property related to ML (none with respect to FT so far). Both POCA and UNATMA vest specific investigation and prosecution powers for ML and FT with the Police and DPP respectively, with a clear division of responsibility between the two functions. However, operationally, the FIU conducts most of the front-line law enforcement activities de facto through the assignment of police and customs officers to the FIU and specific designations by the DPP of FIU lawyers to undertake prosecutorial mandates. The presence of these law enforcement officials makes the FIU, for all practical purposes, a self-contained AML/CFT competent authority. The investigative powers of the FIU, however, derives solely from the authority vested in the law enforcement officers assigned to it. This is not uncommon in some commonwealth countries in the Caribbean and it has worked reasonably well in practice. Nevertheless, there should be additional definition and separation of the respective responsibilities of the FIU per se and the Police/Customs authorities in ML and FT investigations; to this end, MOUs between the FIU and the Police and Customs authorities should be finalized to define the scope of information sharing and separation of functions. (Post mission, the authorities informed that MOUs have been signed by the FIU with the Police and Immigration Departments but that the MOU with the Customs Department was still pending.)

188. The DPP is constitutionally responsible for all criminal prosecutions in SVG but, due to inadequate staff, on a case by case basis, the FIU prosecutes cases on its behalf. To allow the FIU to conduct these activities directly, the DPP is required to sign off on each of the FIU’s court filings, essentially deputizing FIU lawyers as assistant DPPs. The Customs Service has a limited but related law enforcement authority regarding cash seizures. However, there have been some coordination issues as described in Section 6.1 below.

189. In addition to the authority in POCA and UNATMA, there are specialized units within the Police that complement the functions of the FIU. The major crimes and drug squad units of the RSVG Police Force conduct ML and predicate offense investigations in coordination with the FIU. In particular, the increase in drug transshipment operations in SVG have required enhanced coordination between the FIU and the Police. To facilitate this arrangement, a MOU has been agreed in principle between the Police and FIU to memorialize and clarify their respective roles. The Customs Service has some related authority to pursue customs law violations, however, some unevenness in coordination with the FIU has raised concerns. These concerns may be mitigated by the adoption of a Customs-FIU MOU, which has been agreed in principle between the FIU and the Customs. (Post mission, the authorities informed that MOUs have been signed by the FIU with the Police and Immigration Departments but that the MOU with the Customs Department was still pending.)

Ability to Postpone/Waive Arrest of Suspects or Seizure of Property (c. 27.2):

190. Neither POCA, UNATMA, nor the CC provide specifically for the waiver or postponement of arrest for the purpose of identifying suspected persons or seizing of money. Section 49(2) of POCA authorizes court-approved continuation of the detention of cash, “while its origin or derivation is further investigated; this allows for the postponement of the arrest of the suspected person and the seizure of the cash so as to identify other persons involved or for evidence gathering persons”. Furthermore, the authorities inform that both waiving and postponement of the seizure of property, either by the customs or police, have been used in specific ML investigations targeting drug traffickers, which ultimately resulted in arrests for ML and predicate offense prosecution. The DTOA, provides specific authority for postponing of seizures, in Sections 6, 13 and 18.

Additional Element—Ability to Use Special Investigative Techniques (c. 27.3):

191. In practice, specific investigative techniques such as controlled delivery are used on a case by case basis. The DPP has suggested that implementing wire tapping authority may be of benefit to ML and FT investigations in SVG. However, implementing such wire tapping and related authority within the Eastern Caribbean region has been considered from time to time but without much political success.

Additional Element—Use of Special Investigative Techniques for ML/FT Techniques (c. 27.4):

192. The authorities cite two major joint controlled delivery operations with the Bermuda FIU leading to the seizure of $103,000 and $1.7 million (both USD) in 2007-2008, respectively. The latter case has led to charges against two persons for ML that are awaiting prosecution. No other special investigative techniques are regularly used; wire-tapping is not legally authorized for ML/FT.

Additional Element—Specialized Investigation Groups & Conducting Multi-National Cooperative Investigations (c. 27.5):

193. As stated above, because of the structure and composition of the FIU, it in effect operates as a specialized unit responsible for nearly all aspects of investigating and prosecuting ML and FT offenses. However, the FIU is not designated by statute as the specialized investigation entity but so operates de facto due to the composition of its personnel. Authorities cite the three successful confiscation orders and numerous restraint and detention orders as evidence of the benefit of the FIU’s consolidated operations. In addition, there are discussions between the domestic law enforcement authorities and foreign counterparts for cooperative investigations. The recent detention of US $1.7 million and property and the ML charges are cited as successful outputs.

Additional Elements—Review of ML & FT Trends by Law Enforcement Authorities (c. 27.6):

194. The FIU is the primary authority monitoring for trends used by suspected criminals and money launderers. The FIU documents these trends, including typologies, in quarterly and annual reports that are submitted to the Minister of Finance and the NAMLC. The annual report is also presented to the House of Assembly.

Ability to Compel Production of and Searches for Documents and Information (c. 28.1):

195. Chapter V of POCA provide specific authority for production orders, search warrants of persons and property, and monitoring orders for FIs in connection with ML and predicate offenses. While UNATMA does not contain similar specific language in relation to FT offenses, the authorities cite the Sections 11 and 12 of the Police Act, Cap. 280 that allows them to compel production and conduct searches of property and persons. In addition, because FT offenses are predicate offenses for ML that may generate proceeds of crime, the authorities are of the view that the specific authority under the POCA is sufficient to cover FT. However, the POCA provisions have not been used in relation to FT-related investigations mainly because there have been no such FT investigations. Moreover, the extension of POCA authority to compel production or and searches for documents and information directly to FT offense may be subject to challenge, so the general provisions in the Police Act would be the sole basis upon which to compel production of and searches for documents and information related to FT.

Power to Take Witnesses’ Statement (c. 28.2):

196. Section 12 of the Police Act Cap. 280 authorizes police officers to take witness statements, which are admissible in court or any other trial. The authorities inform that such witness statements are regularly procured in ML and predicate offense investigations. In addition, to the authority of the police, the courts may compel witnesses to provide testimony.

Effectiveness of Implementation

197. The legal framework is sufficient for the designation of law enforcement authorities for ensuring that ML and FT offenses are properly investigated. The execution of ML and FT offenses falls almost entirely to the personnel at the FIU, by virtue of its composition of police and customs officers, and lawyers that receive specific delegations from the DPP. The FIU has therefore been transformed into the agency that takes the lead role for a broad range of law enforcement actions related to ML and FT. Competent authorities may compel production of, search persons and premises for and seize and obtain records, information or other evidence and may compel witness testimony for ML offenses; the authority in for FT is less clearly defined in the law.

198. The FIU, in consultation with the DPP, (and with specific delegation from the DPP) has obtained production orders as follows:

Table 14:
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199. [See Rec.10 on effectiveness of record keeping.] Notwithstanding the above, the authorities should review the efficiency and effectiveness of their ability to compel production of records etc., to conduct searches, and to seize and obtain records etc., in cases where the records and persons that would be the subject of such action are located in other countries. In this regard, the mission noted that a number of the international (offshore) FIs and persons that hold manage entities and records are physically domiciled outside of SVG.

2.6.2. Recommendations and Comments

  • Specific FT-related investigative authority should be incorporated either in UNATMA or by amending POCA to directly include any FT offense.

  • The respective roles of law enforcement authorities should be formalized to provide clarity in their respective roles, particularly given the preeminence of the FIU in the development of investigations and prosecutions.

  • The DPP’s staff should be expanded to allow it to play a greater role in ML/FT prosecutions. In the meantime, consideration should be given to formally deputizing FIU lawyers as assistant DPPs.

2.6.3. Compliance with Recommendations 27 & 28

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2.7. Cross Border Declaration or Disclosure (SR.IX)

2.7.1. Description and Analysis

Legal Framework:

200. Customs (Control and Management) Act No. 14 of 1999, as amended by the Customs (Control and Management)(Amendment) Act No. 43 of 2002, the Customs (Control and Management)(Amendment) Act No. 4 of 2007, and the Customs (Control and Management)(Amendment) Act No. 33 of 2007 (collectively the CCMA) and Statutory Rule and Order No. 33 of 2001, the Prescribed Amount (Foreign Currency) Order 2001 (SR&O No. 33).

Mechanisms to Monitor Cross-border Physical Transportation of Currency (c. IX.1):

201. Pursuant to Section 81(1) of the CCMA, SVG uses a dual declaration and disclosure system requiring all persons making a physical cross-border transportation of currency or bearer negotiable instruments in an amount exceeding EC$10,000 (pursuant to Part I, item 20 of the Third Schedule to the CCMA). It requires persons to submit a truthful written or oral declaration at the request of a customs officer. According to the authorities, the written declaration requirement applies only to passengers arriving by air. A targeted disclosure system is used for those passengers departing by air as well as passengers arriving or departing by sea, based on intelligence developed by the Customs Department. The written declaration is required to be made on the official customs declaration form in accordance with SR&O No. 33. Under Section 26(1)(b), false declarations to customs officers relating to incoming packages may result in forfeiture. In addition, according to the authorities, containerized cargo is also covered by Section 81(1) of the CCMA.

Request Information on Origin and Use of Currency (c. IX.2):

202. Pursuant to Section 81(2) of the CCMA, all persons entering or leaving SVG are required to answer questions of customs and police officers.

Restraint of Currency (c. IX.3):

203. (a) Where there is a suspicion that currency is related to money laundering or terrorist financing, customs or police officers may seize and detain the cash for up to 48 hours in accordance with Section 49(1) of POCA with respect to ML and Section 13(2) of UNATMA with respect to FT. Any additional detention must be authorized by a magistrate under Section 49(2) of POCA or Section 14 of UNATMA for ML and FT, respectively. (b) In respect to a false written or oral declaration, currency may forfeited under Section 81(3) of CCMA if not declared, and, under Section 81(4) any person failing to declare may be fined for so doing. Under Section 108 of the CCMA, any person who knowingly or recklessly makes or signs a declaration that is materially false commits an offense and currency may be forfeited. In addition, Section 125 of the CCMA gives the authority to a customs or police officer to seize or detain anything (including currency) that is liable for detention and forfeiture under any customs enactment. Section 29(1)(f) allows detention where currency is concealed in a manner intended to deceive.

204. Retention of Information of Currency and Identification Data by Authorities when appropriate (c. IX.4): Information relating to currency or bearer negotiable instruments that are declared or otherwise detected, including the amount and the identification of the bearer(s), are retained by Customs forming part of the statistics and available for use by the Customs Intelligence Unit and where appropriate, can be shared with other key law enforcement agencies including the FIU and various units of the Police Department. Please see chart at c. 30.2 below.

Access of Information to FIU (c. IX.5):

205. The Customs Department uses an internal procedure which requires reporting of suspicious transportation incidents to the Customs Intelligence Unit by customs officials at the ports. According to the authorities, the Customs Intelligence Unit is responsible for providing the information directly to the FIU in a timely manner. This process is facilitated by the assignment of two members of the Customs Intelligence Unit to the FIU and through an informal procedure that is being used by Customs and the Police which will be formalized through a MOU between the two agencies. A simplified form is used by customs officials at cash collecting centers (designated points at seaports and airport) to report certain types of suspicious payments; such information may, if necessary, be transferred to a SAR-type form to be submitted by Customs to the FIU. The form also includes a list of red flags relating to payments of customs duties, such as a single transaction paid for with more than one checking account, payment of a single transaction by significant amount of cash and the payment of a significant amount of duties by both cash and check. Hence, the information about suspicious payments and movements of cash appears to be provided to the FIU on a timely basis.

Domestic Cooperation between Customs, Immigration and Related Authorities (c. IX.6):

206. While no formal cooperation arrangements (e.g. MOUs) have been established with other departments, according to the authorities, the Customs Department, the immigration authorities, the Special Service Unit of the police and the FIU have established a good working relationship. There is an Intelligence Office established at the E.T Joshua Airport, the main Airport where international passengers are processed, that is occupied jointly by the Customs Intelligence Unit and the Police Special Service Unit. Information relative to passengers entering or leaving SVG is collected from the offices of the Immigration and Customs on a daily basis by officials assigned to this office. Where there is intelligence relating to any special monitoring of passengers, that information is shared with the Intelligence Office where dissemination will take place by customs and police officers to their respective departments.

207. International Cooperation between Competent Authorities relating to Cross-border Physical Transportation of Currency (c. IX.7): The Customs Department is a member of the Caribbean Customs Law Enforcement Council (CCLEC). According to the authorities, cooperation, information sharing and mutual assistance is facilitated in respect of key issues including ML and FT through a MOU in 1989 established between and among the membership, currently 36 signatories. The Membership comprises customs departments from the Caribbean and Latin America as well as Canada, France, the Netherlands, Spain, the United Kingdom and the US. According to the authorities, CCLEC has also entered into MOUs with key enforcement agencies such as Interpol and World Customs Organization thereby widening the information network.

Sanctions for Making False Declarations / Disclosures (applying c. 17.1-17.4 in R.17, c. IX.8):
c. 17.1. Effective, proportionate and dissuasive sanctions for false declarations:

208. Under Sections 81(4) and 29(1)(e) of the CCMA, conviction of an offence may result in a fine of up to the greater of EC$5,000 or three times the value of the currency, and under Section 108, a fine of up to EC$5,000. There is also an administrative process under Section 119 that, subject to the constitutional powers of the DPP over criminal prosecutions, applies to those persons who admit their guilt in writing and agree to pay an administrative fine. In such cases, under Section 119((1)(c), the liability of the offender will be discharged and the currency seized may be returned, although in practice, according to the authorities, this does not occur. Once that occurs, no further criminal liability will attach to such person, and, if they are foreign nationals, they would be free to leave SVG.

c. 17.2. Designated authority to apply sanctions:

209. The DPP is the sole authority in SVG to prosecute criminal cases, which, in practice, is accomplished with assistance from the FIU and police prosecutors, and with respect to the imposition of administrative fines, the Comptroller of Customs is the sole authority.

c. 17.3. Sanctions applicable to legal persons and their directors and senior management:

210. Under Section 118((2), legal persons and their directors who have consented or connived may be held liable for an offense under the CCMA.

c. 17.4. Range of sanctions should be broad and proportionate:

211. There are only two sanctions, a criminal penalty or administrative fine. Criminal penalties under the CCMA range from a fine of EC$5,000 to imprisonment of up to five years or both. Administrative penalties that may be imposed by the Customs Department range from the greater of amounts ranging from EC$5,000 to EC$10,000, or to an amount equal to three times the value of the currency seized. See chart, after c. IX.9, below, for administrative and criminal penalties under the CCMA.

Sanctions for Cross-border Physical Transportation of Currency for Purposes of ML or TF (applying c. 17.1-17.4 in R.17, c. IX.9):

c. 17.1: The offenses in Sections 41–43 of POCA would apply in relation to ML, and Sections 3–6 of UNATMA relating to FT, and the criminal penalties for those offenses are found in Section 47 of POCA and Section 7 of UNATMA, and in each case are the same: On summary conviction, a fine of up to EC$500,000 or imprisonment for five years or both, and on conviction on indictment, an unlimited fine or imprisonment of up to twenty years or both. In addition, under Section 29(1)(f) of the CCMA, conviction of an offence is subject to a fine not exceeding $5,000 or three times the value of the currency, whichever is greater.

c. 17.2: The DPP is the sole authority in SVG to prosecute criminal cases, which, in practice, is accomplished with the assistance of the FIU lawyers and police prosecutors. The Customs Department has the power to impose administrative fines.

c. 17.3: See the responses to c. 2.3 and c. II.4 above.

c. 17.4: See response to c. 17.4 under c. IX.8, above.

Table 15:

Sanctions for customs offenses (all references are to CCMA)

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Confiscation of Currency Related to ML/FT (applying c. 3.1-3.6 in R.3, c. IX.10):

212. See the responses to c. 3.1–c. 3.6. In particular, Section 50 of POCA provides for the forfeiture of cash seized under Section 49 of that Act, and Section 16 of UNATMA provides for forfeiture of cash seized under Section 13 of that Act. In addition, currency is subject to forfeiture under the CCMA, Sections 29(1)(f), which deals with concealment of cash with intent to deceive a customs officer; 81(3), concealed or undisclosed currency; 83(4), currency concealed on board a vessel at the port or an aircraft at the airport; and 89(1) currency concealed in any building or place.

Confiscation of Currency Pursuant to UN SCRs (applying c. III.1-III.10 in SR.III, c. IX.11):

213. See the responses to c. III.1 – III.10.

Notification of Foreign Agency of Unusual Movement of Precious Metal and Stones (c. IX.12):

214. According to the authorities, since SVG is a member of the CCLEC, notification of such transaction would be made in a manner consistent with principles relating to cooperation and information-sharing provided in the MOU. As a copy of the MOU was not made available, the mission was not able to verify whether the MOU covers unusual movements or precious metal and stones.

Safeguards for Proper Use of Information (c. IX.13):

215. According to the authorities, information that is passed to the FIU is accomplished only through the Customs Intelligence Unit, a small specialized group. There are three data systems that are relevant, the first relating to the movement of vessels, the RCS (Regional Clearance System), which is controlled by CCLEC, the second is the RSS, (Regional Security System), and the third is the APIS (Advanced Passenger Information System); in each case information is entered into these systems by units of the Customs Department, and, with respect to the RSS and APIS, the Police Department. RSS and APIS are linked to INTERPOL Access to these systems is controlled by a password requiring authorization; only certain units of Customs and the Police have such access. According to the authorities, all three data systems cover information on cross-border transactions. As a result, there appear to be sufficiently strict safeguards in place to ensure proper use of information in the three databases.

Additional Element—Implementation of SR.IX Best Practices (c. IX.15):

216. According to the authorities, the Customs Department has adopted most of the best practices stated in the paper, including targeting of couriers, risk management and intelligence techniques, behavior analysis, domestic coordination with units of customs, police, coast guard, immigration and the FIU, and the use of RSS and APIS to alert other customs units regionally about high risk targets. One major area not covered is that the Customs Department does not routinely use scanners, x-ray equipment, and canine units in its work nor is such equipment and capabilities available to it.

Additional Element—Computerization of Database and Accessible to Competent Authorities (c. IX.15):

217. RCS, RSS and APIS are all computer-based systems. In addition, according to the authorities, a range of information is available on the internal database maintained by Customs, including profiling, prior actions of suspects, and personal data on suspects such as photographs. According to the authorities, all three data systems cover information on cross-border transactions.

Effectiveness of Implementation

218. Given the potential for ML or FT-related offenses that should be prosecuted in a court of law, it is not clear why the Customs Department continued until 2008 to use its administrative powers over those detected with undisclosed, suspicious or concealed currency to impose fines, accept an admission of guilt and discharge of liability, and then release the offender, who, if a foreign national or resident, would then be free to leave SVG. While the authorities have indicated that this administrative procedure is not routinely used and that there has been an unwritten policy in place since 2004 for the Customs Department to refer all such matters to the FIU, the ability of the DPP, the FIU and the Police Department to develop ML or FT cases could be inhibited given that such administrative procedures were being used as recently as 2008 as discussed immediately below. Finally, the range of administrative and criminal sanctions in the CCMA is not sufficient dissuasive given the amounts of money being forfeited.

219. Statistics provided by the Customs Department indicate that there were three administrative cases in 2005 (US$10,000 in forfeitures, US$2,100 in fines); 20 in 2006 (US$133,00 in forfeitures, US$6,300 in fines); seven in 2007 (US$115,00 in forfeitures, US$1600 in fines); three in 2008 (US$14,000 in forfeitures, US$2,700 in fines); and none in 2009 to date. In addition, the following statistics reflect cases referred to the FIU for forfeiture under Section 50 of POCA: four cases in 2005 (totaling US$40,000); three cases in 2006 (totaling US$15,000); no cases in 2007; one case in 2008 (US$15,000), and three cases in 2009 to date (totaling US$178,000). Hence, since 2006, more money has been forfeited by the Customs Department through the administrative process (US$262,000, exclusive of fines) than by the FIU through forfeiture cases (US$208,000). These numbers suggest at the very least that the administrative procedures are, if anything, more effective than the criminal forfeiture process.

2.7.2. Recommendations and Comments

  • Amend Section 119 of the CCMA that empowers the Customs Department to conduct administrative processes over those caught with undisclosed, suspicious or concealed currency to require that the prior consent of the DPP be obtained before any such administrative process may be initiated; such consent should also cover the amount of the administrative fine and whether the currency will be returned to the suspect. In the meantime, the Customs Department should condition any future exercise of its administrative powers on the receipt of a written determination of the DPP, along the lines that (a) no further investigation by law enforcement authorities, including the FIU, Police and Customs, is required and/or (b) no criminal proceedings will be brought by the DPP against the offender.

  • In order to increase the dissuasive effect of such sanctions, administrative and criminal fines in the CCMA should be substantially increased, from the current range of EC$5,000 – 10,000 to at least EC$100,000.

  • The Customs Department should sign the pending MOU with the FIU regarding cooperation, taking into account the following:

    • In para. 4, it is not clear why it is necessary to wait as much as 14 days to provide feedback and dissemination of intelligence;

    • In para. 5, the imposition by the Customs Department of the administrative fines, admission, discharge of liability and release of the offender referred to above should be addressed; and

    • Also in para. 5, any issues relating to the detention of the offender should be addressed, since the FIU works with the DPP on major financial crimes cases.

2.7.3. Compliance with Special Recommendation IX

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3. PREVENTIVE MEASURES—FINANCIAL INSTITUTIONS

Customer Due Diligence & Record Keeping

3.1. Risk of money laundering or terrorist financing

FIs not covered or not explicitly covered in the AML/CFT legislation and other requirements:

220. Mutual Fund Underwriters are subject to the Mutual Funds Act and, according to the Act, can engage with customers in mutual fund subscriptions and redemptions in the same manner as e.g. fund administrators. The Act, however, does not contain adequate provisions for their regulation and supervision, and hence for AML/CFT purposes. Notwithstanding, the authorities have indicated that they are not aware of underwriters operating in or from SVG and that the law will be amended to remove this category of service providers as they are irrelevant in the SVG context. In addition, it is being recommended that mutual fund administrators and managers be specifically covered under the POCA Schedule to remove any doubt as to their AML/CFT obligations.

221. There is no specific coverage of insurance brokers and agents in the POCA Schedule except under a broad category of “financial intermediaries” the POCA Schedule. In practice, insurance intermediaries (agents, brokers and sales representatives), are regulated under the insurance laws but are not considered to be conducting insurance business. They should be explicitly covered as for mutual funds administrators and underwriters above.

222. There are at least two well-known lending operations in SVG that are unregulated and unsupervised, but may likely fall under relevant business in the POCA Schedule of covered entities. At the time of the mission, no assessment or investigation had been conducted by the authorities to establish the extent of their operations, ownership and control, and inherent risks, and to ascertain whether or not they should be subject to the AML/CFT requirements. No explanation was given, even though the issue was raised on several occasions by the Mission. Post mission the authorities indicated that they had conducted an investigation into these entities to establish, inter alia, fit and proper criteria and type of business being conducted. No adverse information was identified on the owners. A determination is still to be made as to whether they should be subject to regulation at which time they may be brought under the POCA and its Regulations. In the meantime, they were advised to observe the AML/CFT requirements as a matter of good practice.

223. There is one systemically important building society that is covered by AML/CFT legislation but which has not been subjected to an oversight regime for compliance with the AML/CFT requirements. This entity has been in operations decades before the AML/CFT laws were introduced and has effectively been unsupervised. There are plans to bring it under the supervision of the Ministry of Finance later in 2009, which is a positive development. According to the authorities, the FIU has provided guidance to this entity on the implementation of its AML/CFT obligations, and that a compliance Officer was appointed several years ago upon the recommendation of the FIU. The mission confirmed that training had been provided by the FIU and that the compliance officer is also the accountant. This creates a potential conflict of interest. In addition, the accountant/compliance officer dedicates less than 10 percent of his/her time to AML/CFT issues. Post mission, the authorities indicated that the SRD of the Ministry of Finance had conducted a full examination of this entity in August 2009 but it was not specified if it included an AML/CFT component.

224. Reg. 4 of the POCA Regulations exempts from customer identification requirements customers that are introduced by other institutions. This is inconsistent with the provisions of Rec. 9 of the FATF which does not provide for exemptions and which requires certain criteria and conditions for relying on certain elements of the CDD process. In addition, the non-mandatory Guidance Notes provides for other identification exemptions e.g. certain non-face to face business and business conducted over the phone or mail. This is inconsistent with the FATF and should, on the contrary, be subject to additional risk controls.

3.2. Customer due diligence, including enhanced or reduced measures (R.5 to 8)

3.2.1. Description and Analysis

Legal Framework:

225. The POCA 2001, as amended in 2002 and 2005, provides the basic AML/CFT requirements for FIs. These requirements are further elaborated in the 2002 POCA Regulations issued under the POCA. Prevention of Money Laundering Guidance Notes (GNs) have also been issued by the NAMLC. New Anti-Money Laundering Guidance Notes for the insurance sector have been prepared by the Ministry of Finance but as of mission date had not yet been issued to the industry and implemented, and are not used for purposes of this assessment. The mission advised that the procedure for issuing these guidelines should be consistent with the requirements of the POCA and the POCA Regulations which do not provide for the issuance of guidelines by the Ministry. In addition, the provision in the POCA Regulations that guidance are to be appended to the POCA Regulations should also be reviewed for consistency with the POCA provisions.

226. The NAMLC GNs represent non-mandatory good practice recommendations for covered institutions and are not Other Enforceable Means for purposes of this assessment. (See e.g. GN 60 stating that they are not mandatory). They are described and used in this report only for purposes of assessing the effectiveness of implementation to the extent that they are adhered to and can influence the nature of compliance with the Recommendations. However, the mission considered whether they meet the conditions as “drivers” for assessing effectiveness based on the following two FATF criteria:

  • The first condition is only partially met. The GNs have been issued by the NAMLC which is an official body established by law under the POCA. These GNs are intended to have directional effect, that is, represent recommended good practice. They address some but not all of the issues in the essential criteria. In some cases, the GNs go beyond the law and POCA Regulations both by expanding or clarifying on the provisions contained in the POCA Regulations (positive) while in others they go against the POCA Regulations by purporting to limit its application (negative) such as the inclusion of exemption from identification requirements not contemplated in the POCA Regulations. For instance, GNs 49-51 provide exemptions from identification requirements for certain postal, telephonic, electronic, mail shots, off-the-page, and coupon business. These are not exempted in the POCA Regulations;

  • The second condition is also only partially met. Some of the supervisory authorities have used the GNs as a guide for monitoring adherence to the POCA and POCA Regulations but some supervisors have only recently commenced onsite inspections for AML/CFT in some sectors, or only partially assessed for compliance, e.g. the insurance, credit unions. Some have not been assessed at all e.g. money remitters, the building and loan society, international insurance and mutual fund sectors. For these sectors in particular, there is no evidence that enforcement powers have been used in a general or specific case for non-compliance with the GNs.

227. Based on the above, use of the GNs as drivers for assessing implementation is limited and in most cases maybe insufficient to justify an upgrade in rating based on effectiveness of implementation. They will be analyzed, however, to reflect the general guidance such GNs provide for industry practice and considered in assessing implementation where relevant.

228. Schedule 1 of the POCA lists the FIs, DNFBPs and other businesses to which the applicable provisions of the Act apply. These cover all of the financial activities, most of the DNFBPs (not clear if Jewelers covers dealers in precious metals and stones but the authorities believe that it does and that barristers and solicitors cover attorneys. See Rec. 12 and 16 below) and other businesses (See Rec. 20 below), as listed in the Schedule (bolded words are those of the assessors):

Financial Institutions
  • 1. A bank licensed under the Banking Act

  • 2. A bank licensed under the International Banks Act 1996

  • 3. A building society registered under the Building Societies Act

  • 4. An insurance company registered under the Insurance Act

  • 5. International Insurance business licensed under the International Insurance Act 1996

  • 6. Registered agents and trustees licensed under the Registered Agent and Trustee Licensing Act 1996 (DNFBPs)

  • 7. A Trust licensed under the International Trusts Act 1996

  • 8. A person licensed to operate an exchange bureau

  • 9. A person licensed as a dealer or investment adviser

  • 10. A person who carries or cash remitting services

  • 11. A person who carries on postal courier services (other business)

  • 12. Mutual Funds licensed under the Mutual Funds Act 997

  • 13. Credit Unions

Other relevant business activities
  • 14. Lending (including personal credits, factoring with or without recourse, financial or commercial transactions including forfeiting check cashing services)

  • 15. Finance leasing

  • 16. Venture risk capital

  • 17. Money transmission services

  • 18. Issuing and administering means of payment (e.g. credit cards, travelers’ checks and bankers’ drafts)

  • 19. Guarantees and commitments

  • 20. Trading for own account customers in:

    • a. money market instruments (checks, bills, certificates of deposit etc.)

    • b. foreign exchange

    • c. financial futures and options

    • d. exchange and interest rate instruments; and

    • e. transferable instruments

  • 21. Underwriting share issues and the participation in such issues

  • 22. Money broking

  • 23. Investment business

  • 24. Deposit taking

  • 25. Bullion dealing

  • 26. Financial intermediaries

  • 27. Custody services

  • 28. Securities broking and underwriting

  • 29. Investment and merchant banking

  • 30. Asset management services

  • 31. Trusts and other fiduciary services (includes Trust settlement per POCA Regulations)

  • 32. Company formation and management services

  • 33. Collective investment schemes and mutual funds

  • 34. Car dealerships

  • 35. Jewelers

  • 36. Real estate agents

  • 37. Casinos

  • 38. Internet gambling

  • 39. Pool betting

  • 40. Lottery agents

  • 41. Barristers-at-law and solicitors

  • 42. Accountants

  • 43. Charities

229. Insurance companies are explicitly covered under the POCA and POCA Regulations per Schedule 1 of the POCA. However brokers and agents are not so explicitly covered, except under the general category of as ‘financial intermediaries’ under Relevant Business Activities. The interpretation of this with respect to the coverage of brokers and agents (and sales representatives) varies across the industry and the authorities and should be clarified in the law.

230. In addition, mutual fund underwriters are not regulated entities in the mutual funds law but the authorities maintain that they are not aware of any in operation and that these entities will be deleted from the Mutual Funds Act. In addition, there are two known lending operations that are not subject to regulation and supervision. Until an investigation is conducted to ascertain the extent and nature of their operations, they would effectively fall outside the scope of the POCA, POCA Regulations and Guidance Notes. As noted above, post mission the authorities indicated that they have conducted an investigation of these entities and that a determination is to be made on whether they should be regulated.

231. In addition to the above entities and activities, the POCA Reg. 3 provides that any person or entity not falling within the definition of a “regulated institutions” (these are those listed in Schedule 1 of the POCA above) may apply to the Minister of Finance (Minister) to become a “voluntary regulated institution”. Reg. 3(4) requires the Minister to issue a list of such institutions and to-date no such list has been issued by the Minister since no application has been made to/approved by the Minister.

232. For purposes of this report, the following FIs are in operation in SVG and assessment of compliance will be based on these entities. Where there are FIs that are not covered by a supervisory regime that should or are covered under the AML/CFT legislation, these are discussed above under Section 3.1 above, and in the other applicable sections of the report.

Table 16:
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233. There is a systemically important building and loan society with about 25,000-30,000 clients and assets of approximately EC$252 million in assets. This entity is not subject to a supervisory or regulatory regime for prudential or AML/CFT purposes but is covered by the AML/CFT legislation. The intention is for the Ministry of Finance-SRD to assume supervisory responsibility along with credit unions later in 2009. Post mission, the authorities indicated that an onsite inspection of this building society has been conducted in August 2009. No indication was given as to whether it included an AML/CFT component.

234. Section 46 of the POCA requires FIs that carry on business listed in Schedule 1 of POCA to keep and retain records relating to their financial activities in accordance with the POCA Regulations issued under Section 67 of the Act. These will be further discussed below and in Rec. 10. Sections 42-45 also make provisions for reporting of suspicious activities, tipping-off, etc. for FIs. These are elaborated under Rec. 12, 13, 14 and SRIV in this report. Furthermore, Section 46 requires/provides under subsections (2) FIs to pay special attention to complex and other transactions (See Rec. 11); (3) and (4) reporting of suspicious activities to the FIU (Recs.13 and 14); (5) exemption of liability for reporting suspicion (Recs. 14 and 16); (6) and (7) duty to develop and implement a written training and compliance program to ensure and monitor compliance with the POCA Regulations issued under the Act. (Rec. 15). The POCA also established the FIU and the NAMLC.

235. The Drugs Trafficking Offenses Act also contains provisions under Sections 30-33 with respect to FIs listed in that Act. Section 30 requires FIs to retain for a minimum prescribed period, the original or other retrievable form of copies of documents, inter alia, with respect to transactions, accounts, deposit box facilities, wire transfers and transmission of funds, and loans (Rec. 10). Transactions of EC$5,000 or less are excluded. For this purpose FIs are domestic banks, any other licensed financial institution under any Act, trust companies, finance companies or any other deposit-taking company.

236. The UN (Anti-Terrorism Measures) Act, 2002, as amended, also contains provisions for FIs. In particular, Section 10 imposes a duty on persons or citizens to provide information with respect to terrorist property; Section 10A(1) for reporting of suspicious transactions relating to terrorist acts; and Section 10(B) and (C) penalty for failure to report suspicions. (See Rec. 13, 14, 17 and SRIV.)

237. The POCA POCA Regulations establish mandatory customer identification and other AML/CFT requirements for FIs. In particular, it makes provision for:

  • Identification verification;

  • Recordkeeping;

  • Monitoring and verification;

  • Internal reporting procedures and compliance officer (ML reporting officer or MLRO);

  • Training;

  • Offenses and penalties;

  • Accounts in anonymous and fictitious names at time the POCA Regulations were issued;

  • Schedule: Procedures for verification of identity of customers.

238. In summary, many of the legal requirements in the POCA Regulations are to establish/institute and maintain procedures that require FIs and persons involved in relevant business activity as defined, to take certain action. The following analysis will primarily focus on technical compliance with the FATF Recs. based on the requirements established under the POCA and the POCA Regulations. Therefore, reference in the analysis below to the lack of requirements, refers to the lack of legal, regulatory or other mandatory and enforceable requirements, and not to the GNs.

Note:

239. In this report, international banks licensed in SVG under the International Banks Act will be referred to as either international (offshore) banks or simply offshore banks simply to distinguish from other non-“offshore” foreign banks operating in or outside of SVG, and is not intended to cast any adverse connotation on any particular bank or sector.

Prohibition of Anonymous Accounts (c. 5.1*):

240. There are no provisions in the POCA or the POCA Regulations that explicitly prohibit the keeping of anonymous or fictitious name accounts. However, the customer identity verification requirements in the POCA Regulations (esp. POCA Regulations 4, 5, 6 and its Schedule) if strictly applied, would effectively avoid opening accounts under anonymous or fictitious names. In addition, Section 19(8) of the International Banks Act (for offshore banks) states that any account established by a licensee on behalf of a customer shall state the name and address of the customer and/or the beneficiary of the account.

241. Notwithstanding the above, Reg. 10 contains a lacuna with respect to anonymous and fictitious name accounts. The transitional provisions require FIs to establish the beneficial ownership of all “anonymous” accounts and accounts in obviously “fictitious” names within one year of the POCA Regulations coming into force. Where the beneficial owner cannot be established within one year, FIs are required to report these to the FIU. There is no explicit requirement to close such accounts which leaves the possibility of maintaining anonymous and fictitious name accounts that existed prior to the POCA Regulations. Guidance should be given in this regard, e.g. for closing them, or maintaining accounts on instructions from the competent authorities.

242. There are no regulatory provisions with respect to the treatment of numbered accounts which are permitted and treated differently from anonymous and fictitious name accounts in c.5.1.

Non-mandatory Guidance Notes:

243. There are no provisions with respect to this issue in the GNs.

When is CDD required (c. 5.2*):
For all FIs

244. Reg. 4 (2) requires identification, but not the full range of CDD to be conducted when (a) forming a business relationship and (b) conducting a one-off transaction when payment is to be made by or to the applicant for business in an amount of EC$10,000 or more (equiv. to about US$3,704 at exchange rate US$1.00=EC$2.7). For purposes of one-off transactions, identification is also required when two or more such transactions that appear to be linked equal or exceed EC$10,000. The requirement for one-off transactions where “payment is to be made by or to the applicant for business” could be interpreted by institutions as excluding transactions where payments could be made by and to the applicant, or where it is not clear if payments were made such as e.g. currency exchange transactions and the provision of financial guarantees if e.g. no fee payments are involved.

245. The one-off threshold of EC$10,000 (US$3,700) is in significantly in excess of the FATF requirement (US$1,000) for wire transfers under SR.VII.

246. Reg. 4 (2) (d) also requires customer identification when there is knowledge or suspicion of ML (does not cover FT) only in respect to one-off transactions. It is not clear whether the one-off transactions are limited to those of EC$10,000 or more, or whether they include lower amounts. In addition, it does not extend to business relationship in accordance with c. 5.2 (d) and the interpretive notes to Rec. 5.

247. There is no legal requirement to conduct CDD when there are doubts as to the veracity or adequacy of previously obtained customer identification data.

Non-mandatory Guidance Notes:

248. The GNs elaborate on the above requirements, including with respect to the need for identification of joint applicants for business. In particular, it expands on the computation of one-off transactions recommending that for purposes of linking transactions, only those that take place within a period of less than three months should be linked. In addition, GN 80 states that FIs should conduct CDD when doubts arise as to the identity of clients, and GN 82 states that a report should be made the MLRO (compliance officer) if failure to complete verification raises suspicion.

Identification measures and verification sources (c. 5.3*):

249. Reg. 4 (1) (a) requires FIs to implement procedures that require their customers to produce satisfactory evidence of identity as soon as practical after first making contact with the FI, in accordance with the particulars set out in the Schedule to the POCA Regulations. If satisfactory evidence is not obtained, the business shall not proceed any further. One exception to this requirement is when there is suspicion of ML in which case the business can proceed but only in accordance with directions issued by the FIU, and only when they involve one-off transactions. This seems to be a reasonable exception requirement but should extend to business relationships as well. With regards to the identification verification procedures, the Schedule sets out the following key requirements:

Individuals (no distinction between residents and non-residents):

250. Name, address, date and place of birth, nationality, contact details, occupation, copy of passport or identity card and signature. In addition, information on the purpose and potential activity of the account (not of the business whole relationship) is required as well as information on the source of income and wealth, written authority to obtain independent verification of the information provided, and written confirmation that all credits to the account are and will be beneficially owned by the “regulated institution holder”. The terms “regulated institution holder” should be defined to remove any doubt as to which regulated institution it refers. There is also a general requirement to obtain any other document or evidence to establish the identity of the client. This requirement also applies to verification of identity of the beneficial owners of the regulated institutions themselves.

Corporate Entities (no distinction between local and foreign):

251. copy of certificate of incorporation, memorandum and articles, location of the registered office or RA of the corporate entity; resolution of the Board of Directors authorizing the opening of the account and conferring authority on the person who will operate the account, confirmation that the corporate entity has not been struck off the register or is not in the process of being wound up, names and address of all officers and directors of the corporate entity, names and addresses of the beneficial owners of the corporate entity except a publicly traded company, description and nature of the business including date of commencement of business products or services provided and location of principal business, purpose of the account and the potential “parameters” of the account (including size in the case of investment and custody accounts, balance ranges in the case of deposit accounts, and expected transaction volume of the account), written authority to obtain independent verification of any information provided, written confirmation that all credits to the account are and will be beneficially owned by the “regulated institution holder”, and any other official document and other information reasonably capable of establishing the structure of the corporate entity.

Partnerships or Unincorporated Businesses:

252. FIs are required to verify all partners or beneficial owners in accordance with the procedure for the verification of individuals and in particular: copy of partnership agreement (if any) or other agreement establishing the unincorporated business, description and nature of the business (including date of commencement of business, products or services provided, location of principal place of business), purpose of the account and the potential “parameters” of the account (including size in the case of investment and client accounts, balance ranges, in the case of deposit and client accounts and the expected transaction volume of the account), mandate from the partnership or beneficial owner authorizing the opening of the account and conferring authority on those who will operate the account, written confirmation that all credits to the account are and will be beneficially owned by the “regulated institution holder”, and any documentary or other evidence reasonably capable of establishing the identity of the partners or beneficial owners.

253. Reg. 6 states that once a FI has verified the identity of an “applicant for business”, no further verification is necessary so long as the “applicant for business” maintains a business relationship on a regular basis. In addition, where there has not been contact with the customer or there has not been a transaction in five years, the FI shall confirm the identity of the account holder.

254. There are no laws, regulations or other enforceable means that allow the application of identification requirements on a risk sensitive basis.

Non-mandatory Guidance Notes:

255. (See Rec. 9 for a more comprehensive discussion of introduced business and exemptions from customer identification.) Reg. 4 (9) sates that for purposes of establishing satisfactory evidence of identity or reasonable measure of identity, regard “may” be had to the guidance notes appended to the POCA Regulations. However, to date no such guidance notes have been appended but the NAMLC has issued industry wide non-mandatory Guidance Notes that elaborate on the above verification requirements.

256. While the GNs do not constitute laws, regulations or other enforceable means that allow the application of CDD requirements on a risk sensitive basis, the GNs 45-51 state that FIs are exempted from verification of identity requirements in certain cases. This is distinct from and broader than the simplified or reduced CDD that may be allowed under c. 5.9 below. Those clients exempted from verification fall into three broad categories as follows:

Licensed FIs:

257. Seven categories of “eligible institutions” licensed in SVG, or their equivalents in other jurisdictions, including: (i) domestic banks; (ii) international banks; (iii) building societies; (iv) domestic insurance companies; (v) international insurance companies; (vi) RAs and trustees; and (vii) mutual funds. [Note that GN 46 refers to seven “eligible” institutions listed in the Schedule to the POCA. However, the POCA has a much larger number of categories of institutions.]

258. For purposes of establishing whether exemption from identification of a customer is a foreign regulated institution, or is introduced by a foreign financial institution subject to AML laws equivalent to SVG, regard should be had to GN 53 and GN 162 which set out a list of 83 countries that may be used for such purpose. It is noted that for purposes of a customer that is a regulated financial institution (not the full range of relevant business activities contained in Schedule 1 of the POCA which includes non-financial entities), c. 5.9 allows for simplified or reduced CDD, not a complete exemption. And even in the case of Rec. 9 for introduced business (See Rec. 9 below), there is a need for an FI to immediately obtain information on the customer from the introducer, and be able to obtain the underlying documentation (which would allow for verification of identity) promptly on request. Therefore, these exemptions seem to go beyond the FATF requirements.

Small one-off transactions:

259. These are consistent with the requirement to verify identity (but not conduct full CDD) of customers above the established threshold of EC$10,000. In addition, please note the comment under c. 5.2 with respect to the threshold exceeding the wire transfer requirements of US/Euro $1,000.

Introduced business:

260. GNs 53 and 162 relate to introduced/intermediary business covered under Rec. 9 which may also allow FIs the discretion not to verify identity in some cases. (See Rec. 9 below.)

261. GNs provide further details on verification methods that may be used by FIs, including for legal arrangements such as trusts which are not covered in the POCA Regulations (e.g. GNs 60-79). GN 65 also recommends obtaining bank and professional references directly from the issuers, which should be verified.

262. Part IV of the GNs also contain further sector-specific guidelines that would generally apply the exemptions from the verification to Banking, Investment Business, Fiduciary Services and Insurance business. But as discussed above, these would go beyond what is required under the FATF Recs.

Identification of Legal Persons or Other Arrangements (c. 5.4):

263. Corporate Entities (See c. 5.3 above.) c. 5.4 (a)*. The Schedule to the POCA Regulations requires that a FI obtains the resolution of the Board of Directors authorizing the opening of the account and conferring authority on the person who will operate the account. It does not explicitly require verification of the identity of the person so authorized.

264. The Schedule of the POCA Regulations require FIs to obtain certified copies of incorporation documents, address, directors and officers and beneficial owners of the entity, except for publicly traded companies. As indicate in the previous paragraph, the resolution authorizing the opening and operating of the account is required but not identity of the person so authorized, and this may be a narrow power to bind the legal entity.

Partnerships or Unincorporated Businesses (See c. 5.3 above):

265. Verification of all partners and beneficial owners of incorporated businesses is required under the Schedule to the POCA Regulations. This includes a copy of the partnership or other agreement establishing the unincorporated business, location of principal place of business, mandate from the partnership or beneficial owner authorizing the opening of the account and authority to operate it. The FIs can also require any other document or evidence to assist in establishing the identity of partners or beneficial owners.

266. There are no other requirements in the POCA or POCA Regulations for FIs to identify other legal arrangements such as trusts/trustees. There is a requirement to identify corporate entities, which would cover corporate trustees, but no specific identification requirements for FIs to identify the various parties to a trust relationship, that is in addition to the trustees, the settlors and beneficiaries, as provided for in the GNs for the trustees. The provisions for identifying unincorporated businesses is also not appropriate for trust relationships as the “agreement” establishing the business may not consistent with the concept and structure of a trust which may constitute a different type of instrument (e.g. deed, declaration, etc.) and which may be an oral trust relationship.

Non-mandatory Guidance Notes:

267. GN 39 states that for purposes of identifying corporate entities, FIs should include corporate trustees. While this would help meet the requirements of c. 5.4 if it were in the POCA Regulations, it would still be insufficient as non-corporate trustees are not covered. GN 38 also states that FIs should verify the identity of partners/directors of a firm who have authority to operate an account or “otherwise to give relevant instructions” as if they were directors or shareholders of a non-quoted corporate entity. In addition, it states that for a limited partnership, only the general partner needs to be identified unless limited partners are “significant investors” but these terms are not defined in the GNs.

268. The GNs (44) also state that for other legal arrangements such as associations, institutes, foundations, charities, etc. that are not firms or companies, all signatories “who customarily operate the account” should be identified. It is noted that GN 78 refers to the identification of parties to a trust by the trustees (as DNFBPs), and not to the identification of the trustee (corporate or non-corporate) by FIs.

Identification of Beneficial Owners (c. 5.5*; 5.5.1* & 5.5.2):

269. There is no explicit requirement in the POCA Regulations to identify beneficial owners except in the Schedule with respect to corporate and incorporated businesses. Reg. 4(5) requires FIs to establish and maintain procedures to identify persons on whose behalf an applicant for business appears to be acting for, that is, where the applicant is not acting as principal. This is not necessarily the same as identification of beneficial owners or beneficiaries. The Schedule to the POCA Regulations for individuals does not address this issue except for a rather unclear provision that requires FIs to obtain “written confirmation that all credits to the account are and will be beneficially owned by the regulated institution holder”. It is unclear what a “regulated institution holder” is but would also not be a sufficient requirement to identify beneficial owners or beneficiaries such as those of a trust. Para. 2 of this part of the schedule for individual customers also require identification of the beneficial owners of all “regulated institutions” which is confusing. Similar provisions are included for corporate entities, partnerships and incorporated businesses in the Schedule.

270. The Schedule to the POCA Regulations requires that for corporate entities, FIs are required to obtain information that includes the “names and addresses of beneficial owners of the corporate entity, except for a publicly traded company”.

271. For partnerships and incorporated businesses, the Schedule requires FIs to obtain verification of identify for all partners or beneficial owners, using procedures applicable to individuals under the Schedule.

272. For corporate entities, the Schedule to the POCA Regulations requires FIs to obtain information or official documentation that is “reasonably capable of establishing the structural information” of the entity. This may be interpreted as to include ownership and control structure information but is not explicit enough. There is a requirement in the Schedule to obtain the names and addresses of the beneficial owners of non-publicly traded companies as described above.

273. For partnerships and unincorporated businesses, there is no specific requirement to obtain information as to the ownership and control structure, only verification of identity of partners and beneficial owners.

274. Reg. 4(6) provides that, where an applicant for business (customer): (i) is being introduced to the FI by another regulated institution (both FIs and non-FIs as listed in Schedule 1 of the POCA); (ii) is acting for another (principal); and (iii) the applicant is another regulated institution (domestic or foreign), then it shall be reasonable for the FI to accept a written assurance from the applicant for business (the regulated institution) to the effect that evidence of the identity of the principal has been obtained and recorded under procedures maintained by the applicant. This requirement is very confusing and seems to go beyond the requirements for introduced business under Rec. 9 below. It seems to describe a situation where a SVG FI can rely on the identification of an underlying client conducted by a second tier regulated institution, that is, one that is itself introduced by another regulated institution. This issue is further discussed under Rec. 9.

275. While there are sufficient requirements to establish beneficial ownership of legal entities and arrangements covered by the POCA Regulations and the Schedule, a requirement as to the identity and information on natural persons that ultimately “control” a legal person or arrangement is not explicitly required, particularly with respect to trusts/trustees as clients of FIs. There is a need for provisions in the POCA Regulations, similar to those for trustees under para. 78 of the GNs, for FIs to identify settlors, beneficiaries, protectors in addition to the identification of trustees. (See c. 5.4 above.)

Non-mandatory Guidance Notes:

276. The GNs provide additional identification guidance for clubs, societies and clubs, and for those procedures that Trustees should take with respect to identification and information on their clients and businesses. GN 33 states that “principals” should be understood in the widest sense to include beneficial owners, settlors, controlling shareholders, directors, major beneficiaries, etc. GN 32 further states that where there are a large number of verification subjects, it may be sufficient to carry verification on a limited group only such as the principal shareholders and main directors of a company which is reasonable. GN 39 also states that for non-publicly traded companies, the underlying beneficial owners who ultimately own or control the company should be identified. For public companies quoted in recognized stock exchanges, subsidiaries thereof, and ‘private company with substantial premises and payroll of its own”, no identification verification is required. This latter exemption, if put into practice, is not consistent with the requirements under Rec. 5, and would also be ultra vires the POCA and POCA Regulations.

277. The GNs further define “underlying beneficial owner/s” as any person/s on whose instructions the signatories of an account, or any intermediaries instructing such signatories, are for the time being accustomed to act”. This provision is insufficient and would not, e.g. cover beneficiaries under a trust arrangement where beneficiaries would not be expected to provide such instructions to e.g. to the trustee.

Information on Purpose and Nature of Business Relationship (c. 5.6):

278. The Schedule of the POCA Regulations. requires FIs to obtain information on the purpose and potential activity of the account for individuals and legal entities. For individuals, it requires the purpose of the account and potential activity. For corporate entities, partnerships and unincorporated businesses, the purpose of the account and the potential parameters of the account (including size in case of investment and custody accounts, balance ranges in case of deposit accounts and expected transaction volume of the account). These requirements limit the information to account activity and do not extend to information on potentially broader “business relationships”.

Non-mandatory Guidance Notes:

279. Unlike the requirements under the Schedule of the POCA Regulations, there are no requirements to obtain information on the purpose and nature of the account, nor business relationship, except for corporate entities that require a statement of purpose of the account, including expected turnover and volume of activity (GN75).

Ongoing Due Diligence on Business Relationship (c. 5.7*; 5.7.1 & 5.7.2):

280. The general rule under Reg. 6 is that once an FI has verified the identity of a client, no further verification is required so long as the customer maintains a business relationship on a regular basis. There is a limited requirement to verify customer identity when, in the course of business, there are concerns regarding the identity of the client or beneficial owner. Where there has been no contact with a client or no transaction within a period of five years, the FI shall confirm the identity of the account holder. In addition, Reg. 6(2) requires FIs to monitor the relationship for consistency with the stated account purpose, business and the expected account activity. These requirements are consistent with c. 5.7 but it falls short of c. 5.7.2 which should extend the obligation to update documents, data or information through periodic reviews of existing client records, particularly with respect to higher risk business relationships.

Non-mandatory Guidance Notes:

281. The GNs reflect the requirements in the POCA Regulations and do not address the issue of updating CDD documentation especially with respect to high risk business, and focuses mainly on re-verification of identity.

Risk—Enhanced Due Diligence for Higher Risk Customers (c. 5.8):

282. There are no requirements in POCA or the POCA Regulations to perform enhanced CDD for higher risk customers and transactions.

Non-mandatory Guidance Notes:

283. The GNs do not provide for enhanced CDD for higher risk customers and transactions.

Risk—Application of Simplified/Reduced CDD Measures when appropriate (c. 5.9):

284. There are no legal or regulatory requirement that allow FIs to apply reduced or simplified CDD where it has been proven that ML/FT risks are lower, where information on identity can be obtain publicly or where other controls exist in the national regime. On the contrary, the POCA Regulations and GNs exempt certain categories of customers from verification of identity as discussed under c. 5.3 above. (See Rec. 9 below.)

Non-mandatory Guidance Notes:

285. The GNs reflect the requirements under the POCA Regulations and further exempts FIs from verification requirements for certain categories of customers, including other FIs (both domestic and foreign), particularly GN 46, 49, 50 and 50. As indicated above, these exemptions go beyond the simplified/reduced CDD procedures allowed in c. 5.9.

Risk—Simplification / Reduction of CDD Measures relating to overseas residents (c. 5.10):

286. There are no requirements that when simplified or reduced CDD. There is a requirement for introduced business under Reg. 4(6) that exempts FIs from identification verification, where an applicant for business is another domestic regulated institution (those listed in the Schedule to the POCA) or a foreign regulated institution (those subject to POCA Regulations similar to the SVG POCA Regulations.). In such cases, the FIs only need to obtain a written assurance from the applicant that it has obtained and recorded evidence of identity of the principal/beneficiary of such institution. This provision, however, is more relevant to Rec. 9, but in principle goes beyond the simplified CDD regime allowed under c. 5.9.

Non-mandatory Guidance Notes:

287. See discussions above on exemptions from identification requirements in the POCA Regulations and GNs.

Risk—Simplified/Reduced CDD Measures Not to Apply when Suspicions of ML/TF or other high risk scenarios exist (c. 5.11):

288. There are no requirements in POCA or the POCA Regulations that would prohibit simplified/reduced CDD when there is suspicion of ML/FT, or where higher risk scenarios apply. There are no exceptions to the exempted cases for customer identification described above, when there is suspicion of ML or FT. Only the GNs have these provisions as described in the following paragraphs.

Non-mandatory Guidance Notes:

289. GN 45 states that where “a transaction” is suspicious, the exempted cases discussed above with respect to verification of identity would not apply.

Risk Based Application of CDD to be Consistent with Guidelines (c. 5.12):

290. As mentioned above, the POCA and POCA Regulations do not allow for simplified/reduced CDD, and the exempted cases covered in the GNs (Guidance Notes) go beyond what is allowed under the legislation in some cases, e.g. for example, business conducted by post, telephone, electronic means, coupons, etc. (See GNs 49-51).

Timing of Verification of Identity—General Rule (c. 5.13):

291. As a general rule, Reg. 4(2) states that if satisfactory evidence of identity is not obtained, the business in question must not proceed any further except under directions of the FIU when there is suspicion of ML. It does not cover suspicion of FT. This is a reasonable requirement, but should consider the benefits of extending this provision beyond one-off transactions, e.g. under circumstances described under GN 137.

Non-mandatory Guidance Notes:

292. The GNs contain provisions similar to those of the POCA Regulations.

Timing of Verification of Identity—Treatment of Exceptional Circumstances (c. 5.14 & 5.14.1):

293. There are no provisions in the POCA or POCA Regulations that allow for delaying of verification of identity of customers and beneficial owners.

Non-mandatory Guidance Notes:

294. The GNs do not contain provisions for delaying verification of identification except for Investment Business under GN 137 that allow delays when an investor has cancellation or cooling off rights. In such cases, the repayment of investment funds during this cooling off period is not to be considered as proceeding further with business under Reg. 4(2). When this occurs, repayment of investment funds should not be made to a third party to avoid the risk of ML.

Failure to Complete CDD before commencing the Business Relationship (c. 5.15):

295. Reg. 4(2) states that where satisfactory evidence of identity (as opposed to full CDD) is not obtained, the business relationship or one-off transaction shall not proceed any further, except under directions from the FIU when there is suspicion of ML. It is implicit, therefore, that the FIU will be informed of the suspicion. However, the circumstances under which an FI can proceed under directions from the FIU are limited to one-off transactions, and do not extent to business relations. Nonetheless, this seems to be a reasonable provision in that it would provide the opportunity for the FIU and/or other authorities to inquire/investigate the person should there be an interest and avoid tipping off the subject of a SAR.

Non-mandatory Guidance Notes:

296. The GNs contain broadly similar provisions for dealing with an applicant for business when verification is unsatisfactory. In particular, the second GN 82 (note that there are two GN 82s) states that where failure to complete verification and there are no reasonable grounds for suspicion of ML, any business with or one-off transaction for, the applicant for business should be suspended and any funds held to the applicant’s order should be returned in the form it was received, until verification is subsequently completed, if at all. Funds should never be returned to a third party and an internal report to the MLRO (compliance officer) should be made on how to proceed. This provision should be reconsidered to require that where there is suspicion, a SAR should be filed with the FIU.

297. The GNs are vague in that they do not prohibit the establishment of a business relationship or carrying out of a one-off transaction when CDD cannot be completed. It mainly requires the suspension of such business or transaction. In addition, it does not deal with situations involving existing customers as discussed under c. 5.16 below.

Failure to Complete CDD after commencing the Business Relationship (c. 5.16):

298. There are no requirements to terminate an existing business relationship in the circumstances covered by c. 5.16. There is only a requirement under Reg. 10 to report to the FIU anonymous or fictitious name accounts when the beneficial owner of such accounts cannot be established within one year of the POCA Regulations coming into effect (22 January 2002). Part IV of the GNs contains broadly similar provisions for the sectoral guidelines esp. for Investment Business. See c. 5.17 below.

299. Non-mandatory Guidance Notes: See c. 5.15 above.

Existing Customers—CDD Requirements (c. 5.17):

300. There is no requirement to apply CDD requirements to existing customers at the date the POCA Regulations came into effect, except for those anonymous or fictitious name accounts discussed under c. 5.16. The provisions of Reg. 6 apply to customers after the POCA Regulations came into effect and do not address the issue of materiality and risk. Under Reg. 10, when customer identification cannot be established on anonymous or fictitious name accounts existing at the time the POCA Regulations came into effect, they shall be reported to the FIU but there is no requirement to close the accounts.

Non-mandatory Guidance Notes:

301. There are no provision in the GNs with respect to this requirement.

Existing Anonymous-account Customers – CDD Requirements (c. 5.18):

302. See c. 5.16 above. There is only a requirement under Reg. 10 to establish the beneficial ownership of anonymous or fictitious name accounts within one year of the POCA Regulations coming into effect (22 January 2002), and to report to the FIU when the beneficial owner cannot be established within one year. This is insufficient.

303. Non-mandatory Guidance Notes: The GNs do not address issues under c. 5.18.

Foreign PEPs—Requirement to Identify (c. 6.1):

304. There are no requirements to conduct additional CDD measures on PEP including risk management systems to determine whether a potential customer, customer or beneficial owner is a PEP.

Foreign PEPs—Risk Management (c. 6.2; 6.2.1):

305. No requirement for senior management approval for establishing business relationships with PEPs.

Foreign PEPs—Requirement to Determine Source of Wealth and Funds (c. 6.3):

306. While there is no explicit requirement in the POCA Regulations to obtain source of funds and wealth of PEPs, the Schedule to the POCA Regulations for individuals and beneficial owners requires FIs to obtain source of income and wealth for purposes of identity verification which would satisfy this obligation.

Foreign PEPs—Ongoing Monitoring (c. 6.4):

307. There is no requirement to conduct enhanced CDD on PEP relationships.

Domestic PEPs—Requirements (Additional Element c. 6.5):

308. No requirements on domestic PEPs.

Domestic PEPs—Ratification of the Merida Convention (Additional Element c. 6.6):

309. SVG has signed but not ratified the UN (Merida) Convention against Corruption.

Non-mandatory Guidance Notes:

310. The GN 168 asks FIs to apply enhanced CDD on PEPs and to identify sources of information for establishing their position as PEPs. It describes the categories of persons that should be considered as PEPs, implicitly from other countries. Part of the CDD should include identifying related persons and companies, and identifying their source of funds, but not source of wealth. It also includes applying ongoing due diligence on the account. The decision to establish a PEP account/relationship should be taken at senior management level, but there is no similar requirement to obtain senior management approval for the continuation of an existing PEP or beneficial owner who is a PEP, or who subsequently become PEPs.

311. The GNs do not provide for domestic PEPs.

Cross Border Correspondent Accounts and Similar Relationships – introduction

312. It does not seem to be a general practice for domestic and international banks to provide cross-border correspondent account facilities to other banks. However, for purposes of this Rec., the provision of correspondent account facilities to some of the six international (offshore) banks in SVG would be analogous and are assessed under this Rec. In SVG, the domestic bank sector does provide correspondent/ nested correspondent accounts to offshore banks licensed in SVG. The provision of such correspondent accounts in SVG appears to be generally related to difficulties or the inability to open correspondent accounts directly with other institutions abroad. In some cases, it did not appear to the mission that the offshore banks had significant mind and management presence in SVG. Most of the top officials the mission met that had operational duties and knowledge of the banks business were residing overseas. To the extent that the domestic banking sector provides correspondent facilities to these offshore banks, they would be assuming the risks inherent in such business. It is noted that soon after the mission, two of the offshore banks were intervened by the government and may be wound up. (See Rec. 18 for a further discussion of this issue.)

International/Offshore Banks:
Requirement to Obtain Information on Respondent Institution (c. 7.1):

313. There are no specific requirements in the POCA Regulations with respect to the provisions of correspondent accounts to banks or other FIs. And whereas the identification of respondent institutions would have been required with respect to corporate entities under the POCA Regulations, the GNs indicate that when such entities are other FIs (both domestic and foreign) listed e.g. in GN 46, FIs are exempt from identification requirements subject to the jurisdiction of domicile for respondent entities.

Assessment of AML/CFT Controls in Respondent Institution (c. 7.2):

314. There are no specific requirements in the POCA Regulations to assess the AML/CFT controls of respondent institutions.

Approval of Establishing Correspondent Relationships (c. 7.3):

315. There are no specific requirements in the POCA Regulations to obtain senior management approval before establishing correspondent account relationships.

Documentation of AML/CFT Responsibilities for Each Institution (c. 7.4):

316. There are no specific requirements in the POCA Regulations to document the respective AML/CFT responsibilities of FIs.

Payable-Through Accounts (c. 7.5):

317. There are no specific requirements in the POCA Regulations with respect to the provisions of correspondent payable-through accounts to other banks or other FIs institutions. The correspondent accounts provided to offshore banks, while not strictly payable through in nature, seem to be pass-through nested correspondent accounts.

Non-mandatory Guidance Notes:

318. GN 124A indicates that banks should pay particular attention to the provision of services to other banks in jurisdictions where the respondent institutions do not have a physical presence. When providing correspondent services, banks should obtain sufficient information to understand the nature of the respondent’s business, including, inter alia, the reputation of the AML (but not CFT) regime of the jurisdiction where it operates, the status of regulation and supervision of such banks, and the adequacy of its know your policy (KYC) policies.

319. The GNs further indicate that correspondent banks should refuse to enter or continue a relationship with respondents when they are “incorporated” in jurisdictions (but does not include jurisdictions where they operate from) in which they do not have a physical presence and are unaffiliated with a regulated financial group. They should also pay attention to correspondent relationships in existence where the respondents are located in jurisdictions with poor KYC standards or are known as being non-cooperative in AML (but not CFT) issues. Care should also be taken to the use of correspondent accounts as payable-through facilities.

320. From discussion with the industry, it appears that the provisions of the GNs with respect to correspondent facilities to offshore banks are not being strictly adhered to. In addition, the ECCB on instructions from its Monetary Council (comprised of Ministers of Finance from the ECCU member countries) issued prudential Guidelines for Correspondent Accounts in March 2001. These were directed at domestic banks for purposes of making them aware of and managing ML risks inherent in correspondent banking facilities. The introduction to these guidelines also made reference to the risks of providing “nested” correspondent facilities. Consequently the ECCB, “in cognizance of the importance of correspondent banking relationships to economic activity in the currency union, and of the risks posed to these arrangements by the operation of accounts for offshore entities that are subject to a different regulatory and supervisory framework,” recommended that:

“A financial institution shall not provide, or in any way facilitate, access to correspondent banking facilities to third-party FIs not licensed under the provisions of the Banking Act and/or supervised by the ECCB. Banks are also required to employ strict know-your-customer standards and exercise adequate due diligence, particularly in maintaining accounts for offshore entities, in order to minimize counterparty risks.”

321. In practice, international (offshore) banks licensed in SVG under the International Banks Act and subject to supervision by IFSA maintain correspondent/nested correspondent accounts with the domestic banking sector, apparently in breach of to the ECCB’s prudential guidelines.

Misuse of New Technology for ML/FT (c. 8.1):

322. There are no requirements to have policies or measures in place specifically to prevent misuse of technological developments for ML or FT.

Risk of Non-Face to Face Business Relationships (c. 8.2 & 8.2.1):

323. There are no specific requirements to have policies and procedures in place to address risks associated with non-face to face business relationships or transactions. There are provisions in Reg. 4 (and GNs) that allow FIs to completely rely on customer identification conducted by another regulated institution. In such cases, the Reg. completely exempts the FIs from verification of identity of the customer subject to certain conditions. This would be contrary to the requirements of c. 8.2.1 that include measures, by way of example, reliance on third party introduction as one among other possible measures that can be taken. The general principle should be to obtain “additional documentation to complement those which are required for face-to-face customers.” See box under c. 8.2.1.

Non-mandatory Guidance Notes:

324. GN 44A deals with customers who may not be available for an interview at the time an account or relationship is to be established, such as non-resident clients. (Note, under c. 5.8 non-resident clients are an example of a high risk category of customer.) The GN states that in such cases, FIs should apply the same identification and monitoring procedures as applied to customers that are personally interviewed, and should have specific and adequate measures to mitigate the higher risk of non-face to face business. This would be contrary to the provisions of Reg. 4 which provides for possible exemption from identification verification provisions in cases where a customer is introduced by another regulated entity, and which can involve non-face to face and non-resident clients. Nonetheless, GN 44A states that risk mitigation measures should be applied in line with the examples given under c. 8.2.1 which should include, inter alia, certification of documents and independent verification of documents by contacting a “third party”.

325. In addition to the preceding paragraphs, GNs 49-51 go beyond the POCA Regulations, and are contrary to Rec. 8 in that they exempt from identification verification requirements certain transactions such as postal, telephone and electronic business, “mail shots, off-the page and coupon business. The mission did not ascertain the extent to which such business was actually being conducted in or from within SVG.

Effectiveness of Implementation

326. The authorities have not conducted a formal ML/FT risk assessment of the financial sector to better inform and support the development of more effective CDD, monitoring and reporting policies and procedures by FIs. In this regard, the authorities should consider e.g. the relative ML/FT risks inherent in the mutual funds industry as there is a perception of lower risk in private/accredited funds. These are investment vehicles for high value/net worth investments, broadly akin to private banking, which inherently is of higher risk. A reevaluation of the supervisory thinking on this issue is advisable.

327. In particular, no AML/CFT supervision of building and loan societies has been conducted, and limited or no CDD supervision has been undertaken with respect to the offshore financial sector, credit unions, insurance companies and intermediaries, and money remitters.

328. In addition, there are two known money lending operations that are subject to the AML/CFT laws and which openly advertise their activities. However, the authorities have not conducted a review of their operations with a view to determining the need for an authorization and oversight regime. Their beneficial ownership and control, and sources of their funding are unknown.

329. From discussions with the FIs and regulators, it appeared that most FIs were conducting reasonable CDD measures to comply with the SVG AML/CFT requirements, and in the case of foreign banks, with their head office policies and procedures. There were however, some areas that indicated lack of effective implementation as discussed in the following that relate to Recs. 5-8:

  • FIs are mainly focused on ML risk, especially cash transactions and possible linkages with drug trafficking. Little attention seems to be made on FT risks and some FIs were unaware of the official UN terrorist lists;

  • During the conduct of CDD for new clients, it seems that FIs do not report to the FIU all cases where they are suspicious of ML/FT. The FIU on average only gives directions to FIs on how to proceed with suspicious transactions about 3 times a year;

  • With respect to on wire transfers, banks appear to be conducting CDD for amounts lower than the regulatory EC$10,000 equivalent for one-off transactions which is positive but there is a need for enhanced scrutiny of wire transfer activity. In addition, a mitigating factor is that some banks are required by the SWIFT system to include full originator information in all wire transfers. (See SRVII);

  • Senior management approval generally required for opening correspondent accounts, but enhanced CDD including for offshore bank respondents is weak, including for establishment of nested correspondent accounts;

  • CDD on beneficial owners/beneficiaries is weak in some FIs, including the identification of all main parties to a trust, and lack of controls in some banks with respect to opening accounts for bearer share companies. Weaknesses in account opening documentation were evident in some FIs;

  • Ongoing CDD monitoring seems to be less effective for some FIs, particularly offshore entities that deal with customers in many jurisdictions where they do not have a physical presence or representation and may involve non-face to face business relationships. Such review would be particularly important for certain types of business transactions, e.g. back-to-back loans by banks, and loans backed by insurance policies. These loans appear to be common practice by some institutions and inherently carry a higher level of ML risk, and should be subject to more enhanced CDD. In addition, insurance companies, which generally conduct business through intermediaries, also do not require their agents/brokers to have or to provide them with copies of their AML/CFT policies and procedures. Consideration should be given to including this in their agency and broker agreements;

  • Supervisory findings indicate that FIs may not be adequately updating customer documentation which would limit ongoing CDD and risk profile updating;

  • CDD in the credit union and building society sectors appears to be generally weak, and supervision of compliance has just commenced for credit unions and is non-existent for the building and loan society. This is a significant weakness considering the risks inherent in both sectors activities with respect to money remittance business and back-to-back loans;

  • Some banks, but not other FIs, require senior management and/or head office approval for establishing correspondent and PEP accounts. Supervisors state that a number of banks subscribe to database services for PEPs and other official ML/FT lists, and that the FIU circulates terrorist lists. However, not all FIs interviewed were aware of the latter;

  • Inadequate CDD and risk assessment for correspondent account relationships in the domestic banking sector, including such facilities to offshore banks;

  • There appears to be insufficient oversight and training on AML/CFT by insurance companies over the activities of their agents and sales representatives, and where applicable brokers, especially in the domestic sector. The agency contracts between the insurers and intermediaries generally do not contain AML/CFT elements to assist the insurers comply with their own CDD and other requirements. Most insurance intermediaries accept cash from clients which raises the potential for placement stage ML risk.

3.2.2. Recommendations and Comments

R.5
General Recommendations:
  • Consider explicitly covering in the Schedule to the POCA (i) mutual fund administrators, and managers; and (ii) insurance intermediaries i.e. agents and brokers.

  • Implement an oversight and AML/CFT compliance regime for non-regulated lending operations.

  • Extend the Regulations to explicitly cover FT consistent with the requirements of Section 46 of POCA.

Other Recommendations:
  • Explicitly prohibit anonymous or fictitious name accounts particularly those that were in existence before the POCA Regulations were issued.

  • Extend the full range of CDD (only identification verification) for business relationships and one-off transactions.

  • Reduce the threshold for one-off wire transfers to comply with SRVII.

  • Extend the identification requirement when there is suspicion beyond one-off transactions and cover FT.

  • Introduce a CDD requirement for cases when there are doubts as to the veracity or adequacy of previously obtained customer identification data.

  • Remove/amend the provisions in the POCA Regulations that allow exemptions from for customer identification, and review similar exemptions contained in the GNs.

  • Introduce (i) an explicit requirement to verify the identity of the person authorized to act on behalf of a corporate entity, partnership or other legal arrangement, and (ii) expand the verification requirement of provisions regarding the power to bind entity, beyond the power to open and operate accounts.

  • Enhance requirements for identification of legal arrangements such as trusts/trustees, including measures to identify settlors, beneficiaries and other parties to a trust.

  • Extend the scope of the requirement to obtain information on the purpose and intended nature beyond accounts to include business relationships.

  • Extend the ongoing CDD requirements to include update of CDD records particularly with respect to higher risk business relationships.

  • Introduce enhanced CDD requirements for higher risk clients and review/delete exemptions from identification verification as they go beyond the criteria for simplified CDD.

  • Require termination of existing business relationships in the circumstances covered by c. 5.16, subject to any directions from the FIU/competent authorities in case of suspicion or other reason.

  • Remove the identification exemptions in the POCA Regulations especially for cases when there is suspicion ML or FT.

  • Introduce a requirement to apply CDD requirements to customers existing at the date the POCA Regulations came into effect, on the basis of materiality and risk. This may also be relevant for any future changes to the POCA Regulations and other applicable laws.

  • Extend the requirement to perform CDD on existing customers beyond the beneficial owners of anonymous of fictitious name accounts, and require termination of such accounts immediately to the extent that they may exist.

  • Review the provisions of the GNs that only require the suspension, and not prohibition, of a new or existing business relationship or transaction when verification of identity cannot be completed.

  • Enhance supervision and enforcement of compliance to address weaknesses across most sectors in implementation of CDD, including with regards to beneficial owners and bearer/nominee share companies.

R.6
  • Require FIs to conduct additional and enhanced CDD measures, or to obtain senior management approval, for on new and/or existing PEPs relationships.

R.7
  • Require FIs to for perform, inter alia, additional and enhanced CDD on correspondent banking relationships, assess the AML/CFT controls of respondent institutions, and obtain senior management approval before establishing correspondent account relationships.

  • Introduce requirements with respect to the provisions of correspondent payable-through accounts.

  • Enhance supervision of risk management practices and compliance with R.7 by domestic banks that provide correspondent/nested correspondent banking facilities to international (offshore) banks in breach of R.7 and the ECCB’s prudential guidelines on correspondent banking (March 2001).

R.8
  • Require FIs to have policies or measures in place to prevent misuse of technological developments for ML or FT, including non-face to face business relationships and transactions, and review the exemptions provided in the GNs for this type of business.

3.2.3. Compliance with Recommendations 5 to 8

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3.3. Third Parties And Introduced Business (R.9)

3.3.1. Description and Analysis

Legal Framework:

330. The POCA Regulations allow FIs to rely on introducers to perform CDD. In particular, Reg. 4(3) covers CDD for customers (“applicant for business”) introduced to the FI by another regulated institution (these are those entities covered under Schedule 1 of the POCA that includes both FIs, DNFBPs and other specified businesses). Such reliance can also be placed when an applicant for business is introduced by foreign regulated institution (Schedule 1 entities that are subject to regulation at least equivalent to the SVG POCA Regulations.). In such cases, the requirements to obtain satisfactory evidence of identity is met by receiving a written assurance from the introducer to the effect that evidence of identity has been obtained and recorded by the introducer. The SVG FIs are not explicitly required to obtain information (and verification) of customers under these circumstances.

331. The above requirement to obtain a written assurance also applies in cases where the applicant for business is another regulated institution, including a foreign regulated institution. In such cases it is also acceptable to obtain a written assurance that identification information has been obtained and recorded with respect to the underlying principal.

332. It is noted that “principal” is not a defined term under the POCA Regulations and is not clear whether it extends to beneficial owners/beneficiaries.

Requirement to Immediately Obtain Certain CDD elements from Third Parties (c. 9.1):

333. There is no mandatory requirement to immediately obtain CDD information from introducers.

Availability of Identification Data from Third Parties (c. 9.2):

334. Apart from the written assurance from the introducer that CDD information has been obtained and recorded, there is no requirement for FIs to take steps to satisfy themselves that the underlying documentation can and will be available from the introducers promptly on request. There is a requirement under Reg. 4(4) that the FI obtains from a regulated institution (that is, a SVG regulated entity as the POCA Regulations separately define and apply the terms “regulated institutions” and “foreign regulated institutions”) a written assurance that information on “identity” will be “exchanged” in the event that the International Finance Services Authority (IFSA) or the FIU requests such information in connection with a criminal investigation.

335. It is also not clear whether the assurance under Reg. 4(4) is to be given by the introducer regulated institution or the underlying applicant for business but it is assumed from the broader context that the information will be exchanged between the FI and the introducer. Reg. 4(4) as drafted imposes limitations. It would be useful to include in this Reg. a direct general obligation on the FI to take steps to ensure that information will be made available promptly on request by the FI, not only when required by IFSA and/or the FIU in connection with criminal investigations. There may be other legitimate reasons for the FI to require such information without delay, such as to conduct internal investigations and ongoing CDD, to respond to any other supervisory request or purpose (e.g. court order), and to facilitate internal and external audits and compliance checks. Such adequate steps required by c9.2 may include, for example, ensuring that there are no legal secrecy, confidentiality, contractual or other restrictions to provide information to the requesting FI whether domestically or on a cross-border basis. In addition, as drafted and in light of the distinction made in the definitions and Reg. 4 between a regulated institution and a foreign regulated institution, this requirement would also seem to apply only to cases where the introducer is a SVG regulated institution and not a foreign regulated institution, which would also be a limitation. (See para. 326 above.)

Regulation and Supervision of Third Party (c. 9.3) (applying R.23, 24 & 29, c. 9.3):

336. The POCA Regulations require that an introducer that is a foreign regulated institution be subject to AML regulation that is at least equivalent to that of the SVG POCA Regulations Regulated institutions, and their foreign equivalent, cover all of the entities listed in Schedule 1 of the POCA which includes e.g. car dealers, pool betting, lottery agents, and charities, which fall outside the scope of FIs and DNFBPs covered under Recs. 23, 24 and 29. These non-financial entities should not be considered regulated FIs for purposes of c. 9.3. SVG states that, implicit in the process of developing its Guidance Notes (534 and 162), it has taken measures to satisfy itself that the regulated institutions are subject to, regulated and supervised in accordance with FATF Recs. (esp. Recs. 5, 10, 23, 24 and 29) . The Guidance Notes also provide guidance on the discretion that may be applied in deciding who is acceptable as an eligible introducer.

Adequacy of Application of FATF Recommendations (c. 9.4):

337. See c. 9.3 above. There is a requirement that foreign regulated institutions (foreign introducers) be subject to AML requirements similar to the SVGs POCA Regulations, but not with respect to the adequacy of implementation of the FATF Recommendations. The GNs provide further direction as to the countries that are acceptable for this purpose.

Ultimate Responsibility for CDD (c. 9.5):

338. There is no explicit statement that ultimate customer identification and verification responsibility lies with the SVG FI in the case of introduced business. In addition, the lack of a requirement to immediately obtain information on the underlying client under c. 9.1 above limits the interpretation that an implicit responsibility exists.

Non-mandatory Guidance Notes:

339. See also Rec. 5 above on exemptions from customer identification verification. The GNs expand on the exemptions from verification with respect to introduced business. GN 52 states that where an FI exercises its discretion not to verify identity, it may do so under a reliable introduction from an “eligible regulated institution”, that is, one of the seven categories of SVG licensed FIs under GN 46 (banks, building societies, insurance companies, mutual funds, RAs, and trustees) and their foreign equivalents. The latter are those from countries with AML requirements at least equivalent to SVG’s listed in GN 162. In addition, the eligible introducers list reflects those in Schedule 1 of the POCA which go beyond FIs and DNFBPs as discussed above.

340. GNs 52 and 165 suggest using a written introduction letter in the form attached in Appendix B of the GNs to be used for local introductions only. No sample letter is provided for foreign introductions. The underlying key recommendations in the GNs is for: the eligible introducing institutions to be from SVG or from one of the countries listed in GN 162, the AML requirements of these countries to be at least equivalent to those of SVG, the introducer to be in good standing, the introduction letter to provide an “assurance that evidence of identity would have been taken and recorded in accordance with the set procedures of that institution and in accordance with FATF recommendations, and for the introducer to have customer identification and verification procedures that are as rigorous as those of the SVG FI. The introduction letter requires that the name and country of the regulatory body of the introducer.

341. GN 53 states that the FIs should require a written assurance from the introducer that identification data “should” be made available from the “third party” (presumably the introducing institution) immediately upon request. However, it is noted that the recommended introduction letter in Appendix B is not written in an explicit form that requires the introducer to give firm assurance or undertaking, but simply provides statements such as: that the applicant for business is an existing customer of the introducing party or that the latter has verified the customers identity and her name and address, that the applicant for business is acting on his own behalf or acting as a nominee, trustee of other fiduciary capacity for others and only in the case of the latter that documentation has been obtained, held and “can” be produced on demand. Nowhere in the introduction letter is there a requirement to indicate whether or not the identification procedures are in accord with the SVG institution’s own procedures and the FATF recommendations. The introduction letter is provided without any guarantee, responsibility or liability on the part of the issuing entity or its officials.

342. GNs 54 and 55 provide further elaboration with respect to exemptions from verification in cases of introduced business including from a FI’s overseas branch or member of the same group to which the FI belongs. In such cases written confirmation from the parent or holding company should be required as evidence of “the relationship”. This may not be sufficient for purposes of obtaining the requisite identification information for purposes of Rec. 9, and it is unclear as to whether the introducer needs to be one of the eligible categories of entities, and inappropriate in cases where there is no parent or holding company.

Effectiveness of Implementation

For international business, over-reliance on introduced business that limit CDD by the service provider institution, particularly with respect to underlying beneficiaries. See Rec. 5 above.

3.3.2. Recommendations and Comments

FIs should be required to:

  • Immediately obtain CDD information from introducers.

  • Ensure that documentation can and will be available promptly on request.

  • Limit the eligibility of introducing institutions to those FIs and DNFBPs covered by the FATF standard, consistent with the provisions given in the GNs.

  • Explicitly state that ultimate responsibility for customer identification and verification lies with the SVG FI and not the introducer. The exemptions allowed for by the POCA Regulations and GNs are not consistent with this requirement.

3.3.3. Compliance with Recommendation 9

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3.4. Financial Institution Secrecy or Confidentiality (R.4)

3.4.1. Description and Analysis

Legal Framework:

343. SVG no longer has a general law on secrecy or confidentiality; the Confidential Relationships Preservation (International Finance) Act, 1996 was repealed by the Exchange of Information Act (2002). On December 15, 2008, a new Exchange of Information Act (Act. No 24 of 2008) (the”EIA”) was adopted which liberalized the previously criticized limitations on access to information from regulators and other competent authorities under the 2002 EIA. While the EIA has liberalized the confidentiality regime to allow for gateways of information, the acts to which the EIA amendments apply still contain specific wording with respect to the limitations of access to information that are contradictory to the import of the EIA.

344. It should be noted that for purposes of the EIA, the FIU is not a regulatory authority to whom information may be shared pursuant to the EIA gateways. The Exchange of Information Act 2002, Act No. 29 of 2002, 5/30/02) (the “2002 EIA”) repealed the Confidential Relationships Preservation (International Finance) Act, 1996. This “Confidentiality Act 1996” had broad reaching application to information no matter where located.

345. The ECCB, Eastern Caribbean Securities Regulatory Commission, IFSA and other regional regulatory authorities are in the process of signing a multilateral MOU to facilitate open information sharing among all regulatory bodies in the OECS (Organization of Eastern Caribbean States).

346. The FIU regularly obtains information from regulators and reporting entities to facilitate its functions. However, except with respect to reporting entities specifically listed in POCA, the source or authority for the FIU to obtain other confidential information is not clear in the law.

Inhibition of Implementation of FATF Recommendations (c. 4.1):

347. The EIA provides Section 4(1) that if domestic regulatory authority is satisfied that assistance should be provided to another domestic regulatory authority or foreign regulatory authority it may request any person to furnish it with, inter alia, information relevant to the inquiries to which the request relates. When information is supplied from a foreign regulatory authority or obtained under the provisions of the EIA, the information shall not be disclosed by a domestic regulatory authority or by any person who obtains the information directly or indirectly from it, without the consent of the authority from whom the domestic regulatory authority obtained the information. Prior to the EIA, the express consent was required from the person about whom the information pertained or from whom the regulatory body obtained the information, i.e., a regulated entity as set forth in the 2002 EIA.

348. As noted above, although the Confidentiality Act 1996 was repealed, that repeal did not also amend the financial sector specific acts that contained confidentiality provisions or limitations to the information accessible to the supervisor. These include the Mutual Funds Act, the RAs and Trustee Licensing Act and the International Banks Act. Because these provisions have not been repealed or amended in the sector specific Acts, there could be some ambiguity whether the repeal of the confidentiality Act wholly preempts these confidentiality provisions. For instance, Section 15(4) of the RAs and Trustee licensing act does not permit the regulatory authority (IFSA) to gain access to confidential or any other information regarding the trust and company clients of the RA and trustee in the course of conducting its regulatory functions. Under this section, the effect of the repeal of the Confidentiality Act 1996 is to only remove the gateway for sharing obtaining the information – which itself was very limited one – thus keeping in force the inhibitory language on access to information. Read on its face, this provision would not authorize IFSA to compel access to such confidential or other information except by the written consent of the company or of the beneficiaries or of each other trustee of a trust as the case may be or an order of the Court made on the grounds that there are no reasonable means of obtaining such document, information or thing. This limitation constitutes a significant impediment on the regulator to access confidential customer information to ascertain if the regulated entities are complying with e.g. the CDD obligations under the POCA and POCA Regulations. This provision on limiting access should be removed and made consistent with the provisions allowing full access to regulated entity information by the competent supervisor as exists in other regulatory laws.

349. In addition, Section 19 (8) of the International Banks Act (and by reference Section 19(5) which states access to information and examination of licensees shall be subject to any confidentiality provision of the Act), limits access to the name or title of an account of a customer or to any other confidential information about the customer that is in possession of a bank, only to the Executive Director of IFSA. This varies from the other examination and information access provisions under Section 19 of the Act which grants such authority to either IFSA (“Authority”), the Executive Director, or any person or entity acting under or with either of them. Therefore, for practical purposes, it would be difficult for the Executive Director to effectively conduct examinations or access to information on an ongoing basis, without a delegating power for its functions under Section 19(8) or under provisions similar to those where such activities can be conducted by persons or entities acting under the Executive Director. The authorities counter that the Executive Director would have introduced the Authority’s staff to the banks and outlined how the examination would proceed, what information was required and this would have clearly included accounts, etc. Further, they assert that where Executive Director was in fact involved in the on-site examinations, that the Examiners and the Consultant(s) which the Executive Director left behind at the bank to continue with the examination, would have been acting upon and under the authority of the Executive Director. The authorities’ assertion is understandable but not without risk in future examinations where the Executive Director is not a participant. Therefore, the mission strongly recommends that access under Section 19(8) should be extended to the Authority or to any of its authorized officers/examiners, agents, contractors or entities. It is noted that during the recent examinations of international (offshore) banks, IFSA staff other than the Executive Director, conducted examinations and are reported to have access to confidential customer account information. It is for consideration whether IFSA acted outside the scope of the authority of the International Banks Act.

350. It is arguable whether the actual consequence of the repeal of the Confidentiality Act 1996 was to restore the common law definition (i.e., Tournier, case) of confidentiality for purposes of applying Section 15(4) of the RAs and Trustee Licensing Act, as the authorities assert. To the extent that similar confidentiality definitions are contained in the other financial sector licensing laws, the same concerns would arise. Furthermore, it is not clear that the repeal of the Confidentiality Act 1996 itself would cause the gateways established in the subsequent Acts, i.e., the EIA 2002 and the EIA, to replace the former gateways.

351. In addition to the EIA, there are some sector specific gateways for information to facilitate sharing of information. The Cooperatives Societies Act, Section 183(2) states “[i]n addition to the powers set out in the order appointing him, an inspector may furnish to, or exchange information or otherwise cooperate with, any public official in [SVG] or elsewhere who is authorized to exercise investigatory powers concerning the society …and is investigating, with respect to the society, an allegation of improper conduct . . . .” This is a useful provision because the Registrar of Cooperatives, unlike the other domestic financial sector regulators is not a domestic regulatory authority for purposes of the EIA.

Effectiveness:

352. The continued application of confidentiality provisions in the RAs and Trustees Act, the International Banks Act, and the limitations in other Acts to the scope of information available to supervisors undermines effective implementation of the FATF recommendations. These limitations could have knock on consequences for the effective transmittal and sharing of information among competent authorities.

353. Further, the EIA – having liberalized the conditions upon which information may be shared among regulators – has only been in effect for three months, so the capacity to test the efficacy of the assigned gateways of information is limited.

3.4.2. Recommendations and Comments

  • Each provision of confidentiality and limitation of access to information in sector specific acts, in particular Section 15(4) of the RAs and Trustees Act, should be removed from law.

  • The AG should provide a legal opinion on the meaning of “confidential” information in light of the repeal of the Confidentiality Act 1996, in particular the extent to which such repeal restored the common law definitions of bank secrecy and confidentiality.

3.4.3. Compliance with Recommendation 4

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3.5. Record keeping and wire transfer rules (R.10 & SR.VII)

3.5.1. Description and Analysis

Legal Framework:

354. There are a number of recordkeeping requirements for AML and CFT in the SVG legislation, and some of these provisions are elaborated in the GNs. In addition, the various financial and regulatory laws complement the recordkeeping requirements placed on FIs, including access by the regulatory authorities. The recordkeeping requirements of the AML/CFT legislation are discussed below.

POCA:

355. Section 46 of the POCA requires FIs and other regulated businesses (listed in Schedule 1) to keep and retain records relating to financial activities in accordance with the Regulations issued under Section 67 of the POCA by the Minister of Finance. Section 48(4(g) also states that the regulations may provide, inter alia, for the keeping of records.

POCA Regulations:

356. Reg. 5 provides the main recordkeeping requirements for FIs. It states that “if” a FI obtains evidence of identity in accordance with the POCA Regulations, it shall keep (i) a copy of such evidence “or” a record indicating the nature of such evidence, and (ii) records or copies of records of details of its business, as may be necessary to assist in an investigation of ML. The requirement to keep records of “its business” is very broad, however, the “if” condition is presumably to account for introduced business where the FI would not obtain and possess such information except on request as provided for under Reg. 4. Such records or copies shall be kept in a legible form that is retrievable within a reasonable period of time. Th1e minimum retention period is seven years.

357. The UN (Antiterrorism Measures) Act does not contain applicable similar recordkeeping provisions.

Drug Trafficking Offenses Act:

358. Section 30 of this Act also requires FIs to retain for a minimum of seven years, in original form, financial transaction documents including but not limited to those that relate to account opening and closing, account operations, opening and use of safety deposit boxes, telegraphic or electronic funds transfers, transmission of cross-border funds, and loans. FIs shall also keep records of documents “that relates to a financial transaction carried out by the institution in its capacity as a financial institution that is given to the institution by or on behalf of the person, whether or not the document is signed by or on behalf of the person.” It is not clear what this refers to but seems that it may include instructions from clients. Section 30 also defines the start of the minimum retention period, e.g. following the closure of an account. The record keeping requirements do not apply to a single deposit, credit, withdrawal, debit or transfer of money under EC$5,000, or such larger threshold as may be prescribed.

359. Records may be kept under the requirements of the drug trafficking law in microfilm or other retrievable form. Where a FI is required by law to release the original of the required records, it shall retain a copy thereof until the minimum period expires or the original is returned. A register of such released documents shall also be maintained. For purposes of the drug trafficking law, a FI is a domestic bank, any financial institution of whatever kind licensed, registered or otherwise regulated in SVG, and a trust company.

Note:

360. All of the main criteria of Rec. 10 are required to be in law or regulations as indicated by (*) below.

Record-Keeping & Reconstruction of Transaction Records (c. 10.1* & 10.1.1):

361. Reg. 5 (1) requires that (1) “If” a FI obtains evidence of a person’s identity in accordance with the POCA Regulations, it shall keep such records for the minimum prescribed period of seven years. Such records shall include evidence of identity, the nature of the evidence and information that would enable a copy to be obtained. Reg. 5(2) requires retention of records or copies thereof for the seven-year period containing details relating to its business as may be necessary to assist an investigation into suspected ML.

362. Reg. 5(5) also states that what constitutes records to assist in such investigation shall be determined in accordance with guidance notes appended to the regulations. No such guidance notes have been appended. Consequently, there is no specific provision that would require FIs to ensure that records are sufficient to reconstruct individual transactions that may provide evidence for prosecutions of criminal activity.

363. Reg. 5 (4)(c) requires FIs to keep records of transactions for a minimum of seven years after the day on which the transaction “recorded” takes place. This requirement is broad (see para. 354 above) and does not distinguish between domestic and international transactions, and whether or not it applies to transactions related to an existing or terminated account or relationship. Rec. 5(4) also requires that where the FIU has notified the regulated institution in writing that particular records are or may be relevant to an investigation that is being carried out, records shall be retained pending the outcome of the investigation. The requirement to keep records on request by the FIU only in connection with ongoing investigations is a good one and generally applies when there is a requirement to hold records longer than the basic minimum period. To emphasize this point, the Reg. could be clarified to also indicate that under these circumstances, the records should be kept for a period of not less than 7 years even where such investigations conclude before the minimum period expires.

364. In addition to the above, the financial laws contain various recordkeeping requirements that complement the above. In particular, the Money Services Business (MSB) Act (Section 9(4) state that without prejudice to the recordkeeping requirements under Section 46 of the POCA (and by extension to the POCA Regulations.), MSBs shall maintain (a) a record of each transaction and outstanding transaction for at least seven years after the date the transaction is complete; (b) bank statements for at least seven years after the date the transaction is complete; and (c) bank reconciliation records for at least seven years after the date of creation.

Record-Keeping for Identification Data, Files and Correspondence (c. 10.2*):

365. Reg. 5(1) requires FIs to keep records for seven years a copy of evidence of customer identity or a record indicating the nature of that evidence including information as would allow a copy to be obtained. Reg. 5(4) also states that for purposes of the minimum retention period, such period will be seven years after an account has been closed or a transaction takes place. Unlike the explicit requirement to keep records of accounts, transactions and identification, there is no specific requirement to retain records of business correspondence. This may be captured by the general requirement to retain copies or records of “details relating to its business” under Reg. 5(2).

Availability of Records to Competent Authorities in a Timely Manner (c. 10.3*):

366. Reg. 5(3) requires FIs to keep records or copies in a form to allow retrieval in legible form within a reasonable period of time. This would provide the basis for making such records available to competent authorities in a timely manner, especially when read in connection with the requirement under Reg. 5(2) with respect to assisting with an investigation into money laundering.

Mutual Funds:

367. Section 13 of the Mutual Funds Act allows public (retail) funds to keep such accounting records and financial statements available for examination by the Registrar or any person authorized by IFSA at (i) its place of business or registered office in the SVG; or (ii) such other place as its officers may see fit, provided that copies of such records and statements or such other documents or information as the registrar may consider adequate are kept at its place of business or registered office in SVG. The Act is silent about the maintenance and location of records with respect to books, investor accounts, subscriptions, redemptions, etc. with respect to public funds, private and accredited funds. In practice, customer related records are generally kept by fund administrators and managers in other countries from which they operate, and at least in one important case in a country with which IFSA has no formal supervisory cooperation arrangements. The provisions of the Exchange of Information Act may be invoked to obtain information from foreign regulatory and other authorities but it may not be practical for the IFSA to access such records for purposes of ongoing supervision of mutual funds, managers and administrators. IFSA maintains that it can and has obtained such records on request.

368. The International Insurance Act also contains broadly similar provisions that would allow insurance companies, brokers and managers to maintain records abroad.

Non-mandatory Guidance Notes:

369. GNs 102 to 110 make provisions for recordkeeping by FIs which should “facilitate the investigation of any audit trail” concerning transactions with customers. To achieve this, the GNs recommend keeping, inter alia, records of account opening, identification verification, customer instructions, for the seven year minimum period. FIs should also keep copies of account ledger records including records that support entries in such ledgers such a credit and debit slips.

370. Where the FIU has initiated an investigation into ML, it may request FIs to keep records open until further notice, notwithstanding the prescribed seven-year period. GN 103 states that even if the FIU does not make a request and where an FI knows of an ongoing investigation, it should not destroy records without the prior approval of the FIU even though the prescribed period has elapsed. It is unclear how this would apply in practice as the likelihood of an FI becoming aware of an investigation into ML would be rare.

371. GNs 104-108. Records to be retained should include, inter alia, details of identification verification, transaction details including of securities and investments, and electronic transfers (does not specify full originator information e.g. account number and address but SVG believes that “transaction details” would cover this.) FIs should keep records in readily retrievable form and be able to access them without undue delay in original, “microform” or electronic data. The authorities state that electronic data would be admissible as evidence for prosecutions for purposes of c. 10.1.1 subject to the requirements of the Evidence Act.

372. The GNs further state that records held by third parties are not regarded as being in a readily retrievable form unless the FI is reasonably satisfied that the third party is itself an institution which is able and “willing” to keep such records and disclose them to it when required. This would be insufficient for purposes of c. 9.2 where a more explicit requirement to satisfy itself that the relevant records have been obtained and retained. FIs should also maintain a register of enquiries made by the FIU for the minimum seven years.

Effectiveness of Implementation

373. Recordkeeping requirements seem to be generally met in the domestic financial sectors largely as part of commercial business practices, which also cover AML/CFT requirements.

374. With respect to the international/offshore sector, however, the absence of records in SVG (e.g. for the mutual fund and insurance sectors records are generally kept in other countries but legal access to the IFSA is available and has been done in a few cases) can limit the ability of supervise to effectively monitor for compliance on an regular basis.

Obtain Originator Information for Wire Transfers (applying c. 5.2 & 5.3 in R.5, c. VII.1):

375. No specific regulations with respect to wire transfers have been issued. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. Under Section 4(2)(b) of the POCA Regulations the threshold for identification of a one-off transaction is EC$10,000, equivalent to US$3,750. c. VII.1 sets the threshold at US$1,000. The standard CDD requirements have no provisions dealing with originators’ account number or unique reference number.

Inclusion of Originator Information in Cross-Border Wire Transfers (c. VII.2):

376. No specific regulations with respect to wire transfers have been issued by any of the regulators responsible for FIs in St. Vincent. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. Under Section 4(2)(b) of the POCA Regulations the threshold for identification of a one-off transaction is EC$10,000, equivalent to US$3,750. The standard CDD requirements have no provisions dealing with the contents of international wire transfer messages or payment orders.

Inclusion of Originator Information in Domestic Wire Transfers (c. VII.3):

377. No specific regulations with respect to wire transfers have been issued by any of the regulators responsible for FIs in St. Vincent. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. Under Section 4(2)(b) of the POCA Regulations the threshold for identification of a one-off transaction is EC$10,000, equivalent to US$3,750. The standard CDD requirements have no provisions dealing with the contents of domestic wire transfer messages or payment orders.

Maintenance of Originator Information (c.VII.4):

378. No specific regulations with respect to wire transfers have been issued by any of the regulators responsible for FIs in St. Vincent. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. Under Section 4(2)(b) of the POCA Regulations the threshold for identification of a one-off transaction is EC$10,000, equivalent to US$3,750. The standard CDD requirements have no provisions dealing with the information that should be accompany transfers throughout the payment chain, nor with respect to record keeping requirements for receiving intermediaries of such information.

Risk Based Procedures for Transfers Not Accompanied by Originator Information (c. VII.5):

379. No specific regulations with respect to wire transfers have been issued by any of the regulators responsible for FIs in St. Vincent. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. Under Section 4(2)(b) of the POCA Regulations the threshold for identification of a one-off transaction is EC$10,000, equivalent to US$3,750. The standard CDD requirements have no provisions dealing with risk-based procedures for handling wire transfers that are not accompanied by complete originator information.

Monitoring of Implementation (c. VII.6):

380. No specific regulations with respect to wire transfers have been issued by any of the regulators responsible for FIs in St. Vincent. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. The standard CDD and record keeping requirements do not have the detailed provisions for wire transfers that are called for in SR.VII. Nor do the compliance monitoring systems of the various FI regulators cover the detailed provisions for wire transfers contemplated in SR.VII.

Application of Sanctions (c. VII.7: applying c. 17.1 – 17.4):

381. No specific regulations with respect to wire transfers have been issued by any of the regulators responsible for FIs in St. Vincent. The standard CDD and record keeping requirements under POCA, POCA Regulations, and the Guidance Notes that are analyzed above apply equally to wire transfers as well as to the other business activities of FIs. The sanctioning powers of the financial regulators with respect to CDD and record keeping for wire transfers are limited to the requirements imposed under POCA and the POCA Regulations and other St. Vincent regulations and do not extend to the specific elements set out in SR.VII.

Additional elements: elimination of thresholds (c. VII.8 and c. VII.9) (c. VII.8 and c. VII.9):

382. St. Vincent does not require that all incoming and outgoing cross-border wire transfers below a US$1,000 thresholds should contain full and accurate originator information.

Effectiveness of implementation

383. Notwithstanding the absence of specific wire transfer requirements, operating practices of most St. Vincent FIs with respect to wire transfers appear to follow some of the FATF standards for international transfers. Banks handling wire transfers state that the Swift systems they use require the inputting of complete originator information or the transactions will not go through; and that these systems retain the originator information across the payment chain. The accuracy of such information is reliant on the FIs effectively implementing their POCA CDD obligations, and identification below a threshold of $3,750 is not assured. General record retention requirements are for 7 years, although the detail expected under the FATF wire transfer standards will not be achieved. Risks based procedures are not emphasized in St. Vincent financial regulation and no risk based procedures specifically for dealing with wire transfers are likely to be in place except in cases where the local bank is a subsidiary of a large international bank.

384. Similarly, operating practices of money transmitters with respect to wire transfers address several elements of the FATF standard, even if not specifically required under St. Vincent laws and regulations. Money transmitters are all agents or sub-agents for regional or international money service companies and they use these companies’ proprietary electronic systems for transmitting payment instructions. As under the Swift system, complete originator information is required in order for the system to accept payment instructions, although it was unclear whether this information routinely included addresses. A money transfer control or reference number is included, which identifies the specific transaction. Identification is required for all transactions. One money transmitter stated that its internal procedures set a threshold of US1,000, at which level additional verification details were required and at which level more complete records were required to be maintained. Another service provider stated that its threshold was EC4,000, slightly more than US$1,000. In the absence of sufficient originator information, transactions are not accepted. Licensed money service providers have not as yet been examined by their supervisor for their compliance with their CDD, record keeping, and internal control requirements established under POCA, the POCA Regulations and the Money Service Business Act.

3.5.2. Recommendations and Comments

R.10
  • Clarify in the regulations the provisions to keep records longer than the minimum period when required by the FIU, consistent with the GNs.

  • Explicitly require FIs to retain business correspondence.

  • Review for and remove potentially conflicting recordkeeping requirements between the POCA/POCA Regulations and the DTOA and with some of the provisions in Guidance Notes 102-110.

  • Review recordkeeping arrangements by some FIs that operate and keep records outside of SVG to ensure adequate compliance supervision and efficient access by competent authorities.

SR. VII
  • Binding regulations should be adopted requiring all wire transfer service providers, including banks, money transmitters, and other FIs, to adhere to the wire transfer recommendations of FATF SR.VII.

  • All FIs subject to wire transfer requirements should be monitored for compliance by a supervisor with the authority and capacity to enforce compliance.

3.5.3. Compliance with Recommendation 10 and Special Recommendation VII

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3.6. Monitoring of Transactions and Relationships (R.11 & 21)

3.6.1. Description and Analysis

Legal Framework:

385. FIs and persons engaged in relevant financial activities, as set forth in Schedules 1 and 2 of POCA, respectively (hereinafter “reporting entities”) are required under POCA Section 46.2 to verify accounts on a continuous basis (see also POCA REGULATIONS Section 6(2) and Section7(a)). (The GN elaborate on circumstances where monitoring of transactions is required and where reliance and third party introductions is allowed.

Special Attention to Complex, Unusual Large Transactions (c. 11.1):

386. POCA Section46(2) requires reporting entities to pay special attention to all complex, unusual or large transactions, whether completed or not, and to all unusual patterns of transactions, and to which insignificant or periodic patterns of transactions, which have no apparent economic or lawful purpose. However, the GNs, which are not enforceable, exempt specific transactions from CDD requirements, in particular in GN Sections46-50 (related to exempt FIs) and Sections 52-53 (related to reliable instruction from regulated institutions or professional intermediaries). Accordingly, a subset of exempt transactions would not subject to monitoring on an ongoing basis. Thus, there is an insufficient scope of monitoring for consistency with the customer’s business or personal profile because the requisite such background information would not be obtained or scrutinized.

Examination of Complex & Unusual Transactions (c. 11.2):

387. There is no specific legal requirement for reporting entities to examine as far as possible the background and purpose of such transaction or to set forth their findings in writing. To some extent, Section 6(2) of the POCA Regulations, which requires regulated institutions to at all time monitor a business relationship for consistency with the stated account purposes and business and the identified potential account activity, would address this criterion; in any case this is limited to regulated institutions and not applicable to all reporting entities. As such there is insufficient information for authorities or auditors of to assess the scope of the reporting entities examination of complex or unusual transactions. In addition, assessors could not establish with any certainty whether supervisors or external auditors have in fact reviewed the level of compliance of reporting entities in their examinations into the background and purpose of complex and unusual transactions or whether such examinations are documented.

Record-Keeping of Findings of Examination (c. 11.3):

388. Neither POCA, the POCA Regulations nor the GN require a reporting entity to keep records of their analysis (background and purpose) with respect to complex and unusual transactions, such information would not be available for competent authorities and their auditors. Only records of those complex and unusual transactions that result in the filing of a SAR are required to be maintained for a period of 7 years and hence available to competent authorities but in practice are not made available to external auditors.

Special Attention to Countries Not Sufficiently Applying FATF Recommendations (c. 21.1 & 21.1.1):

389. FIs are not required to pay special attention to transactions and relationships with persons, including legal persons and other FIs, from or in countries that do not or insufficiently apply the FATF Recommendations. In addition, there is no formal mechanism or measures to ensure that FIs are advised of concerns about the weaknesses in the AML/CFT systems of other countries. To date no advisories have been issued to FIs in SVG.

Examinations of Transactions with no Apparent Economic or Visible Lawful Purpose from Countries Not Sufficiently Applying FATF Recommendations (c. 21.2):

390. There is a general requirement under Section 46 of the POCA that requires FIs to pay special attention to all complex, unusual or large transactions, whether completed or not, to all unusual patterns of transactions, and to insignificant but periodic patterns of transactions, which have no apparent economic or lawful purpose. This requirement would include transactions with persons in countries that do not or insufficiently apply the FATF Recommendations. However, Section 46 should be broadened to include all transactions with such countries that do not have an apparent lawful or economic purpose, not only those transactions that are complex, large, unusual etc. (See also Recs. 11 and 13.)

Ability to Apply Counter Measures with Regard to Countries Not Sufficiently Applying FATF Recommendations (c. 21.3):

391. There are no provisions that enable SVG to apply counter-measures against countries that do not or insufficiently apply the FATF Recommendations and in practice no such measures have been applied.

Non-mandatory Guidance Notes:

392. GN 17 contains provisions similar to Section 46 of the POCA except that they recommend that FIs desist from entering into business relationships or significant transactions unless FIs have fully implemented their AML regimes. In addition, GN 162 provides a long list of countries that are considered to have an AML regime at least equivalent to that of SVG. There is a possibility that not all countries on this list apply or sufficiently apply the FATF Recommendations.

Effectiveness of Implementation
Monitoring of Transactions (R.11):

393. Reporting entities display wide discrepancies and unevenness in their monitoring of transactions. This is due to a variety of factors:

394. First, there is a discrepancy among FIs that appears to apply the legal requirement for monitoring transactions, which, while embodied in the law, is not supplemented with a specific requirement to examine the background and purpose of complex or unusual large or unusual patterns of transactions. Many of the reporting entities are conducting one-off transactions, in particular the money remitters. As such, the depth of the background and purpose information these entities obtain is shallow. As stated above, the only legal requirement to examine the purpose of an unusual transaction applies to regulated institutions that enter into ongoing relationships with a customer, under the POCA Regulations. The result is that nearly all large transactions or transactions that are just below the EC $10,000 threshold, i.e., for $9,900 for enhanced verification are reported by money remitters to the FIU in a SAR, without substantial analysis.

395. (See also, Rec. 16 DNFBP STR reporting). Second, while not relevant to the rating of Rec. 13, the inconsistency in SAR filing evidences some weakness in the guidance provided on SAR filing; in particular there is limited reporting by offshore banks and an essential failure to comply by a number of reporting entities, in particular DNFBPs that are not otherwise subject to supervisory body oversight such as lawyers. As inferred from the SAR filing outputs of DNFBPs (discussed in 3.7 and 4.2), certain DNFBPs are not instituting procedures for monitoring transactions nor applying the legal requirements to their clients. These DNFBPs essentially balance the cost and potential loss of business arising from the monitoring requirements (among other requirements) against the likelihood of sanctions under POCA being enforced. Because all POCA sanctions are criminal sanctions requiring the involvement at least nominally of the DPP, charging in court and the high criminal threshold for prosecution, in particular lawyers, calculate the odds of prosecution as low. Because there are no direct POCA and UNATMA administrative sanctions and no regulatory sanctions apply, monitoring of transactions is virtually nil. Compounding this problem in the case of lawyers is the wide interpretation of the exemption in POCA relating to activities relating to legally privileged communications.

R.21:

396. FIs do not take account of business that originates from countries with weak AML/CFT regimes. The assessors believe that reliance on the list of countries in the GNs that are considered to have legal requirements at least equivalent to SVG’s is too liberal.

3.6.2. Recommendations and Comments

R.11
  • The POCA Regulations should be amended to require explicitly that reporting entities be required to examine as far as possible the background and purpose of such transactions and to set forth their findings in writing.

  • The POCA Regulations should be amended to require that the written findings of reporting entities on their examination be subject to the POCA record keeping requirements.

  • POCA should be amended to provide for direct administrative sanctions for reporting parties that fail to adhere to the requirements for monitoring transactions, including failure to implement procedures to monitor, prepare written findings and maintaining records on such monitoring.

R.21
  • Require FIs to pay special attention to transactions and relationships with persons from countries that do not or insufficiently apply the FATF Recommendations.

  • Implement a formal mechanism to advise FIs of AML/CFT concerns with other countries and where necessary advise FIs of such concerns.

  • Introduce provisions and procedures that would require SVG to apply counter-measures against countries that do not or insufficiently apply the FATF Recommendations.

3.6.3. Compliance with Recommendations 11 & 21

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3.7. STRs and Other Reporting (R.13-14, 19, 25 & SR.IV)

3.7.1. Description and Analysis13

Legal Framework:

397. The legal requirements to make SARs are contained in: (1) POCA Section 46(3) and (2) and in UNATMA Section 10A. Both obligations are direct, mandatory obligations. These statutory obligations are complemented by the POCA Regulations, which define SARs, and the non-mandatory GNs which elaborate on detection of suspicious transactions and include the SAR form and instructions. In addition, the FIU Act establishes the FIU to which all SARs are filed (as described in detail above, in Section 2.5.1).

Requirement to Make STRs on ML and TF to FIU (c. 13.1 & IV.1):

398. Under POCA Section 46(2) and UNATMA Section 10A, FIs and persons engaged in a relevant business activity are required to file SARs. The combined requirement under both statutes mandates that a person or financial institution to file a SAR upon suspicion that a transaction or financial activity could constitute or be related to money laundering, the financing of a terrorist act or the proceeds of criminal conduct. SARs are required to be filed as soon a reasonably practicable but in no case, more than 14 days from the date the financial activity was deemed to be suspicious as relating to ML, the proceeds of crime or the financing of a terrorist act. The authorities confirmed that Section 46(2) of POCA, which authorizes filing the SAR upon the reporting party’s drawing a conclusion of suspicion that the transaction is related to money laundering or the proceeds of criminal conduct, does not unduly delay filings of SARs. Because SVG takes an “all-crimes” approach to predicate offenses for ML, activities related to the proceeds of all such predicate offenses would be captured. The standard for SAR filings in SVG is a subjective standard of a “suspicion” rather than an objective test of reasonable basis to suspect. The authorities inform that in practice reporting entities frequently file based on their conclusions that there are reasonable grounds to suspect ML or proceeds of crime exists.

399. However, under Section 46(3) of POCA, there is a two-part requirement for SAR filings. First, a determination must be made under Section 46(2) that the transaction that fall under one of the following three categories: “Complex, unusual or large transactions, whether completed or not;” “unusual patterns of transactions;” or “insignificant but periodic patterns of transactions,” that, in each case, “have no apparent economic or lawful purpose.” This is partly a R.11 requirement and not an R.13 reporting obligation.. Second, once the determination is made under Section 46(2) that a transaction falls under one of these three categories, a second determination is required under Section. 46(3) that the transactions as described under Section 46(2) “could constitute or be related to ML or the proceeds of criminal conduct.” Consequently, the requirement to report for purposes of R.13 is limited to those described under Section 46(2), that is, those that are complex, unusual or large, etc. This formulation is not sufficient for purposes of R.13.

STRs Related to Terrorism and its Financing (c. 13.2):

400. UNATMA Section 10A requires FIs and persons engaged in relevant financial activities to file SARs directly to the FIU for suspicions constituting or that may be related to the financing of terrorist acts. The wording of the direct filing requirement in UNATMA is narrow. However, there is no legal requirement to file a SAR for suspicions of financial activity constituting or being related to financing of terrorist organizations or financing of an individual terrorist in the absence of an identified terrorist act.

No Reporting Threshold for STRs (c. 13.3):

401. Neither POCA nor UNATMA requirements for filing of SARs impose a reporting threshold for SAR filing. POCA Section 46 requires filing of SARs when reporting entities detect complex, unusual or large transactions, whether completed or not, upon suspicion that such transaction could be related to ML or the proceeds of crime, thus capturing attempted transactions. However, c.13.3 requires that all transactions be reported, not just those that fall under the three-part determination set forth in Section 46(3) of POCA, as described in more detail in the discussion of c.13.1 above.

Making of ML and TF STRs Regardless of Possible Involvement of Tax Matters (c. 13.4, c. IV.2):

402. Neither the POCA nor UNATMA contain any limitation on reporting in connection with tax matters.

Additional Element - Reporting of All Criminal Acts (c. 13.5):

403. POCA’s SAR filing requirements cover the proceeds of all criminal acts that constitute predicate offenses for ML. Because SVG has taken an all crimes approach to criminalizing ML, all crimes are predicate offenses for ML and therefore, would be subject to SAR filing if the reporting entity has a suspicion that such an offense would constitute or be related to the proceeds of crime.

Protection for Making STRs (c. 14.1):

404. POCA Section 46(5) provides the legal protection for persons filing SARs related to transactions that could constitute or be related to ML or the proceeds of criminal conduct. When a SAR is filed in good faith, the FIs or persons engaged in relevant business activities, and their employees, staff, directors, owners or other representatives as authorized by law, are exempted from criminal, civil, or administrative liability as the case may be for complying with the SAR filing requirement in Section 46(3) POCA. This protection applies regardless of the result of the communication; as applied within SVG, this language has the effect of protecting a SAR filer for disclosures in SARs to the FIU for attempted transactions. UNATMA Section 10A provides a separate legal protection for persons filing SARs for transactions or financial activity that could constitute or be related to the commission of a terrorist act. Specifically, a person or financial institution who in good faith files a SAR on an activity suspected to be related to the financing of a terrorist act, and their employees, staff, directors, owners and other representatives, are exempted from criminal, civil or administrative liability arising out of contract or by any legislative, regulatory or administrative provision.

405. In addition to the direct protection for filing a SAR in Section 46(2)(5) and in UNATMA Section 10A, POCA Section 44 provides the legal protection for persons reporting suspicions of ML. This protects a person who discloses in good faith to a police officer his suspicion or belief that another person is engaged in ML, or any information or other matter on which that suspicion or belief is based. Such disclosure shall not be treated as a breach of any restriction upon the disclosure of information imposed by statute or otherwise and shall not give rise to any criminal, civil or administrative liability. One advantage of this particular provision – while not completely coextensive with the tipping-off provision in Section 45, is that it protects a person who is not required to file a SAR, i.e., a voluntary filer for reporting to a police officer. There is a one important defect in this additional provision because it includes a defense to the criminal offense contained in this Section. if the person had “a reasonable excuse for not disclosing the information or other matter in question.” This defense is too broad for effective implementation of the legal protection.

Tipping Off Offenses:

406. POCA Section 45 contains the criminal offense for tipping off for ML and criminal conduct that generate proceeds.

Prohibition Against Tipping-Off (c. 14.2):

407. Under POCA Section 45, a person commits an offense if discloses to any other person that he knows, suspects or has reasonable grounds to suspect that a police officer is acting, or is proposing to act, in connection with an investigation into money laundering or the proceeds of criminal conduct, and the disclosure is of information or any other matter which is likely to prejudice the investigation or proposed investigation. In addition, the same section provides that it is a criminal offense for a person to disclose to any other person, if he knows, suspects or has reasonable grounds to suspect, that a disclosure has been made to a police officer or to an appropriate person related to an offense under POCA.

408. There are three significant limitations in the tipping off offenses.

  • First, the fact of filing a SAR itself is not explicitly covered by the offense of tipping off in Section 45 of the Act. That is, the fact of filing the SAR would not be an offense unless it is established that the disclosure relates to a police officer acting or proposing to act in connection with an investigation and the disclosed information is likely to prejudice the investigation or proposed investigation.

  • Second, the defense provided in Section 45(4) to a person charged with a tipping-off offense under this section renders the offense ineffective. It provides that it is a defense for the person charged “to prove that he did not know that the disclosure was likely to be prejudicial in the way there mentioned.”

  • Third, there is no direct offense for tipping off with respect to the FT. Although POCA has been amended to make the FT offenses in UNATMA (Sections 3-6) predicate offenses for ML offenses under POCA, for FT offenses that do not generate proceeds of criminal conduct, such offenses would not be captured for the purposes of POCA. As such, the prohibition on tipping off is not sufficiently broad to meet the requirements of the criterion.

Additional Element—Confidentiality of Reporting Staff (c. 14.3):

409. The approach is to rely on the provisions of Section 7(1) of the FIU Act, which provides that a person who obtains in any form as a result of his connection with the FIU shall not disclose that information to any person except insofar as it is required or permitted in the FIU Act or other law.

Consideration of Reporting of Currency Transactions Above a Threshold (c. 19.1):

410. The FIU has proposed to the NAMLC the establishment of a currency transaction threshold. The expectation is that the reporting volume would not be significant and the FIU would receive these reports. The threshold currently under contemplation is EC $10,000. This threshold may be too high for the level of cash transactions conducted within SVG, which while numerous are normally well-below the threshold.

Additional Element—Computerized Database for Currency Transactions Above a Threshold and Access by Competent Authorities (c. 19.2):

411. Not applicable.

Additional Element—Proper Use of Reports of Currency Transactions Above a Threshold (c. 19.3):

412. Not applicable.

413. Feedback and Guidelines for FIs with respect to STR and other reporting (c. 25.2) [Note: guidelines with respect other aspects of compliance are analyzed in Section 3.10]:

414. Feedback to FIs with respect to STR and other reporting (c. 25.2):

Effectiveness of Implementation:
SAR Reporting:

415. The following table shows the level of SAR reporting by entities covered by the POCA, the POCA Regulations and the UNATMA.

Table 17:

SARS filed with the FIU during 2005 through 2008

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416. The table above shows a rather uneven but generally increasing pattern of reporting with a large concentration of SARs filed by banks and money remittance businesses, particularly in the last two years. No SARs have been filed by the systemically large building and loan society. Particularly worrying also is the absence of SARs from the international (offshore) mutual funds and insurance sectors both of which have significant numbers. Banks, credit unions and money remitters are on one end of the spectrum, filing the vast majority of SARs since 2004. (On the other end, certain DNFBPs – in particular those that are not subject to regulatory oversight – are not reporting altogether.)

417. This level of under-reporting by some sectors is worrisome and appears to be due to combination of deficiencies in training of FIs, lack of effective compliance oversight, enforcement and sanctions. It does not appear to be a matter of outreach by the FIU and regulators as the sole obligation to report and to provide training is on the FIs themselves and their management. Addressing these deficiencies should be a priority. In addition, administrative sanctions and assigning a competent authority like the FIU as the default supervisor for otherwise not supervised entities would be an effective step in increasing such compliance.

Table 18:

ANALYSIS

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Quality of SAR Reporting:

418. Even with respect to the FIs that are regularly filing, there are quality issues that need to be addressed. The authorities distinguish two types of SARs, those filed by FIs such as banks and credit unions and those that are filed by money remitters. The former are generally of a higher quality, shows greater analysis of underlying factors, including background and purposes of the activity. The SARs from money remitters are by very nature of the activity is less likely to elicit substantial analysis by themselves. The FIU reports that about 50 percent of SARs filed require the FIU to return for additional information. Nevertheless, the FIU reports that when combined with other available information, the information contained in the SARs is very useful and actionable. The FIU finds both types of SARs are useful. Nevertheless, the guidance for SAR filing provided in the GNs and SAR form could be significantly improved including e.g., a field in the form for the amount of suspected transaction. The authorities state that one of the long-term objectives is to implement a more secure electronic SAR filing system that will provide an updated SAR tailored to each main sector. In doing so, the authorities should be cautious about creating unnecessary confusion among reporting entities.

419. Another concern is that not all offshore FIs with substantive physical presence/mind and management in SVG. This has led in some instances of the FIs and/or their managers and administrators not being fully aware of the reporting procedures to the FIU, and at least in one case they did not even have copies of the SARs. This tends to support the statistics above that indicates 0 SARs from the non-bank offshore financial sectors.

Tipping Off Protection:

420. As detailed above, the limitations on the protection for breach of disclosure and tipping off effectively undermine the legal strength of these provisions. While the authorities assert, persuasively, that the reporting populace views the breach of disclosure and tipping off provisions as broadly applicable, including in relation to the SAR itself, the law is not so generous.

3.7.2. Recommendations and Comments

  • POCA (Section 46(3)) should be amended to require FIs to report all suspicion with respect to funds that are the proceeds of criminal conduct and not only those described under Section 46(2).

  • Either POCA or UNATMA should be amended to require the filing of SARs for transactions or financial activities that are suspected to constitute or be related to the financing of individual terrorists or terrorist organizations.

  • POCA Section 45 should be amended to prohibit tipping off of the fact of the filing of the SAR itself.

  • The defense in POCA Section 45(4) should be removed.

  • UNATMA and/or POCA should be amended to prohibit the tipping of the filing of SARs and any related disclosure of information to a police officer of suspected terrorist financing activities or transactions.

3.7.3. Compliance with Recommendations 13, 14, 19 and 25 (criteria 25.2), and Special Recommendation IV

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Internal controls and other measures

3.8. Internal Controls, Compliance, Audit and Foreign Branches (R.15 & 22)

3.8.1. Description and Analysis

Legal Framework:

421. Section 46 of the POCA requires every FI to develop and implement a written compliance program that is reasonably designed to ensure and monitor compliance with the POCA Regulations made under the POCA. Such program shall include a system of internal controls to ensure ongoing compliance, internal or external independent testing of compliance, staff training in the identification of suspicious transactions, and the appointment of senior staff or a senior staff member at management level for ongoing compliance with the POCA and POCA Regulations. Section 48(4) of the POCA also empowers the Minister of Finance to issue regulations under the POCA to, inter alia, require FIs to establish and maintain procedures for customer identification, recordkeeping, making of “reports” (taken to denote SARs), and training. See discussion of Reg. 8 below.

422. The POCA Regulations issued under the POCA make provisions that require FIs to: (a) Reg. 4 establish and maintain customer identification procedures; (b) Reg. 5 maintain records of identification, accounts and transactions, etc.; (c) Reg. 6 conduct ongoing verification of accounts; (5) Reg. 7 institute and maintain internal reporting procedures for reporting of suspicious activities including identification of a money laundering “reporting officer” (“MLRO or compliance officer”) to whom the internal reports are to be made and for making reports to the FIU; (6) Reg. 8 train staff on the POCA, POCA Regulations and any other statutory provisions relating to ML and of its compliance procedures.

423. For domestic banks, the ECCB also has the power under Section 19 of the Banking Act to appoint annually an auditor whose duties shall be, inter alia, to certify whether suitable AML/CFT measures have been adopted by a bank and are being effectively implemented in accordance with the applicable laws. Auditors are required to report to the ECCB any evidence of criminal activity involving fraud (but not ML or FT), or if they detect serious irregularities. No similar provisions are contained in the other financial laws.

424. Some of the financial laws provide for FIs to maintain systems of internal controls, as part of their prudential management functions. These provisions are complementary to those requirements established under the POCA and POCA Regulations discussed below.

Establish and Maintain Internal Controls to Prevent ML and TF (c. 15.1, 15.1.1 & 15.1.2):

425. There are requirements to establish AML/CFT procedures and controls, but no explicit requirement for AML/CFT policies. Nonetheless, the SVG authorities have indicated that they interpret the procedures and controls requirement more broadly to encompass policies. In particular, the POCA Regulations require measures with respect to identification, recordkeeping, detection and reporting of suspicious transactions. The limitations in the legal requirements discussed in the preceding Recs. would also apply here, especially with respect to the need to have policy and procedure requirements that cover the full scope of CDD, and for the detection of unusual transactions, and FT. Therefore, an explicit and comprehensive policy requirement would be recommended to more directly commit the board of directors and top management to implement ML/FT risk management controls and compliance with the applicable legislation. As mentioned below under effectiveness of implementation, most banks met had an AML/CFT policy in place but deficiencies were noted in the non-banking sectors.

426. There are requirements in the POCA and POCA Regulations for FIs to establish a compliance program that includes the appointment of a money laundering reporting (MLRO or “compliance officer”) for purposes of implementing the internal and external suspicious activity reporting regime. Section 46 (7) of the POCA requires the appointment of the MLRO at a senior level who shall be responsible for ongoing compliance with the POCA and the POCA Regulations. It also includes a provision for FIs to have a system of internal controls to ensure ongoing compliance.

427. The internal reporting procedures requirement under Reg. 7 would allow the MLRO to have access to any other information that may be of assistance to him in considering an internal report of suspicion. The provisions of Reg. 7 could be expanded to make them consistent with the much broader compliance requirements established under Section 46 of the POCA.

428. The International Banks Act, Section 13, requires the directors (presumably the board of directors) of offshore banks to manage and supervise the business and affairs of banks and to establish, inter alia, anti-money laundering policies. There is also a general requirement to establish controls and procedures.

Independent Audit of Internal Controls to Prevent ML and TF (c. 15.2):

429. Section 46 of the POCA requires FIs to have a compliance program that includes internal or external testing for compliance. There are no similarly broad provisions in the implementing POCA Regulations that would require FIs to maintain an adequately resourced and independent audit function for testing compliance with the applicable policies, procedures and controls. Consistency between the obligations under POCA and the POCA Regulations is desirable.

430. Under Section 19 of the Act, the ECCB can appoint annually an auditor whose duties shall be, inter alia, to certify whether suitable AML/CFT measures have been adopted by a bank and are being effectively implemented in accordance with the applicable laws. Auditors are required to report to the ECCB any evidence of criminal activity involving fraud, but not ML or FT, or if they detect serious irregularities. Similarly, Section 13 of the International (offshore) Banks Act requires an international bank to appoint an external auditor to audit its accounts and to report to the bank and IFSA any evidence of a criminal offence that may come to their attention during their audits involving fraud, money laundering or dishonesty. It does not include the duty to report on suspected FT crimes. While the authorities interpret the requirement by domestic banks to report serious irregularities as encompassing ML and FT issues, such requirements should be consistent for all FIs, and for the avoidance of doubt should specify ML and FT, in the same manner as ML and fraud are covered.

431. Section 21 of the Money Services Business Act also imposes the duty to maintain a system of internal controls and recordkeeping, a system of inspections and reporting. It also requires that the direction and management of the business be conducted with prudence and integrity by a sufficient number of fit and proper persons.

Ongoing Employee Training on AML/CFT Matters (c. 15.3):

432. Both the POCA and the POCA Regulations contain provisions for FIs to provide training to their staff. Section 46 of the POCA requires that, as part of a written compliance program to ensure and monitor compliance with the POCA Regulations, such training includes the identification of suspicious transactions. In addition, Reg. 8 requires FIs to take measures from time to time to make “relevant employees” aware of the POCA, the POCA Regulations, any other ML statutory provisions, and of the procedures maintained by the FIs in compliance with the duties imposed under the POCA Regulations. These duties would include customer identification, recordkeeping, reporting, etc. Reg. 8 also requires FIs to train staff with respect to the handling and reporting of suspicious ML transactions. There are no specific requirements to train staff on current ML and FT trends, typologies, techniques, etc. Training under Reg. 8 shall be given to all new relevant employees as soon as practical after their appointment.

433. For purposes of Reg. 8, a “relevant employee” are those that at any time in the course of his/her duties has or may have access to any information that may be relevant in determining whether a person is engaged in ML. The authorities are of the view that relevant employee covers most employees but it would be useful to clarify the scope of this requirement is unclear and to ensure that it does not restrict its application.

Employee Screening Procedures (c. 15.4):

434. There are no legal requirements to screen employees to ensure high standards.

Additional Element—Independence of Compliance Officer (c. 15.5):

435. Neither Section 46 of the POCA nor the POCA Regulations requires that the compliance officer/MLRO is operationally independent and reports to senior management above their positions, or to the board of directors, or a committee thereof.

Application of AML/CFT Measures to Foreign Branches & Subsidiaries (c. 22.1, 22.1.1 & 22.1.2):

436. Neither the POCA nor the POCA Regulations requires that FIs apply AML/CFT measures to any foreign branches and subsidiaries under any of the circumstances covered under these criteria.

Requirement to Inform Home Country Supervisor if Foreign Branches & Subsidiaries are Unable Implement AML/CFT Measures (c. 22.2):

437. There are no requirements in the POCA or the POCA Regulations that require FIs to inform their supervisors of cases where their foreign branches and subsidiaries cannot observe appropriate AML/CFT measures when prohibited by local law or other measures.

Additional Element—Consistency of CDD Measures at Group Level (c. 22.3):

438. There are no requirements for Core Principles institutions to apply CDD measures at group level.

Non-mandatory Guidance Notes (Rec. 15 Internal Policies, etc.):

439. While the GNs do not explicitly require FIs to have comprehensive policies, procedures and controls to prevent ML and FT, and to communicate those to employees, they contain some of these elements in several of its provisions. GN 15 would require FIs to exercise a duty of diligence to prevent assisting ML operations through customer verification, recordkeeping, recognition and reporting of suspicion, and training. This would require them to have systems that would enable them to achieve these objectives and to cooperate with the NAMLC on vigilance issues concerning ML policy and systems. It should also involve internal audit and compliance departments to regularly monitor implementation of such systems.

440. GN 18 states that the nature and scope of vigilance systems should be appropriate to the size, structure and nature of the business of FIs but that nonetheless they should be consistent with the GNs. GNs 19 and 20 also cover training as part of the vigilance systems to help staff comply with their responsibilities, including providing them with copies of FIs manuals with regard to customer acceptance (entry), verification and records. GN 21 also deals with the appointment of a MLRO at senior level that should act as the contact point for the FIU, and who should have authority to ensure compliance with the GNs. GN 21 also allows for the possibility to delegate such authority to other Prevention Officers with respect to their regular compliance duties. For large FIs, the compliance and audit functions could be by way of departments out of which the MLRO would be appointed.

441. GNs 23-25 make provisions for having “know your employees” policies which include hiring policies and due diligence checks on new employees, and for monitoring their lifestyles.

442. (Rec. 22 Application to Branches and Subsidiaries): GN 9 states that where a group whose headquarters are in SVG operates foreign branches and subsidiaries, it should ensure that such operations observe the recommended measures contained in the GNs or to adhere to local standards if those are at least equivalent to the GNs. In addition, it states that branches and subsidiaries are to be informed of the group policy and of the local reporting procedures for SARs and of the reporting procedures to the SVG FIU. However, GN 9 states that the local reporting point should be the equivalent of the NAMLC, and not the FIU, which would be inconsistent with the reporting requirements and practice for suspicious activity in SVG.

Effectiveness of Implementation