The BVI’s progress in mitigating money laundering was highlighted during the LIVE broadcast of ‘What is Money Laundering?’, an interview with Kenneth Baker, Managing Director and CEO of the British Virgin Islands Financial Services Commission (FSC).
Mr. Baker asserted that the BVI, like other financial services jurisdictions, is already an active player in the fight against money laundering and other financial crimes, and in so doing, has made significant progress in legislation over the years.
“The BVI has made significant progress, but we have some ways to go. I anticipate that by the end of the year, the legislative process [for the anti-money laundering regime] will be complete.”
He explained that a number of amendments have been made to financial services legislation, all in preparation for the upcoming CFATF assessment, and in compliance with international regulatory standards.
The CFATF Assessment
Conversations turned to the jurisdiction’s upcoming assessment by the Caribbean Financial Action Task Force (CFATF). The assessment determines the effective implementation of, and compliance with, the Financial Action Task Force’s (FATF) recommendations to prevent and control money laundering and to counter the financing of terrorism and proliferation of weapons.
Mr. Baker said that the BVI’s role was to translate the FATF’s recommendations through domestic legislation or regulations, adding, “Those recommendations are the measures that should be in place to prevent money laundering. The CFATF assesses whether the jurisdiction has the right legislation in place, and the overall effectiveness.”
Mr. Baker outlined the assessment stages, which includes the dissemination and submission of questionnaires, along with personal interviews with both private and public sectors to determine the level of understanding of the anti-money laundering regime.
The CEO said that the BVI received a “fairly good assessment,” when it was done in 2008, as the jurisdiction had much of the recommended legislative framework in place. He explained that since then, the FATF revised the methodology and added an effectiveness component, which is about 80-percent of the overall assessment score.
What determines effectiveness? Mr. Baker said, “A jurisdiction would have to demonstrate that you are identifying potential money laundering cases, you are investigating them, prosecuting where necessary, conviction and confiscation of the proceeds of the crime. If a jurisdiction can demonstrate those steps, you’re well on your way to have a good outcome in the assessment process.”
Money Laundering Specifics
According to Mr. Baker, money laundering is placing the proceeds of criminal activities into the banking system to perform a number of transactions.
He added, “By the end of the process - where the money is being used to acquire goods and services, there is no link to the tainted source of those funds, so that it does not raise any suspicion that funds have been sourced illegally.”
The financial services expert, who has over 37 years in the industry, said that the biggest risk for those in BVI and the wider Caribbean is money laundering, he continued, “The Caribbean is not known to have links to terrorist or proliferation financing networks. Not saying it is not happening, but the risk is much lower.”
He further broke down the difference between money laundering and terrorist financing, which specifically uses legitimate funds to finance terrorist activities. Proliferation financing involves using funds to acquire, transport or develop nuclear, biological, or chemical weapons.
Mr. Baker said persons within and outside of the financial services industry may be exposed to some level of money laundering from time to time, but which can be avoided by asking questions, knowing the persons they are doing business with, and being suspicious when something doesn't feel right.
The FSC managing director also assured persons that it is part of a bank’s legal requirements to ask questions about financial transactions, adding, “There are some international standards that require banks and financial services institutions, to not only be able to identify clients, but to also know the source of funds, and monitor the transactions.”
He noted that banks may inquire if they notice a change in the pattern of deposits and further explained, “If the amount you are depositing suddenly increases, the bank will inquire and if a proper explanation and documentation is not provided, they will likely file a suspicious activity report with the Financial Investigation Agency who will determine if something nefarious is happening.”
The November 8 interview wrapped up with Mr. Baker answering a host of questions posed by viewers.
Special mention was made about Dr. Robert Mathavious being honoured for his contributions in financial services, to which the new FSC CEO commented: “The legacy of Dr. Mathavious is humongous...both regionally and internationally. Taking over from him is a big task, [to actualize] the vision to have the BVI considered in the first tier of regulators.”
BVI Finance CEO Ms. Elise Donovan facilitated the money laundering conversation, which is the first in a series of interviews, part of an educational and public awareness campaign on Anti-Money Laundering and Customer Due Diligence requirements.
The campaign, implemented by the Financial Services Commission and BVI Finance, is “calling on the members of the community and all business owners to become more knowledgeable on the subject and support efforts of the sector to combat financial crime.”
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