Financial Crime World

IMF and World Bank Launch Sector Assessment Program to Strengthen Financial Systems

In May 1999, the International Monetary Fund (IMF) and the World Bank launched the Financial Sector Assessment Program (FSAP), a joint effort aimed at enhancing the effectiveness of financial system stability in member countries. The program assesses the strengths and vulnerabilities of a country’s financial sector, identifies key sources of risk, and provides recommendations for policy responses.

Financial Sector Assessment

As part of the FSAP, detailed assessments are conducted on observance of relevant financial standards and codes, resulting in Reports on Observance of Standards and Codes (ROSCs). These reports are typically produced every five years.

The Bahamas’ Financial Sector Assessment

In a recent assessment, The Bahamas’ financial sector was evaluated under the FSAP. The assessment identified several key findings, including:

  • Strengths:
    • A well-regulated banking system with high capital adequacy ratios and low non-performing loans.
  • Vulnerabilities:
    • Limited diversification of the economy, dependence on tourism and offshore financial services.

The report also highlighted areas for improvement, including enhancing the effectiveness of anti-money laundering (AML) regulations and strengthening supervision of financial institutions.

Anti-Money Laundering Regulations in The Bahamas

In response to these findings, The Bahamas has implemented several measures to strengthen its AML regime. The country has enacted a range of laws and regulations aimed at preventing money laundering and combating terrorist financing.

  • Under the Proceeds of Crime Act (POCA), all accounting firms in The Bahamas are subject to anti-money laundering requirements.
  • Accounting firms that offer financial intermediary services are deemed to be financial institutions under the Financial Transactions Reporting Act (FTRA).

Key Measures

The FTRA requires financial institutions, including accounting firms offering financial intermediary services, to implement certain measures to prevent money laundering and terrorist financing, including:

  • Conducting customer due diligence
  • Maintaining accurate records of transactions
  • Reporting suspicious transactions to the authorities

Accountants as Financial Institutions

The assessment also highlighted the importance of accountants in preventing money laundering and combating terrorist financing. Accounting firms that offer financial intermediary services are deemed to be financial institutions under the FTRA.

To comply with AML regulations, accounting firms must:

  • Separate their financial intermediary activities from those of the general accounting firm
  • Maintain separate records for financial intermediary business
  • Avoid providing access during on-site examinations to files and information that is not relevant to the Commission’s concerns

Conclusion

The Bahamas’ Financial Sector Assessment under the FSAP has identified several areas for improvement in the country’s financial sector. The government has implemented measures to strengthen AML regulations, and accountants have a critical role to play in preventing money laundering and combating terrorist financing.