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Terrorist Financing Detection Methods in Saint Lucia Under Scrutiny
April 11, 2018 - By Financial Intelligence Authority
Money laundering and terrorist financing have become a major concern globally, compromising the stability of financial systems worldwide. The devastating attacks on September 11, 2001, heightened international alarm bells regarding the financing of terrorism.
The Global Scale of Money Laundering
The International Monetary Fund estimates that money laundering could be worth between $590 billion to $1.5 trillion annually, with approximately $300-430 billion spinning around the globe in the laundering cycle.
What is Money Laundering?
Money laundering is defined as the conversion of criminal proceeds into legitimate funds. The Financial Action Task Force (FATF) defines it as “the processing of criminal proceeds to disguise their illegal origin in order to legitimize the ill-gotten gains of crime.”
Stages of Money Laundering
Criminal proceeds often stem from crimes such as drug trafficking, prostitution, embezzlement, and other serious offenses. There are three stages of money laundering:
- Placement: The launderer places criminally derived cash into the financial system or disposes of it through currency smuggling. Common forms of placement include purchasing assets or monetary instruments like money orders, securities, etc.
- Layering: The launderer attempts to separate criminally derived proceeds from their illicit origin by moving funds through a complex series of financial transactions. Wire or electronic funds transfer is often used for this purpose.
- Integration: The final stage involves creating a justification or explanation for the criminally derived profits, making it appear legitimate. Shell companies are frequently used for this purpose.
Challenges in Combating Money Laundering
Money launderers enjoy an advantage as they can study regulatory efforts and plan their crimes accordingly. Financial systems lacking record-keeping requirements or reporting suspicious transactions provide additional opportunities for laundering.
Recommendations and Enforcement
To combat money laundering, international organizations like FATF and the Caribbean Financial Action Task Force (CFATF) have made recommendations urging member countries to impose measures on financial institutions requiring them to report suspicious transactions to the Financial Intelligence Authority.
Saint Lucia’s Financial Intelligence Authority
Saint Lucia has established a Financial Intelligence Authority, responsible for collecting, receiving, and analyzing reports submitted by financial institutions and businesses. This agency is consistent with FATF and CFATF concepts.
Obligations of Financial Institutions in Saint Lucia
Financial institutions in Saint Lucia are required to comply with obligations including reporting suspicious transactions to the Financial Intelligence Authority, which may involve proceeds from prescribed criminal offenses.
Consequences of Money Laundering and Terrorist Financing
Money laundering and terrorist financing can harm a country’s financial sector by damaging reputations, leading investors to cease business dealings. Developing nations with lax anti-money laundering and terrorism financing enforcement systems may struggle to receive foreign aid.
The Role of Financial Institutions in Saint Lucia
Financial institutions in Saint Lucia play a vital role in fighting money laundering and terrorism financing, helping maintain the integrity of the financial system and creating an environment conducive to investment.