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Financial Institutions Face Liability for Breaches in Anti-Money Laundering and Combating Financing of Terrorism Regulations

Recent developments in Guyana’s financial sector have highlighted the importance of compliance with anti-money laundering (AML) and combating financing of terrorism (CFT) regulations. The country’s AML/CFT Act 2009 imposes strict penalties on individuals and institutions found guilty of breaching these regulations.

Immunity from Liability

According to Section 23(1) of the Act, any individual who transmits information or submits reports to the Financial Intelligence Unit (FIU) in good faith is immune from liability, regardless of the outcome of the communication. However, the Act also criminalizes “tipping off,” which refers to the disclosure by employees, directors, officers, or agents of a financial institution that a suspicious transaction report has been submitted to the FIU or that an investigation into money laundering, terrorist financing, or the proceeds of crime is pending.

Penalties for Breaching AML/CFT Regulations

The penalty for tipping off can be severe, with fines not exceeding $1 million and imprisonment for up to three years. Additionally, individuals found guilty of breaching AML/CFT regulations may face civil liability actions and professional liability claims.

Proactive Measures for Compliance

In light of these developments, financial institutions in Guyana are advised to take proactive measures to ensure compliance with AML/CFT regulations. The Board of Directors (BOD) has ultimate responsibility for the effectiveness of a financial institution’s AML/CFT framework, and directors should:

  • Demonstrate their commitment to an effective program by understanding statutory duties
  • Approve policies and procedures
  • Ensure that the institution is in compliance with its statutory responsibilities

Risk-Based Frameworks

Financial institutions are also required to develop risk-based frameworks that assess the level of potential risk each client relationship poses to the institution. This includes:

  • Segregating client relationships by risk categories
  • Differentiating client relationships by risk factors
  • Requiring know-your-customer (KYC) documentation and due diligence information

Independent Oversight Function

The BOD should ensure that the financial institution has an effective independent risk-based oversight function to test and evaluate its compliance program. Additionally, institutions should:

  • Establish management information/reporting systems to facilitate aggregate and group/branch-wide monitoring
  • Implement screening procedures for hiring and ongoing systems to promote high ethical and professional standards

Periodic Review of Policies

Policies should be periodically reviewed for consistency with the business model, and changes and developments in products and services should be taken into account. Special attention should be paid to:

  • Emerging technologies and new payment products
  • Trends in money laundering and terrorist financing

Conclusion

In conclusion, financial institutions in Guyana must take compliance with AML/CFT regulations seriously to avoid liability and maintain their reputation in the industry.