The European Union's latest money laundering blacklist included four Caribbean nations that have been deemed to be high-risk countries. The list was met by cries of unfairness from officials, but why were these countries added in the first place and what can they do to get off the list?
In early May, the EU published its list of countries that have failed to properly address the threats of money laundering and terrorism financing, including the Bahamas, Barbados, Jamaica and Trinidad and Tobago. Panama was the only other country from Latin America to join the list.
The list is based on recommendations made by the Financial Action Task Force (FATF), the main standard-setting body in this field. The EU blacklist uses the FATF monitoring list as a starting point and serves as a way to hold the included countries accountable since the FATF has no enforcement ability of its own.
The consequences for the blacklisted countries could be severe. Any companies from these countries are banned from receiving new EU funding while European banks and other financial institutions must carry out more thorough checks for transactions conducted in or related to these blacklisted nations.
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And while in theory, countries only have to show positive and tangible progress in the recommended areas to get off the EU blacklist, no Latin American country has been removed from it since it began in 2016.
Condemnation from the countries included was almost universal, accusing the EU of arbitrary decision making, of not taking into account progress already made and of providing little to no warning.
Further complicating the matter, the 2020 blacklist included a revised methodology for identifying high-risk third countries, meaning that countries have no concrete past examples to look at on how to be removed from the list.
Condemnation from the countries included was almost universal, accusing the EU of arbitrary decision making, of not taking into account progress already made and of providing little to no warning.
Here, InSight Crime looks at the reasons each country was included on the list.
The Bahamas
The Bahamas may well feel it was unfairly included on the blacklist. In February, the FATF determined the country had completed an action plan to address money laundering vulnerabilities. An on-site assessment was planned to remove the Bahamas from the FATF’s monitoring list (from which the EU list is drawn) but this was delayed due to coronavirus travel restrictions.
When the assessment does occur, the Bahamas will be judged on specific improvements, including strengthening the financial system against money laundering and terrorist financing by putting procedures into place for risk-based supervision, information sharing with international partners and law enforcement, collecting and verifying beneficial ownership information and a demonstrated commitment to solving and prosecuting money laundering cases, including complex cases where proceeds may have originated abroad.
In September 2019, Bahamas’ Attorney General Carl Bethel stated that the country has made great progress in fighting money laundering, having secured 40 money laundering convictions in four years and demonstrating a willingness to investigate and prosecute all types of money laundering.
The EU stated that pending the FATF’s assessment, it did not have enough information to confirm that the Bahamas’ “strategic deficiencies have been effectively addressed.”
This explanation did not suffice for Bethel who lambasted the EU for its decision, saying that it was “a hostile act by one of the world's largest economic blocs" to try and get the Bahamas to implement a “corporate income tax.” He dismissed that the EU was simply following the FATF recommendations, since Trinidad and Tobago exited FATF financial crime monitoring in February 2020 yet remains on the EU blacklist.
The Bahamas was recently removed from another EU list. In February 2020, the EU removed the Bahamas from the EU List of Non-Cooperative Jurisdiction for Tax Purposes, congratulating the island nation for having “implemented the necessary reforms to meet the EU criteria on tax governance and cooperation on tax matters.”
Barbados
The blacklist included five specific areas for Barbados to improve on. The first and perhaps most important issue is a lack of “risk-based supervision” for sectors and businesses likely to be used for money laundering, including banks, casinos, real estate brokers and precious metals dealers.
The others pointed to overall problems in Barbados’ current system to fight money laundering, including knowing the complete ownership of companies based there, as well as poor results for prosecutions and asset confiscations in money laundering cases. And while Barbados has a Financial Intelligence Unit (FIU), FATF monitoring stated it still had deficiencies to work on, including improving “the quality of its financial information to better assist law enforcement agencies.”
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In January 2020, Barbados’ former industry and commerce minister Donville Inniss was found guilty of money laundering in New York, having attempted to launder bribes he received from an insurance company in the United States.
But Barbados is unhappy with the lack of communication from the European Union. Barbados’ Attorney Dale Marshall condemned the EU action, telling Jamaica Observer that it amounted to little more than a conviction without a trial. “We have been given no details of this, and in fact the first time we are hearing of it is through the overseas press,” he stated.
If true, this goes against the EU Commission’s claim that it “informed third countries in advance of its intention to include them on the list and provided them with the results of its analysis.”
Jamaica
By its own admission, money laundering is a serious problem in Jamaica. In September 2019, the Jamaican Ministry of National Security estimated that money laundering represents about 2.8 percent of the national GDP and called it a “clear and present danger to the country.” In February 2020, Jamaica’s Minister of Finance and Public Service Nigel Clarke told the Jamaica Gleaner that, although the country had made progress, “a significant amount of work remains to be done.”
Like Barbados, Jamaica is now on both the FATF monitoring list and the EU blacklist, with six major areas of improvement to address in order to have a chance at getting removed from either. To start, Jamaica needs to develop a more comprehensive understanding of its money laundering and terrorist financing risk, before it can even begin improving risk-based supervision.
This lack of information seems to affect Jamaica’s other deficiencies since, if available, it would enable the country to increase money laundering investigations by using financial information to address holes in its beneficial ownership regulation. Jamaica was also told to improve its barriers to terrorist financing, especially through non-profits. It is the only country in Latin America and the Caribbean on the list with this deficiency.
Still, the decision seems to have been highly politicized within Jamaica, evoking outrage towards the EU from the sitting administration.
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According to Clarke, the decision was arbitrary, based on a technical change to the FATF’s measure of economic size, which meant that Jamaica for the first time exceeded the FATF’s threshold for financial assets and "was included in the list of countries that FATF would focus on and monitor,” he told the Jamaica Observer. However, Jamaica’s opposition, the People's National Party, has said that the government needs to accept responsibility for being added to the EU financial blacklist and that it was “endangering Jamaica.”
Trinidad and Tobago
In February 2020, the FATF congratulated Trinidad and Tobago for significant progress in addressing the deficiencies in its money laundering strategy and officially took the country off of its monitoring list. Yet the island nation remains on the EU blacklist, as the bloc said available information did not allow it to conclude whether Trinidad and Tobago had addressed its deficiencies at this time, especially in regards to beneficial ownership for legal arrangements.
This demonstrates that while the FATF’s assessment may largely influence the EU, the bloc does not blindly accept the FATF decisions and adheres instead to its own methodology.
Beneficial ownership refers to when the owner of an asset can obscure their control and their money by investing it into structures like trust funds, offshore accounts and companies -- often in the name of a lawyer or accountant. This makes it a priority for the EU and FATF that countries collect information on the beneficial, as well as legal, owners of all assets and structures.
Until 2019, Trinidad and Tobago did not require companies to gather, maintain and report this vital information. However, an amendment to the Companies Law closed this loophole in the country’s legal framework.
InSight Crime found no public response from Trinidad and Tobago, perhaps because there is no change in their status or because the EU Commission has promised to prioritize its review of the country’s anti-money laundering efforts.
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