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Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If undertaken successfully, it also allows them to maintain control over those proceeds and, ultimately, provide a legitimate cover for their source of income.

The Need To Combat Money Laundering

In recent years there has been a growing recognition that it is essential to the fight against crime, that criminals be prevented from legitimising the proceeds of their criminal activities by converting funds from "dirty" to "clean".

The ability to launder the proceeds of criminal activity through the financial system is vital to the success of criminal operations. Those involved need to exploit the facilities of the world's financial institutions if they are to benefit from the proceeds of their activities. The increased integration of the world's financial systems, and the removal of barriers to the free movement of capital, have served to make the process by which proceeds of crime can be laundered much easier and at the same time, making the tracing process more complicated. Consequently, The Bahamas has an important role to play in combating money laundering by virtue of being a major international business and financial center. Any financial institution licensed or registered to operate in or from The Bahamas that becomes involved in money laundering, risks prosecution and loss of entitlement to operate from this jurisdiction.

Stages of Money Laundering

There is no single method of laundering money. Methods can range from the purchase and resale of a luxury item (e.g., cars or jewelry) to passing money through a complex international web of legitimate businesses, "shell" companies and other corporate vehicles. Initially, however, in the case of drug trafficking and some other serious crimes, such as robbery, the proceeds usually take the form of cash that needs to enter the financial system by some means.

Despite the variety of methods employed, the laundering process takes place in three stages, which may comprise numerous transactions that could alert a financial institution to criminal activity. The three stages of money laundering are:

1. Placement - the physical disposal of cash proceeds derived from illegal activity;
2. Layering - separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity; and
3. Integration - the provision of apparent legitimacy to criminally derived wealth. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds.

The three basic steps may occur as separate and distinct phases, they may occur simultaneously or, more commonly, they may overlap. How the basic steps are used depends on the available laundering mechanisms and the requirements of the criminal organisations.

The Global Fight Against Money laundering

The Financial Action Task Force(FATF)

The Financial Action Task Force was founded by the Governments of the G7 leading industrialised nations in 1989. The FATF is the main international body for addressing money laundering. A list of its member countries can be found at the FATF website www.oecd.org/fatf. The FATF is an inter-governmental body that develops and promotes policies, both nationally and internationally, to combat money laundering. As a "policy-making body" therefore, its primary goal is to generate the political will necessary for bringing about national legislative and regulatory reforms in this area.

The FATF has put together 40 Recommendations [1]on tackling money laundering. The 40 Recommendations provide the scope for cooperation at the international level in the global fight against money laundering.

The Forty Recommendations set out the framework for anti-money laundering efforts and are designed for universal application. They provide a complete set of counter-measures against money laundering covering the criminal justice system and law enforcement, the financial system and its regulation, and international co-operation.

Some of the basic obligations contained in the Recommendations are:

• The criminalization of the laundering of the proceeds of serious crimes (Recommendations 4) and the enactment of laws to seize and confiscate the proceeds of crime (Recommendation 7).
• Obligations for financial institutions to identify all clients, including any beneficial owners of property, and to keep appropriate records (Recommendations 10 to 12).
• A requirement for financial institutions to report suspicious transactions to the competent national authorities (Recommendation 15), and to implement a comprehensive range of internal control measures(Recommedation 19).
• Adequate systems for the control and supervision of financial institutions (Recommendations 26 to 29).
• The need to enter into international treaties or agreements and to pass national legislation which will allow countries to provide prompt and effective international co-operation at all levels (Recommendations 32 to 40).

The FATF has also promoted the concept of regional organisations along the lines of its own structure, whose goals are to raise awareness of money laundering and introduce regional evaluation programmes to monitor implementation of the 40 Recommendations, amongst other things.

The Caribbean Financial Action Task Force (CFATF)

Within this region, the Caribbean Financial Action Task Force was established as part of the efforts of the FATF to set up regional style bodies patterned after the FATF. The CFATF came into existence as a result of three regional meetings of Governments. The first occurred in June 1990 in Aruba at a conference attended by representatives of fifteen states, plus the five "donor' countries of the FATF which have an affiliation with the region. The Aruba meeting reviewed the 40 recommendations of the FATF and produced twenty-one recommendations [3]. These complement the original FATF recommendations and have particular applicability within this region.

The second regional meeting took place in Kingston, Jamaica, in June 1992, and was attended by the representatives of the states and territories which had attended the Aruba meeting. This meeting addressed the main areas of focus: legal; financial; political; and technical assistance. Detailed recommendations were prepared, and later presented to a Ministerial meeting which was convened in Kingston in Novemebr 1992. The Ministerial Meeting produced an accord embodied in the "Kingston Declaration on Money Laundering". This Declaration endorses the implementation of the 1988 UN "Vienna" Convention, the OAS Model Regulations and the FATF and the CFATF recommendations. The Kingston Declaration also called for the establishment of a Regional Secretariat to co-ordinate the process of implementation within member states.

In November 1993 a Steering Group meeting that agreed on the arrangements for the creation of the Secretariat was convened in Port of Spain. The Secretariat was established during early 1994, in Trinidad and Tobago, and funded by the FATF donor countries. The Chair of CFATF is rotated annually amongst its members.

The members of the CFATF are: Anguilla, Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman islands, Costa Rica, Dominican Republic, Dominica, Grenada, Jamaica, Monserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos Islands and Venezuela.

Contact Information

Compliance Commission
Poinciana House
#34 East Bay Street
Nassau
New Providence
The Bahamas
Phone: (242) 604-4323, 604-4331, 604-4333
Email: compliance@bahamas.gov.bs
Opening Hours: Monday through Friday, 9:00am to 5:00pm