Jamaica: In defence of banks - proceeds of crime legislation

One of the country's oldest and largest commercial banks has been the subject of litigation by customers operating unregulated investments schemes who are seeking to resist the bank's notice to them to close their accounts within a stipulated time. The actions of the bank to close these accounts have elicited cries of discrimination and 'bullyism' from some members of the public.

The financial services sector is one of, if not, the most highly regulated sector of the economy. Financial services institutions must operate within an extensive regulatory framework which includes strict adherence to provisions under the Proceeds of Crime Act and the Proceeds of Crime (Money Laundering Prevention) Regulations (POCA), as well as Guidance issued by the Regulators (the Bank of Jamaica and the Financial Services Commission).

Prevent money laundering

Under the provisions of POCA, financial institutions (i.e. commercial banks, merchant banks, building societies, credit unions, securities dealers and investment advisers, insurance companies and intermediaries, money remitters and cambios) must establish programmes, policies and procedures to detect and prevent money laundering. Among the policies and procedures which are followed are Know Your Customer (or Customer Due Diligence) procedures which include establishing the true identity of customers, the intended nature and purpose of the customers business, monitoring and verification of customers' transactions.

Where the transaction profile of a customer's account(s) has changed without a plausible or credible reason, the financial institution must make a report of the transaction(s) to the Financial Investigations Division (FID). The FID can then request further information from the institution pertaining to the report which has been made and can also seek, for example, a Monitoring Order instructing the institution to provide information on the transactions which take place through the account(s) over a stipulated period of time. The institution will maintain the account(s) and when the order expires will close the account(s) and/or sever its relationship with the customer. It should be noted that the bank and its employees cannot disclose to anyone that a report has been made, or an order has been served on the bank, or that an investigation is taking place. Disclosure attracts a penalty of a fine and/or imprisonment.

Cross-border transactions

Commercial banks, in particular, are part of an international banking system and have banking relationships with overseas banks to facilitate cross-border transactions for their customers. Overseas banks operate under similar anti-money laundering/proceeds of crime legal regimes as that of local banks. The latter must ensure that their customers' activities do not jeopardise their relationship with overseas banks. For example, relations with banks in the United States of America are governed by the USA Patriot Act. Certain provisions under the Patriot Act can lead to the US bank ending its relationship with a Jamaican bank because of the deemed 'status' of the customer of a local bank by the US authorities. Jamaican banks must therefore comply with certain legal provisions under which their overseas counterparts operate.

Jamaica's largest banks have parent companies/major shareholders in North America. These banks must also comply with certain laws governing the operations of their parent companies/major shareholders. Failure to do so will jeopardise the operations of their parent companies/major shareholders.

In the international arena, unregulated investment schemes are considered to be high-risk vehicles for fraud, money laundering, tax evasion and other types of financial crimes.

It is prudent for a bank to sever its relationship with any scheme(s) which the court has stated is operating in breach of the law; which admits that it is operating in contravention of the law; or which the bank reasonably believes may pose a threat to its licensed status or that of its overseas parent companies/shareholders and its relationship with overseas banks.

http://www.jamaica-gleaner.com/gleaner/20080128/cleisure/cleisure3.html

Jamaica: Money laundering trial againstg NCB begins

Government prosecutors have begun marshalling evidence in the trial involving the National Commercial Bank (NCB) which is accused of breaching the Money Laundering Act.

The trial started on Monday in the Half-Way-Tree Criminal Court.

Charges were laid against NCB last year that it allegedly breached the Act by failing to report the financial transactions of alleged drug kingpin Norris 'Deedo' Nembhard.

In a landmark move, the Financial Investigation Division (FID) of the Ministry of Finance served summonses on NCB in February last year concerning six threshold transactions.

The FID accused the bank of failing to report to the relevant authority, information on Deedo Nembhard's accounts.

The Act requires banks to report all cash transactions above US$50,000 to the FID.

NCB confirmed that the transactions occurred on Mr. Nembhard's accounts at one of its branches over a period of eight months in 2003.

However, in its defence NCB said when the transactions, totalling $US870,000, were discovered, it took disciplinary action against the employees involved.

The bank said it also filed the requisite reports based on information available at the time.

But investigators said the bank only filed the reports after they began probing the financial accounts of "Deedo" Nembhard and his family.

Government prosecutors intend to argue that NCB failed to report on multi-million dollar transactions of the accused drug kingpin during the "period specified" as outlined under the Act.

But NCB intends to argue that there is no set time line under the Act which requires the bank to report on the transactions, therefore they cannot be held liable.

The trial continues on September 8.

http://www.radiojamaica.com/content/view/8278/26/