Regulators and financial intelligence units are tasked with challenging jobs to fight money laundering and terrorism financing, but some have room for improvement. Financial institutions observe that some regulators and units give unfavorable audit reports not necessarily due to legal breaches, but because of subjective methods rather than proper risk assessment. Excessive compliance costs are incurred without clear evidence that they reduce financial crimes. Regulators and units should ensure regulatory actions have benefits exceeding costs to avoid counterproductive policies. Proper risk understanding and mitigation is important over prescriptive rules and one-size-fits-all approaches.

1. Common Sense Not So Common with Regulators and FIUs
Regulators and Financial Intelligence Units (FIUs) in many jurisdictions have one of the most
challenging jobs in this globalized and ever increasing criminal environment. To say that these
bodies around the region are not fighting Money Laundering and Terrorism would be nothing
short of untruthful. Criminals no doubt are also getting smarter and remain a step ahead of
Regulators, Financial Intelligence Units (FIUs) and Financial Institutions.
Financial Institutions are observing that Regulators and Financial Intelligence Units, that conduct
Audit Assessments, are sometimes giving subpar and not so favourable reports. We are not
speaking about any breaking of the law by the Financial Institution during the Audit. In many
instances, the findings are not based on any Money Laundering and Terrorism Financing threats,
but rather because the Regulators and FIUs rate them on their own subjective and prescriptive
methods and are dictating instead of risk assessing as to how they feel the institutions’ Anti–
Money Laundering and Counter Financing of Terrorism Programs should be maintained. It is
quite obvious that the FATF revised recommendations on risk assessment of Anti-Money
Laundering and Counter Financing of Terrorism Programs either are not fully understood or are
simply not being practiced in some jurisdictions.
Even if the law makers’ ideal vision of an Anti–Money Laundering and Counter Financing of
Terrorism Program may in fact be more effective than what actually exists in the Financial
Institutions, it is unclear as to whether the benefits would outweigh the unnecessary costs that
Financial Institutions have been incurring. Conventional wisdom begs for these law making
organizations in the region to conduct qualitative and quantitative assessments of all
consequences of their regulatory actions. One would think that efforts would be made to ensure
that the benefits outweigh the costs of any regulatory action undertaken by these organizations
or the whole process would be counterproductive. If this is not done, the costs and benefits of
their subjective methodologies would be troubling to the industry and the economy thus;
resulting in in bad public policies by the respective governments.
There is clearly no indication that their recommendations and massive costs on institutions to
maintain their AML/CFT Programs are in any way reducing Money Laundering, Terrorism and
other Financial Crimes. Regulators and FIUs are always incentivized to be proactive and to be
firm in addressing any potential Money Laundering and Terrorist Financing Risk in the Financial
Institutions, as well as, nationally. However, it appears as though more focus seems to be on job
security, personal ego by some of these officers and also political mileage for some elected
officials in their effort to ramp up public support.
The irony, however, is that persons employed by these bodies for the most part, as well as, those
setting strategic directives do not have any knowledge of some of the industries they regulate.
One would think that it would make logical sense that people who lack knowledge in a particular
area, would place emphasis in ensuring that they are trained so that they can have knowledge of
the industry. This is not to say that they are not exposed to or would not have received training.

2. Of course, most of the key Stakeholders have received a considerable amount of training from
supporting organizations and from the private sector. The problem, however, is that most of the
trainings are limited to regulations and generic knowledge of an institution’s AML/CFT Program.
What makes matters worse, is when Audits and/or Assessments are done using a one size fits all
methodology.
The actions by some of these organizations are certainly having a domino effect on the sector
and are, therefore, affecting customer service standards. As a result, Financial Institutions such
as Banks, for example, are losing one of the core fundamental principles of Banking which is
customer service by truly knowing their customers. Customers are now treated as numbers and
the same yardstick is being applied for customers, even in cases of totally unrelated transactions.
The fight against Money Laundering and Terrorism Financing is now thwarting the core business
of Banking which is providing loans and offering effective and efficient banking services.
Regulators and Financial Intelligence Units appear to have shifted their focus on how much
institutions are spending on Compliance to institute internal procedures and training employees,
as opposed to the effectiveness of their compliance efforts and whether or not their risks are
properly mitigated.
Institutions are now operating out of fear rather than ensuring their risks are properly mitigated.
In everything, we can all agree that there is a risk and no one can stop Money Laundering and
Terrorism. FATF has pointed out the importance of not applying prescriptive risk assessment but
rather institutions should understand their business risk and put mitigating risk factors in place
to bring their inherent risks to some form of manageable residual risk. Regulatory fines, sanctions
and compliance costs have contributed to institutions retreating from high-risk regions and
businesses and preventing leaders from being strategic and thinking outside of the box. Vacuum
management and “Compliance Officers with Blinkers” seems to be the order of the day.
The concept of “de-risking” has made financial activity less transparent and more susceptible to
misuse by criminals. For example, in some jurisdictions, the fear of losing correspondent Banking
relationships have forced Banks to not open accounts for certain businesses, such as Money
Services Businesses and Offshore Gaming, to name a few. These same institutions are regulated
and supervised in the same jurisdiction as the Bank and sometimes by the same Regulatory
Entity. Whether or not the Money Services Businesses or Gaming Companies get a favourable
rating, the prescriptive decision is still applied by Banks. No effort whatsoever is being placed by
Banks to even conduct an assessment of these businesses to see if their AML/CFT Program is
effective. Some countries have Citizenship by Investment Programs as an additional service to
boost their economies. Even with the added due diligence by the Citizenship by Investment Units
and the Agents, Agents are finding it difficult to open bank accounts in some Banks in the same
countries. Some Banks oblige and on-board this type of business. However, when the applicant
attains citizenship after going through all the due diligence by the Bank and the Government Unit,
they are still having problems opening a Bank account. As a result, criminals and those assisting
them will be more creative and beat the system while genuine customers will remain as outcasts.

3. The inconsiderate and unthinkable regulatory crackdown will support the principle of “too-big-
to fail” institutions. Smaller entities will not have the economies of scale needed to implement
the prescriptive Anti-Money Laundering and Counter Financing of Terrorism Programs. Smaller
entities will be forced out of business while those with overseas head offices will be able to
implement the prescriptive model and survive. The result of this will be a negative effect on the
economy resulting in more unemployment and lack of innovation in businesses, to name a few.
Financial Intelligence Units have been called out by citizens in some countries for abusing the
powers granted to them by law. One of the principles of the Egmont Group of Financial
Intelligence Units that set guidelines for FIUs, is that an FIU should not be given more power than
it can handle. Drugs, moving through the streets of any country, certainly will have economic
and social consequences that can be detrimental to a country. However, the way Drug
Prevention is approached by some employees of FIUs appears to be personal rather than
professional.
In some small countries, citizens tend to know almost everyone. Citizens in these countries are
sometimes lost in time zones. Sometimes FIU employees just cannot imagine or understand how
non-traditional funds are generated in this globalized era. However, it is one thing when you do
not understand how a citizen can generate wealth and another when it is simply based on a
grudge due to an individual’s age, race, gender, ethnicity or past knowledge of the individual.
Using simply power and no proper due diligence assessment and evidence gathering will result
in loss of confidence in the Agencies and lack of public support and cooperation when needed.
We can all agree that there is an absolute need to fight Money Laundering and other Financial
Crimes, but it must be done utilizing ethical due diligence practices since absolute power corrupts
individuals and institutions.
Statistics have also shown that there is a low percentage of Money Laundering convictions in the
Caribbean over the years. Besides the lack of fortitude to pursue certain cases, there is also that
issue with the charges being laid on criminals. Those with the power to lay charges sometimes
do not understand the charges themselves. Alleged criminals are sometimes charged for Money
Laundering after being caught with Drugs, for example, when no Money Laundering ever took
place. One of the fundamentals of Money Laundering is that there are three stages – Placement,
Layering and Integration. The problem is that we are so caught up with the term Money
Laundering and so quick to make a name for ourselves, that as soon as someone is caught with
drugs, they are charged with Money Laundering. It is understood that Drug Possession is a
Money Laundering Predicate Offence, which means that it can give rise to a Money Laundering
offence. However, law enforcement agencies need to be better educated so as to ensure proper
assessments are conducted and charges laid are properly categorised. Failure to this do this will
result in many cases being dismissed.
In concluding, it is expected and quite natural for Regulators and FIUs to focus almost exclusively
on maintaining the stability of the financial services sector and fighting Financial Crimes. It is also
expected and quite natural that Financial Institutions and systems should be effectively

4. supervised. However, there must always be a basis for doing so. Before implementing
procedures, the aim is to determine whether those efforts actually reduce Financial Crimes, and
if so, whether the benefits and costs are justified.