Suspicious Transactions Reporting and
"Customer Identification"
Procedures for Institutions Supervised by the Commission
 

The Financial Intelligence Unit

The Financial Intelligence Unit Act, 2000 establishes the Financial Intelligence Unit of the Bahamas which has power, inter alia, to obtain, receive, analyse and disseminate information which relates to or may relate to the proceeds of offences under the Proceeds to Crime Act, 2000.
 
The Financial Intelligence Unit has power to compel production of information (except information subject to legal professional privilege), which it considers relevant to fulfill its functions.  It is an offence to fail or refuse to provide the information requested by the Financial Intelligence Unit.  Such offence is punishable on summary conviction to a fine not exceeding fifty thousand dollars ($50,000) or to imprisonment for a term not exceeding two (2) years or to both such fine and imprisonment.  
 
The Financial Intelligence Unit is a member of the Egmont Group. This is an international organisation of Financial Intelligence Units from fifty-four countries, that provides a forum to improve support for the respective national anti-money laundering programmes of its members. The Information Paper prepared by The Egmont Group details the background and purpose of the organisation.

Egmont Group Membership List

Suspicious Transactions Reporting Guidelines
 
The FIU has issued guidelines for the following sectors which can be viewed by clicking on the relevant sector below:
 
*   Banks and Trust Companies
 
*   Securities Industry
 
*   Insurance Industry
 
*   Licensed Casinos
 
*   Cooperatives
 
*   Financial Service Providers (lawyers, accountants, real estate brokers and other financial institutions supervised by the Compliance Commission other than Cooperatives.)
 
CUSTOMER VERIFICATION/IDENTIFICATION

The "know your customer" (KYC) rules are found in the Financial Transactions Reporting Act and the Regulation made thereunder. There are three main situations in which a general duty to verify the identity of a customer or client arises.
 
(1)       Verification of a new client must take place before he is allowed to establish a facility or be added to an existing facility as the case may be.
 
(2)       Verification of identity of all clients (facility holders) in existence on 1st Jan. 2001 must be carried out by 31st Dec. 2001 unless the Minister exercises his discretion to extend this period which he may do up to 31st Dec. 2002.

(3)      Verification of identity must be carried out on any third party on whose behalf a transaction over $10,000 is being conducted through an account/facility of an intermediary, before the transaction is permitted.

(4) Verification of a customer, other than a client operating through his own account/ facility, must take place before such customer is allowed to conduct a cash transaction of $10,000 or more, whether on his own behalf or for someone else. If the customer is acting for someone else in such a transaction then that person's identity must also be verified  before the transaction is permitted to take place.

A facility holder is a person with whom there is a client type relationship and for whom a professional service is being rendered (a facility), consistent with the business activities set out in the definition of financial institution under section 3 of Financial Transactions Reporting Act. 
 
There are several exemptions to these general rules. These exemptions either relieve a financial institution of the obligation to verify identity in certain circumstances or permit a financial institution to rely on a verification which has been carried out by another financial institution concerned with the transaction.
 
The evidence to be obtained where a duty to verify identity exists is found in the Financial Transactions Reporting Regulations.
 
RECORDKEEPING RULES
 
The records which a financial institution must keep include transaction records, verification records and wire transfer records. A brief summary of the requirements for these appears below. There are other recordkeeping requirements which are explained more fully in the FIU guidelines.
 
Transactions Records

Records of every transaction that would enable the FIU to reconstruct the transaction must be kept for a minimum period of five (5) years. Such record should include: the nature and amount of the transaction; the currency in which it was denominated; the date on which the transaction was conducted; the parties to the transaction; where applicable, the facility through which the transaction was conducted, and any other facilities  (whether or not provided by the financial institution) directly involved in the transaction.
 
Verification Records
These must be maintained for a period of at least five (5) years after the customer ceases to be a facility holder and in any other case where the customer is not a facility holder, a minimum of five (5) years from the date of the verification.
 
Wire Transfers
A record of every wire transfer is to be maintained and must include information on the original source, the fields of ordering and final destination of funds together with names and addresses.

SUSPICIOUS TRANSACTION REPORTING RULES
 
General Duty
 
There is a mandatory obligation to report to the FIU where there is actual knowledge, a suspicion, or there are reasonable grounds to suspect that a transaction or a proposed transaction involves the proceeds of criminal conduct under POCA[1]. This is termed a suspicious transaction report (STR).
 
An STR must be made to the FIU where a financial institution knows, suspects or has reasonable grounds to suspect that a transaction or proposed transaction involves: (i) proceeds of criminal conduct as defined in the Proceeds of Crime Act, 2000, or (ii) any offence under the Proceeds of Crime Act, 2000 or (iii) an attempt to avoid the enforcement of any provision of the Proceeds of Crime Act, 2000.
 
 Auditors
 
Auditors have a mandatory obligation to make a report to the police, where they have a reasonable suspicion, which arises out of the performance of their duties as auditors, that a transaction is or may be relevant to the enforcement of the Proceeds of Crime Act.
 
 Legal Privilege
 
The obligation to report does not override legal professional privilege so long as the privileged communication is not made or brought into existence for the purpose of committing or furthering the commission of some illegal or wrongful act and is :
 
(1) confidential and passing between two lawyers in their professional capacities whether directly, or indirectly through agents of either;
 
(2)  legal advice communicated to a client;
 
(3)  or is brought into existence for the purpose of giving or obtaining legal advice or assistance;
 
Information held by lawyers which relates wholly or partly to, the receipts, payments, income, expenditure or financial transactions of a specified person (whether a counsel and attorney, his or her client or any other person), is not considered privileged if it is contained in, or comprises the whole or part of, any book, account, statement or other record prepared or kept by the counsel and attorney in connection with a client's account.


Restriction on disclosure concerning STRs
 
There is a strict prohibition against disclosing the fact that a report is being contemplated or has been made except to –
 
(a)  the financial institution's Supervisory Authority;
 
(b)  the Financial Intelligence Unit;

(c)  the Commissioner of Police or a member of the Police who is authorised by the Commissioner to receive the information;
 
(d)  an officer or employee or agent of the financial institution, for any purpose connected with the performance of that person's duties;
 
(e)  a counsel and attorney, for the purpose of obtaining legal advice or
representation  in relation to the matter;
 
(f)  the Central Bank of The Bahamas, for the purpose of assisting the Central     Bank to  carry   out   its  functions  under  the Central Bank of The Bahamas Act, 2000; or
 
(g)    in connection with, or in the course of, proceedings before a court. 
 
Form of the Suspicious Transactions Report
 
STRs are to be in a form prescribed by the FIU[2], (though in cases of urgency a verbal report is acceptable) and should contain the following details:

1. The name, address, date of birth, and occupation (or, where  appropriate, business or principal activity) of each person conducting the transaction and  of any person on whose behalf the transaction is conducted (if known to the person making the  report).

2.  Where an account is involved in the transaction - the type and identifying number of the account; the name of the person in whose name the account is operated and the names of the signatories to the account.

3. The nature and date of, the amount and type of currency involved in, the transaction.

4.  In relation to the financial institution through which the transaction was conducted, the name of the officer, employee, or agent of that financial institution who handled the transaction.

5. The name of the person who prepared the report.

Immunity for persons making STRs
 
The law provides persons with immunity from civil, criminal or disciplinary proceedings when making disclosures in good faith to the FIU or the Police.
 
Suspicious Transactions Reporting Offences
 
(1)   Failure to make an STR in circumstances that would require that a report be made.
 
Penalty $20,000 maximum fine for an individual and $100,000 for a corporation.
 
(2)  Knowingly making any statement that is false or misleading in a material particular; or knowingly omitting from any statement any matter or thing without which the statement is false or misleading in a material particular.

Penalty: maximum of $10,000 fine.

(3)  Disclosing information about the contemplation or existent of an STR -

          (a) for the purpose of obtaining, directly or indirectly, an advantage or a pecuniary gain for yourself or any  other  person; or

          (b) intentionally to prejudice any investigation into the commission or possible commission of a money  laundering offence.
Penalty: maximum 2 years imprisonment.
 
(4)    Disclosing information  about the contemplation or existence of an STR.         

 Penalty: Maximum fine of $5,000 of 6 months imprisonment for an individual and in the case of a corporation a maximum fine of $20,000.

THE MONEY LAUNDERING REPORTING OFFICER (MLRO)
 
All financial institutions are required to establish a point of contact with the Financial Intelligence Unit in order to handle the reported suspicions of their staff regarding money laundering.  Financial institutions are required to appoint a "Money Laundering Reporting Officer" to undertake this role, and such officer is required to be registered with the Financial Intelligence Unit. A financial institution is also required to appoint a Compliance Officer. However a financial institution may choose to combine the roles of the Compliance Officer and the Money Laundering Reporting Officer depending upon the scale and nature of business.
 
All financial institutions are required to provide the Money Laundering Reporting Officer with the necessary access to systems and records for the prompt investigation of suspicions and subsequent reporting to the Financial Intelligence Unit. 
 
OBLIGATION TO EDUCATE AND TRAIN STAFF
 
 Financial institutions must implement appropriate measures to make employees who have or are likely to have access to any information that may be relevant to money laundering activity aware of:
 
i.     policies and procedures put in place to detect and prevent money laundering including those for identification, record keeping and internal reporting; and  
 
ii.     the legislation relating to money laundering.
 
Financial institutions are also under an obligation to implement training programmes in the recognition and handling of suspicious transactions and ensure that these employees are exposed to such training at least once per year.
 
 

 


[1] Proceeds of Crime Act 2000, bribery and corruption, drug trafficking, money laundering and any serious offence under Bahamian law.
[2] A copy of the prescribed form can be found in the appendices to the FIU Guidelines.