The key challenges of AML compliance in Latin America and the Caribbean

Whether conducting risk assessments or reviewing client due diligence, it is vital to understand the risks and responsibilities of money laundering challenges for different jurisdictions.

In this article, VinciWorks considers the key AML challenges and laws in The Bahamas, and what organisations should consider when assessing customer, geographic or matter risk.

For more on the key AML risks and challenges in Latin America and the Caribbean, download our free guide to compliance.

Click here to download a free copy.

Key risks

• Trade-based schemes – the National Risk Assessment identifies trade-based schemes as a particular money laundering concern. Little is done in terms of prevention, detection or enforcement of these schemes. 
• Fraud – over 100 suspicious transaction reports were filed under fraud, the highest of any category. Fraud is considered to be the most prevalent predicate money laundering offense in The Bahamas. Forgeries, counterfeits, stealing by reason of employment and fraud by false pretenses are typical.
• Human trafficking – The Bahamas is a major transit for trafficked people and migrants attempting to enter the US. People smugglers operate extensively in the country, with forced labor also rife in the country’s construction, agriculture, fisheries and domestic labor sectors.
• Drug trafficking – cannabis and cocaine are the most common drugs smuggled, often via fast boats and small aircraft which are transported to the US, Haiti, Jamaica and Panama.

Criminal proceeds

An estimated $179 million – $448 million is laundered every year in The Bahamas

AML policy summary

The Bahamas is seen as having untested AML laws given many are newly enacted. It is also weak in terms of prosecution but is strong in prevention and detection.

Legal summary

The Bahamas have overhauled their AML and financial crime regulatory framework in recent years. In December 2020 the country was take off the FATF grey list in a major milestone. This was in part thanks to significant work by the government in the areas of a national AML/CTF risk assessment in 2017. The Bahamas enacted a Proceeds of Crime Act which empowered police, customs and the judicial branch in AML investigations as well as a Beneficial Ownership Register Act in 2018. 

Also in 2018 they updated the Financial Transactions Reporting Act to impose stronger responsibilities on banks and financial institutions to verify customers’ identity and legitimacy before doing business. This amendment expanded the scenarios where obliged entities must carry out CDD and EDD. The country updated their Anti-Terrorism Act in 2018 to comply with UN resolutions.

Weaknesses

Designated non-financial businesses and professions (DNFBPs) report suspicious transactions through a paper-based system. It is not electronic which has a negative impact on reporting and analysis. The judicial system of The Bahamas is seen as very slow moving. Most defendants who do not plead guilty must wait for years. Some drugs cases have been pending for over a decade. The relationship between law enforcement and the regulated sector is informal and consultative. 

There is also little publicly available information on beneficial ownership, or data on the effectiveness of the wider AML program. There is concern that the country was more invested in a tick-box exercise to get off the FATF’s grey list, as opposed to properly investing in an AML regime. 

Software and human resources in these departments is also lacking. Financial intelligence is therefore patchy and difficult to disseminate given the paper-based system and lack of coordination between newly created agencies with untested authority. 

Strengths

Following the country’s fourth round mutual evaluation in 2017, The Bahamas redoubled their efforts at tackling financial crime. This resulted in a raft of new laws and clear political will to make the necessary changes, even if much of the legislation remains untested. 

More information

VinciWorks has created a guide designed to support businesses that currently operate in Latin America and the Caribbean, or are planning to, or seeking to expand to new countries in the region. This guide provides an overview of some of the key AML challenges and issues and includes a country-by-country assessment of AML risks and laws. 

Click here to download a free copy.