THE PRECEDING ARTICLE mentioned three ways in which the money laundering organism manifests itself. Crucial to all three aspects is the concept of “knowing”. But how would you or a financial institution “know” that a transaction involves dirty money from crime? Well it so happens that neither you nor the institution are required to have absolute knowledge; the regulations give a fairly wide interpretation to “knowledge”. The Barbados Money Launder And Financing Of Terrorism (Prevention and Control) Act 2011 frames it this way:
“A person engages in money laundering where he knows or has reasonable grounds to suspect that the property or benefit is derived or realised directly or indirectly from some form of unlawful activity.”
The act goes on to include persons or businesses who fail to take reasonable steps to ascertain whether or not the benefit is derived or realised from some form of illegal activity. This concept is not far removed from what obtains in respect of receiving stolen goods.
I recently paid my house insurance premium with my broker of many years and for the first time I was asked what kind of work I do. The broker tried to keep it matter of fact like this was a routine question and looked like she would rather she did not have to ask. Another client would probably wonder what his occupation had to do with paying property insurance. I smiled and said: “You are doing your money laundering thing?”. She smiled and was visibly relieved that I was not going to throw a tantrum. She was doing retrospective due diligence and that brief encounter illustrates what is germane to the detection of money laundering.
The banker’s role is to alert the relevant authority if the transaction seems suspicious from a money laundering perspective. So how do they determine whether there are reasonable grounds to regard a transaction as suspicious? When you opened that non-borrowing account the information you gave probably included occupation, income and likely deposit limits. The future conduct of your account is evaluated against this data along with other factors which are pertinent to persons with your profile. In this way the bank establishes a benchmark against which it can “reasonably” determine suspicious activity.
But you might surmise that you or a bank could choose not to look too closely so as not be accused of having knowledge that should arouse suspicion. Well, the regulators thought of that too. So if all the red flags are visible to a reasonable man and you choose not to draw an inference then that is captured in a phrase which in the rather cut and dried world of anti-money laundering amounts to “wilful blindness”. It is the deliberate avoidance of knowledge of the facts or purposeful indifference and courts have regarded it with the same seriousness as actual knowledge. “See and don’t see” does not operate here.
All this seems like pretty tricky territory for banks, credit unions and other financial institutions. Are they in any way protected? We will see in our next article.
Louis Parris is a certified compliance professional, consultant and publisher of the Caribbean Banking Intelligence Anti-Money Laundering Compliance newsletter. The concluding part of this series will be published next week. Email: louisp@caribsurf.com