Belize escapes sanctions with new anti-money laundering measures

The Caribbean Financial Action Task Force (CFATF) issued a statement Thursday saying that while it has decided to call for counter measures against Guyana over what it deems to be inadequate progress in the passage of counter-terrorism and anti-money laundering legislation, it recognizes that significant progress has been made by Belize.

The statement notes that CFATF had required Belize to implement outstanding issues within its action plan, such as customer due diligence requirements, the operational independence of the Financial Intelligence Unit (FIU), and prohibiting dealings with shell banks.

“Belize has since brought into force significant mechanisms to address its AML/CFT [anti-money laundering and combating the financing of terrorism] deficiencies. Belize and the CFATF should continue to work together to ensure that Belize’s reform process is completed, by addressing its remaining deficiencies and continue implementing its action plan,” the statement said.

It explained that back in November 2011, the CFATF had brought this to the attention of its members in certain jurisdictions, including Belize, which it deemed to have “significant strategic deficiencies” in its regime.

In its May 2013 statement, CFATF called on Belize to enact legislation and issued recommended guidelines for addressing their AML/CFT deficiencies.

In November 2013, CFATF called on members to “consider implementing counter measures to protect their financial systems” from possible money laundering and terrorist financing emanating from Belize.

“Belize had made efforts to address its deficiencies; however, it had not taken sufficient steps towards improving its AML/CFT compliance regime, by failing to approve and implement required legislative reforms,” the report acknowledged.

Belize’s Parliament has passed a raft of legislation to avert the threatened sanctions. Those bills—which included the Companies (Amendment) Bill, 2014; the Domestic Banks and Financial Institutions (Amendment) Bill, 2014; the Financial Intelligence Unit (Amendment) Bill, 2014; the Money Laundering and Terrorism (Prevention) (Amendment) Bill, 2014; and the Mutual Legal Assistance and International Co-Operation Bill, 2014—received rare bipartisan support in the National Assembly of Belize.


Belize a money laundering hotspot?

Multiple International media outlets have recently named Belize as a money-laundering hotspot, but the International Business Companies registrar, Gian Gandhi, speaking to The Reporter on Thursday, said there’s no cause for concern.

On Monday, an Associated Press article entitled “Foreign banks agree to reveal Americans’ hidden assets to IRS”, published by a Pittsburgh Pennsylvania paper, described Belize as one of several tax-evasion havens.

“As much as $25 trillion … was stashed in 70 or more countries whose banking laws allowed individuals and corporations to mask their wealth from the Internal Revenue Service and avoid paying taxes,” the article stated.

“To demonstrate how easy it is for people to stash money out of the IRS’ reach,” the article by Trib Total Media alleged that two of their reporters spent less than $1,000 to set up a shell company and bank account in Belize. The money, they say, was then “accessible through ATMs”.

In addition to AP, a Reuters article, entitled “Billion-dollar medical project helped fund “Putin’s palace” on the Black Sea”, and published in late May, also put Belize in less-than-favorable company. That article claimed that a sprawling estate in Russia known as “Putin’s Palace”—reportedly belonging to Russian President Vladimir Putin—was built with money intended for a health care program.

According to Reuters, their evidence shows that an English company, Greathill, received payment from another Russian company headed by Putin’s associates.

Greathill then sent $56 million to the Swiss bank accounts of a Belize company. Finally, the Belize company sent funds to a firm registered in Washington, DC.

Gandhi, who is also director general for the International Financial Services of Belize, said that because in each article no details including names of the companies alleged to have been formed as ‘shell’ companies were given, it is difficult to investigate the claim.

He added that should such information become available to them the matter would be investigated. Gandhi, however, explained that the IBC Registry does not form companies; that is done by registered agents who may be in other countries.

The request to form the company would then come from an IFSC licensed agent.

The due diligence process to profile applicants should be done by the agent before agreeing to form a company for the client. That should only be done if all regulations and standards are met.

“It is possible, however, that a media reporter trying to prove that a shell company can easily be formed, may manage to deceive the registered agent by posing as a genuine investor and giving false information about the purpose of the company. Such instances are, however, rare,” Gandhi said.

He said that currently there are over 70,000 active IBCs and while the formation of a shell company cannot be totally ruled out, they believe that, having regard to the due diligence carried out by the registered agents, the chances of forming shell companies are minimal.

CFATF commends Belize for financial legislation

The Caribbean Financial Action Task Force (CFATF) has commended Belize for enacting nine pieces of key legislation, six laws and three regulations to boost Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) standards.

The statement from the CFATF, last week, stated that Belize has brought into force significant mechanisms to address its AML/CFT deficiencies.

The statement also said Belize and the CFATF should continue to work together to ensure that Belize’s reform process is completed, by addressing its remaining deficiencies and continue implementing its Action Plan.

According to the CFATF, in January, Belize brought together technical capacity and political will to approve different pieces of legislation and regulations, which represent a significant step in improving compliance with AML/CFT Standards.

In November 2013, the CFATF issued a Public Statement, encouraging greater compliance with AML/CFT standards and identified Belize and Guyana as jurisdictions that had strategic deficiencies. Guyana has still not complied with CFATF standards and they have called upon members to implement further counter measures to protect their financial systems from the ongoing money laundering and terrorist financing risks emanating from that country.

In January, as Prime Minister Dean Barrow introduced the bills, he stated that, in his view, a number of the requirements were hypocritical but “these people have such power over our financial sector and can in fact provoke the collapse of our commercial financial sector; we have no choice but to comply.”

The Reporter