22.02.12

Money Laundering

The proceeds of crime help criminals to proceed with crime. This is part of the thinking that informs the anti-money laundering provisions of the Proceeds of Crime Act. These provisions create specific money-laundering offences, outline applicable penalties, and impose obligations on businesses in regulated sectors to take active steps to prevent and detect money laundering. A failure to observe these statutory anti-money laundering obligations could turn the unwitting business into a silent partner in crime and an offender under the Act. It is therefore essential to have an understanding of the content and scope of these obligations.

Money laundering is any activity that deals with criminal property. The specific money laundering offences under the Act are: the concealing of criminal property; the acquisition use and possession of criminal property; an attempt, conspiracy or incitement to commit these first two offences, and the aiding, abetting, counselling or procuring the commission of these first two offences.

One of the most important anti-money laundering obligations under the Act is the duty of businesses in the regulated sector to report suspicious transactions to a nominated officer or to a designated authority. A suspicious transaction is essentially one which could constitute or be related to money laundering.  In this regard, an offence is committed if a person knows or believes, or has reasonable grounds for knowing or believing that another person has engaged in a suspicious transaction; the information came to that person in the course of a business in the regulated sector and the person does not disclose the information to a nominated officer or designated authority.

Financial institutions in particular are required under the regulations to report cash transactions involving prescribed amounts to the designated authority. The prescribed amount is US$5,000 or more for money transfer and remittance agents or agencies; US $8,000 or more for cambios and bureaux de change and US$15,000 or more for any other financial institution.

The categories of businesses in the regulated sector comprise financial institutions and "designated non-financial institutions". A designated non-financial institution is a person who is not primarily engaged in carrying on financial business and is designated as a non-financial institution for the purposes of the Act by the minister by order subject to affirmative resolution. This means that, while financial institutions have been the focus of money laundering regulations, this focus may shift to other persons such as lawyers and accountants given the minister's power to bring non-financial institutions under the cover of the Act.

Apart from the Act's provisions, the bulk of the other operational and regulatory controls can be found in the anti-money laundering regulations. These make it clear that no regulated business shall form a business relationship or even carry out a one-off transaction with another person unless that business maintains procedures relating to customer identification and transaction verification, record keeping and internal control and communication. These due diligence procedures are all outlined in the regulations in a fair amount of detail with the effect of establishing a minimum level of requirements.

In terms of identification procedures, the regulations stipulate that the regulated business must require that the applicant for business produce satisfactory evidence of identity and must further take measures to verify that identity. Regulated businesses are also required to update customer information at least once every five years during the course of the business relationship. If customer information is not updated in this manner, the regulations stipulate that the business relationship shall not proceed any further. This requirement for termination is scattered throughout the Regulations in relation to other regulatory procedures. When drafting contractual arrangements with customers, regulated businesses should therefore ensure that such arrangements allow them to terminate the relationship when required under the regulations.

The regulations are detailed. For example, they define "customer information" as including the applicant's full name, current address, taxpayer registration number or other reference number, and date and place of birth (in the case of a natural person). In the case of a transaction involving a person other than a natural person, customer information also includes the identity of the natural persons who exercise ultimate effective control and in the case of a body corporate, it includes evidence of incorporation and the identity of each director and shareholder (if any). In light of this, customers should think twice before getting upset about the tedious "bureaucracy" involved in transactions with certain financial institutions.

Another highlight of the regulations is the new concept of De Minimus, amounts that do not require the identification procedures above. More specifically, the identification procedures outlined in the regulations are not required in the case of customer transactions worth US$250,000 or less unless the nature of the transaction is suspicious. This De Minimus concept does not apply to a money transfer, remittance agent or agency.

In terms of record keeping procedures, the regulations require, among other things, the keeping of a record for a prescribed period in any case where evidence of the identity of an applicant for business is obtained under the identification procedures stipulated under the Act and must comprise a copy of that evidence.

Lastly, the internal reporting procedures referred to above must include procedures for identifying a nominated officer who, under the regulations, is the person responsible for ensuring the implementation of regulatory controls, including the reporting of suspicious transactions.

A full analysis of all of the anti-money laundering procedures under the Act is beyond the scope of this Article. For further guidance, please note that the Bank of Jamaica has issued Guidance Notes on the Detection and Prevention of Money Laundering and Terrorist Financing Activities for Commercial Banks, Merchant Banks, Building Societies, Credit Unions, Cambios, Bureau de Change, and Money Transfer and Remittance Agents or Agencies.

These guidance notes not only provide a useful overview of the regulatory regime, but are arguably compulsory for the relevant entities. Regardless of whether or not they are compulsory, these notes are quite important since, in determining whether a regulated business has contravened the Act or the regulations, a court shall consider any regulatory or supervisory guidance issued by a competent authority over an entity charged with an offence under that regulation. This illustrates perfectly why the adoption of proper anti-money laundering procedures is not just good business sense for regulated businesses, but is also a means of ensuring that these businesses do not unwittingly end up on the wrong side of the law.

Malene Alleyne is an Associate at Myers, Fletcher & Gordon and is a member of the firm's Commercial and Property Department. Malene may be contacted via malene.alleyne@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice