October 21, 2020

The Editor Speaks: Should we be surprised US State Report lists Cayman Islands as ‘country of primary concern”?

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Colin Wilson2webIn our Front Page story today we have published the whole of the “Bureau for International Narcotics and Law Enforcement Affairs International Narcotics Control Strategy Report Volume II Money Laundering And Financial Crimes March 2015” as it pertains to the Cayman Islands.

“The Cayman Islands, a UK Caribbean overseas territory, is an offshore financial center. Most money laundering that occurs in the Cayman Islands is primarily related to fraud and drug trafficking. Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdictions,” is the opening gambit.

One of its concerns is the enforcement issues regarding money laundering and the failure we have of not reporting it.

“In 2014, the Cayman Islands increased both its regulatory and law enforcement staffing. In order to better gauge the effectiveness of the Cayman Islands’ AML/CFT programs, authorities should release updated information on the numbers of suspicious transaction reports (STRs), prosecutions, and convictions,” the report says.

Jude Scott, Cayman Finance CEO, has hit back saying, “It appears that ComplianceAid has chosen to sensationalize media reports to negatively focus on Caribbean countries for the purpose of increasing attendance at ComplianceAid’s upcoming conference in Miami.”

ComplianceAid is an AML/CFT consulting firm and Scott said the firm took the information from the 2015 International Narcotics Control Strategy Report out of context implying there was a problem in the Caribbean.

“The article by ComplianceAid was deceptive at best and this type of behavior intentionally, or unintentionally, by conference promoters should never be encouraged,” he added.

For Cayman to be labeled as a “major money laundering” jurisdiction of “primary concern” is misleading Scott claimed. He said the report was not based on an assessment of the country or the jurisdiction’s legal framework to combat money laundering, or any role in the terrorist financing problem.

“The Cayman Islands continues to perform very strongly when examined for the effectiveness of programmes to detect and prevent money laundering and terrorist financing, among other things, and we continue to be surprised that the country continues to be included in the classification of a country of “primary concern.”

Thank you Mr. Scott. I would have been surprised if you hadn’t come out fighting.

I, however, am not surprised we have been included in the report especially of the recent publicity given to prominent Caymanian businessman Bryce Merren.

Merren was arrested in March 2014 in Puerto Rico on allegations that he was attempting to set up a money laundering operation to cover for planned cocaine shipments with another man who was an employee at his Cayman Islands trucking business.

From the probable cause affidavit:
“Merren explained to [undercover agent #2] he has legitimate businesses in the Cayman Islands and Curacao where he receives funds from customers from all over the world that conduct credit card transactions utilizing his businesses’ merchant machines in order to convert foreign currency into U.S. currency. Merren charges a percentage for the exchange and then wire transfers the bulk amount of the currency back to its correspondent owner. Merren also prepares purchase receipts for the customers in order to make it seem as if they are purchasing or paying for services.”

In an article written by Miles Harvey published by ASKMEN under the title “How To: Money Laundering” he writes:

“Far more exciting and global in the practice of money laundering is the use of offshore and overseas banks. Nations like the Cayman Islands, Bahamas and Panama are very accommodating to criminals looking to legitimize their cash; these nations are unrestricted with regards to burdensome banking laws and anti-laundering procedures, which ultimately helps hide the launderers behind strict veils of secrecy. Opening accounts in a number of these offshore accounts allows launderers to move their money around and create a nearly impenetrable defense against curious investigators.”

In a US Department of Treasury financial Crimes Enforcement Network advisory written in July 2000 that US Senate lobbyists still quote from states:

“The counter-money laundering regime embodied in the legal, supervisory, and regulatory systems of the Cayman Islands suffers from serious systemic problems.

“Most Cayman Islands financial institutions are not required to identify their customers.
“Cayman Islands financial institutions are not required to maintain records of customers, financial transactions or account opening documents.
“ Cayman Islands law makes it impossible for the supervisory and regulatory authority to obtain information held by financial institutions regarding their clients’ identity absent a court order. Officials have no access to information relating to investment funds held by 15 or fewer persons.
“Failure of financial institutions in the Cayman Islands to report suspicious transactions is not subject to penalty; instead, a nonreporting institution is unable to invoke a ‘reporting defense’ if the institution is itself accused of money laundering.
“ Despite its significance as an international financial center, Cayman Islands law bars its supervisory and regulatory authority from collecting for, and sharing with, its counterparts records of financial transactions and customer identification (to the extent that such documents are maintained by Cayman Islands financial institutions).”

It is tragic this is still used and it is 15 YEARS old!

How many times do we still read of the “notorious” and the “nefarious” Cayman Islands – adjectives still used by journalists today?. Movies portraying Cayman as a hot bed of criminal minds and gangsters?

No. I am not surprised. Especially when it comes out of the USA. The squeaky clean country of the world! Now I can’t stop laughing.

And didn’t I see United Kingdom’s name on this Report? Yes I did.

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