By
Dr. Peter D. Maynard[1]
The Bahamas is one of the latest among those countries which have set up financial intelligence units.[2] The Financial Intelligence Unit Act, 2000 (No. 39 of 2000)(“the Act”) provides for the establishment of a body to be known as the Financial Intelligence Unit (FIU) and the functions and powers of that body. The FIU is the mechanism for co-operation with foreign FIUs.
The Act, which took effect on December 29, 2000, consists of 14 sections, 2 schedules, and 13 pages. Section 3 establishes the Financial Intelligence Unit. It is embodied with perpetual succession and a common seal with power to enter into contracts. This Section also provides for the appointment of personnel for the FIU. These consist of a director, an attorney, a public accountant, police officers, consultants, and other necessary staff.
Matters relating to the appointment of the director are set out in the First Schedule. He is appointed for a period not exceeding five years. He may not be a member of either house of parliament, a public officer, or a director, officer or servant of, or have a controlling interest in, any financial institution.
Section 4 sets out the functions of the FIU. It is the agency in The Bahamas responsible for receiving, analyzing, obtaining and disseminating information which relates to the offences specified in the Second Schedule. It is noteworthy that the FIU is responsible for disseminating information. No further permission or intervention is required to pass over information to another FIU. The offences are those under the Proceeds of Crime Act, 2000 (44 of 2000)(“POCA”), namely bribery, money laundering, indictable offences (except drug trafficking which is treated elsewhere), and offences committed anywhere which under the duality principle would be offences in the Bahamas as set out in the Schedule of POCA.
Section 4 (2) begins with language which overrides any other law apart from the Constitution. Given such a wide ambit, provision is made for the FIU to have the following functions:
(a) suspicious transaction reports – Indeed, it receives all disclosures required under the POCA relevant to its functions, including information from foreign FIUs;
(b) 3 day (72 hour) orders – Upon receipt of the above disclosures, it may order any person to refrain from completing a transaction for a period not exceeding 72 hours;
(c) 5 day freezing orders – It may upon receipt of a request from a foreign FIU or law enforcement authority order any person to freeze another person’s bank account for a period not exceeding five days, if satisfied that the request relates to the proceeds of any of the above offences.
This latter subsection contains an important proviso. An aggrieved person may apply to a judge in chambers to discharge the order. He is required to serve notice on the FIU to join in the proceeding. But the order remains in full force and effect until the judge determines otherwise.
(d) requiring the production of information – The FIU may require the production of such information, excluding information subject to legal professional privilege, that the FIU considers relevant to fulfill its functions.
In addition, the FIU is to retain a record of all information for at least five years. It is also required to provide information to the police relating to the commission of one of the above offences, and to any foreign FIU, and may enter into any agreement or arrangement with a foreign FIU. It is also to inform the public, financial and business entities of their obligations.
Section 5 states that the Minister responsible for the administration of the Act (the Ministerof Finance) may give general directions to the FIU.
Sections 6, 7 and 8 give protection from proceedings to the FIU and its officers and persons who in good faith transmit information or submit reports to the FIU. No order for the provision of information, documents or evidence may be issued in respect of the FIU or against the minister, director, officer or personnel are the FIU or any person engaged pursuant to the act. There is no criminal or civil liability for dealing with information in the FIU’s ordinary course of business. But, Section 9 provides for confidentiality of information received by the FIU. Persons connected with the FIU are subject to sanctions for the unauthorized disclosure of information.
Section 10 provides for an annual report on the work of the FIU to be presented to the Minister who must lay such report in Parliament. Section 11 states that the funds of the FIU shall be provided by Parliament.
Sections 12 and 13 make provisions relating to the keeping of accounts by the FIU. The FIU must prepare, in respect of each financial year, a statement of accounts which must be audited annually. The audited accounts must be laid in Parliament by the Minister.
Section 14 gives the Minister power to make regulations for giving effect to the Act.
“Fishing expeditions” would be harmful not only to a customer, but also to the financial sector as a whole. As presently formulated, the provisions of the Act are amenable to “fishing”.
The procedure and effect of a suspicious transaction report needs to be more clearly formulated. What is the viability of the bank after a freeze or expires? How is the financial institution protected, when a client demands that action be taken on his account which has been frozen by the FIU, bearing in mind that the financial institution cannot engage in tipping off?
It would seem to be an abuse of the Act to obtain a series of orders beyond the period specified. However, this is not dealt with in the Act.
An “aggrieved person” is not defined in Section 4.
Regarding internal controls, policies and procedures, under the old Act, financial institutions were required to appoint a money laundering reporting officer. Ironically, under Section 25 of the Act, the language is not mandatory. It is simply stated that financial institutions “should” appoint such officer. The same consideration applies to Section 26.
In the Section 47, the reference to “Bahamian resident personal customers” would be more appropriately “facilitator holders” as in a Financial Transactions Reporting Act. This Section also requires that the first four pages of a customer’s passport be photocopied. However, it is more sensible to simply provide that the relevant pages of the passport which identify the customer should be photocopied. Not all the relevant information is necessarily found on the first four pages. There are persons who travel without a passport. Indeed, the Bahamas immigration authorities permit U.S. and other visitors to use other forms of identification. The proper procedure in addition to them is not specified.
The provisions dealing with client accounts opened by intermediaries do not appear to be consistent with the regulations, which require that the verification of identity be received from financial institutions. In Section 76, the language used does not appear to be mandatory.
The terms of reference for a money laundering reporting officer are not given.
Other deadlines seem to be based on transactions. The position for closed accounts, where there are no transactions, is not discussed. Is the officer required to report a suspicious transaction if such a former client reappears?
What is the turnaround time for feedback from the FIU? If there is not immediate acknowledgement by the FIU, what is the officer to do in the meantime? How confidential are reports? Will not the name of the reporting officer, and the filing of an affidavit be disclosed?
Section 123 suggests that education and training are voluntary. This is in contrast to Section 125 which requires that the staff must be aware of money laundering.
Section 127 is not relevant to private banking. It appears that the minister responsible for the Act is the Minister of Finance. But, this is not clear.
The status in the Regulations of a trust settlement is not clear.
[1] Counsel and Attorney at Law, specializing in commercial law, company law, trusts, banking, and civil and criminal litigation. President of the Bahamas Bar Association and President of the Organization of Commonwealth Caribbean Bar Associations. Admitted to practice law in 1979 in England, Wales and The Bahamas; and in 1986 in St. Lucia, St. Vincent and the Grenadines, Antigua and Barbuda and Trinidad and Tobago, in 1996, pro hac vice in the Turks and Caicos Islands. Education: McGill University (B.A., Hons.); Johns Hopkins University (M.A., Ph.D.); Cambridge University (LL.M.); Sorbonne University (1996); Cornell University (1968). Member os the Hon. Society of Gray’s Inn. Former posts: Legal Adviser, Bahamas Ministry of Foreign Affairs; Economics Affairs Officer, United Nations; and Acting Stipendiary and Circuit Magistrate. Contributing Editor, Journal of Financial Crime, Journal of Money Laundering Control, Amicus Curiae, International Journal of Banking Regulation, Company Lawyer and Caribbean Law and Business. PETER D. MAYNARD & CO., Chambers, Jehovah Jireh House, Bay & Deveaux Streets, P.O. Box N-1000, Nassau, Bahamas, telephone: (242) 325-5335 , fax: (242) 325-5411, email: peter.maynard@maynardlaw.com
[2] Five new units were accepted as members of the Egmont Group during its plenary meeting in Panama City in May 2000: Dominican Republic, Colombia, Estonia, Japan, and Romania. As of 15 May, 2000, there were 53 countries, not including the Bahamas but including other countries in the region, such as British Virgin Islands, Aruba and Netherlands Antilles. See www.oecd.org/fatf/pdf/EGFIUlist2000_en.pdf. The Group is named after the Egmont-Arenberg Palace in Brussels, where the first meeting was held in 1995. The Bahamas was the 54th member. See a useful web site of the Bahamas compliance commission at www.thebahamascompliancecommission.com.
