Jamaica’s Financial Fraud Epidemic: $700 Million Lost Annually

According to Dr. Jide Lewis, deputy governor of the Bank of Jamaica (BOJ), a staggering $700 million to $800 million is lost annually due to financial fraud in Jamaica’s banking system.

A Growing Concern

The revelation was made during a discussion on money laundering and plans for Jamaica to get off the list of flagged nations with weak links in its anti-money laundering defenses. Despite a decline from the estimated annual average loss of $1 billion found in a BOJ study covering a 46-month period ending in 2021, Jamaica remains among the top jurisdictions for financial fraud.

Strengthening Regulatory Reach

The BOJ has been working to strengthen its regulatory reach by overseeing not only banks but also non-bank financial companies and pension funds. This move comes as the bank investigates a major fraud case involving Stocks & Securities Limited, a boutique securities firm.

FATF Requirements

To get off the grey list of the Financial Action Task Force (FATF), Jamaica must complete 13 action items to fully comply with the global watchdog’s 40 measures aimed at ridding the world of havens for money laundering and terrorist financing. The FATF has commitments from over 200 jurisdictions to achieve this goal.

Meeting the Requirements

Jamaica is expected to meet with the FATF later this month to discuss its progress on the 13 action items, with a decision on whether it will be removed from the grey list due in the summer. Lewis emphasized that the country needs to demonstrate significant improvement in the coming months.

Banking Fraud Study

The BOJ has conducted studies on banking fraud among deposit-taking institutions, revealing that losses averaged $1 billion per annum between January 2018 and October 2021. The majority of these incidents were related to credit and debit card fraud.

UK Privy Council Ruling

The recent UK Privy Council ruling against the Jamaican Bar Association, which had sought to invoke client privilege in reporting suspicious financial activity under the Proceeds of Crime Act (POCA), is seen as a significant development. If lawyers fail to report such transactions, they will face sanctions.

Ensuring Effective Prosecution

Lewis emphasized that Jamaica must work to ensure that its anti-money laundering framework allows all stakeholders, including designated parties and investigative arms of the judicial system, to have access to necessary information to prosecute fraud cases effectively.

Conclusion

The issue of financial fraud remains top-of-mind as Jamaica strives to improve its anti-money laundering framework. With significant improvement needed in the coming months, it is crucial that the country takes decisive action to address this epidemic and get off the grey list of the FATF.