Antigua and Barbuda is located within the Eastern Caribbean which sits at the centre of the flow of narcotics from the drug producing countries in the south to the large consuming countries in the north. For this reason Antigua and Barbuda is considered a transit country. It is worth noting that as improved efforts are developed to interdict the flow of narcotics through the Central American corridor the resulting effect is likely to be an increase in the flow of drugs through the alternate route offered by the geography of the Eastern Caribbean. This will therefore likely have a direct impact on the flow of drugs through Antigua and Barbuda.
Trafficking in Class A drugs such as cocaine continues to offer the criminal the highest profit margin, but the growth, shipment and distribution of the Class B drug, cannabis continues to provide important seed funding for traffickers to enable them to commit further offences by trafficking more profitable drugs. Marijuana is the most widely used drug according to information in the World Drug Report 2010 and this is also true for Antigua and Barbuda. The World Drug Report 2010 indicates that drug trafficking is a US $320 Billion per year industry. This highlights the significant challenges that small states face as they commit precious resources and take the fight to criminals involved in drug trafficking, money laundering and the financing of terrorist activities.Reproduced below is an article entitled, DRUG TRAFFICKING AND MONEY LAUNDERING A THREAT TO FINANCIAL STABILITY & NATIONAL SECURITY, written by the Director of ONDCP, remains relevant to financial institutions and the general public.
DRUG TRAFFICKING AND MONEY LAUNDERING A THREAT TO FINANCIAL STABILITY & NATIONAL SECURITY
The aim of this article is to bring awareness to citizens, residents, and businesses that drug trafficking and money laundering are threats to financial stability and by extension to national security though they may not be recognized as such by many in our society. My office, The Office of National Drug and Money Laundering Control Policy, (ONDCP) is tasked with combating drug trafficking, money laundering and terrorism financing so as to secure the integrity of the financial system of our country and enhance the security of our society.
Drug Use: Unfettered drug use has been recognized by the United Nations as having the clear potential to damage societies and cause their disintegration unless inhibited and eliminated. This is because the use of illegal narcotics and mind altering drugs is something that is likely to entice people across the whole spectrum of our society. We can therefore expect that it will affect some of the brightest and best minds and contributors to our society. It can also be expected to affect the young and undeveloped who have the potential to contribute positively to society in many different ways, potential businessmen, economists, doctors, lawyers, social workers, artists, etc. Once hooked on and distracted by a drug habit, the potential of these people to contribute to society is compromised or even wiped out, and in a small society like ours that would be devastating.
The ONDCP is tasked with confronting and suppressing drug trafficking, with particular emphasis on the larger quantities. This we do through a specialized and highly trained task force of operational and intelligence officers. The ONDCP has had a number of notable successes, but the road ahead is long and difficult in reaching the point where we can eliminate drug trafficking and drug abuse altogether.
Drug traffickers: One of the things you almost never hear of is of drug traffickers retiring. The low level suppliers may need to keep at it to sustain a living. Yet for the drug kingpins, though there are huge profits to be made from a sizeable shipment of cocaine or marijuana, they do not seem to content themselves with one big pay day. What occurs is that they use part of the proceeds from a shipment to reinvest in another shipment, and after that another and then another. Soon they have so much disposable cash or wealth that they tend to have difficulty hiding it.
Money laundering: Drug traffickers and other criminals need to hide their wealth because it is illegal to possess the proceeds of such illegal activity and the law empowers the government to strip criminals of such ill gotten gains. The criminal’s solution is to change the form in which he holds the proceeds. This change in the form of illegal proceeds is called money laundering. Oddly enough it is a label applied not only to money but to all illegally acquired property exchanged for legitimate property. If for example, a drug trafficker has thousands of dollars in cash in hand from the sale of say cocaine, he may want to put it in bank accounts, purchase houses, cars, jewelry etc. so that what he then comes to possess has the appearance of a legitimate asset which many people are likely to assume was lawfully obtained or which people will be unable to easily show is from an illegal source. The drug trafficker is therefore able to end up with significant amounts of money and other assets that he can dispose of, and enjoy a comfortable lifestyle to which he is not legally entitled. Money laundering is what makes crime pay. It is the job of the ONDCP to prevent money laundering, and to take away the incentive to commit crimes of profit by depriving criminals of their profits.
How to respond to Money Laundering:
The ONDCP continually interacts with financial institutions to keep them aware of the threat of money laundering and to supervise and encourage their implementation of legal requirements to deter and detect money laundering. The ONDCP is a specialist organisation in the investigation and prosecution of money laundering. Drug interdiction and prosecution, together with combating money laundering is the prime mandate of the ONDCP.
Financial Institutions and Businesses:
Besides banks, any business that has the potential to receive cash or currency particularly large quantities for example a lump sum or aggregate of $10,000 or more should be vigilant against the possibility that their facilities could be used to unload criminally obtained funds such as money from drug sales. The law imposes strict obligations on only a limited category of businesses such as insurance companies, credit unions, money remitters, real estate agents, jewelers and casinos to officially report to the ONDCP any suspicious financial transactions or activity. Businesses that are not included on the list must be aware that nonetheless they are not allowed to exercise what is called willful blindness, such as receiving, concealing, disposing of or managing any property which there is reasonable grounds to suspect is derived from some form of unlawful activity. To do so is to commit the offence of money laundering which will make them liable for criminal charges.
Ordinary citizens and residents:
One of our greatest concerns is how criminals prey on and abuse ordinary people to launder the proceeds of their criminal activity. Let me preface this by citing the old saying, “If it seems too good to be true, it probably is.” Some persons have been the victims of financial scams, where an unusual high rate of return on investment is offered and never realized.
Everybody may be assailed with letters, faxes or emails notifying them that they have won lotteries they have never participated in. Persons being asked by a total stranger to cash cheques for a 30 – 40% commission, or to assist a grieving relative who just inherited over a million dollars but that some foreign government won’t allow him or her to get the money and if you could let him have the use of your bank account he will be truly appreciative and will allow you to keep 30 – 40% for your troubles. Quite often these emails often ask the recipient to (please send account number and tracking details and also to send a small administrative fee to be refunded immediately). These scams are money laundering. Yet permit me to add this, sometimes there are even real payoffs where fraudulent documents are involved and a local bank is compromised. You do this once, you can claim ignorance. Do it again, especially after reading this article, then you are aiding and abetting money laundering. Money laundering, however, has a greater and much more dangerous potential than merely making criminals rich. The problem arises out of the wealth and resources that criminal activity allows participants to have at their command. There is a strong tendency for criminals with a lot of money and resources to behave like legitimate businessmen with strong inclination to expand their business, to maximize profits and extend resources. This often results in what is called organized crime. Experts, including Gary Novis, John McDowell and R.E. Bell have identified the adverse economic impacts of money laundering on a society. They include:
- Undermining legitimate business, for example, by using fronting companies whose real purpose is to hide criminal funds. As these business activities are not profit motivated or based on market forces, they can offer products at prices that undercut legitimate business.
- Undermining financial integrity and contributing to instability of a financial system: Where there is no real interest in legitimate profits criminals could invest in and sustain unsound businesses and investments that are convenient for hiding criminal funds. They can move large sums of money suddenly and unpredictably and without legitimate economic purpose, which can distort and affect the availability of funds.
- Loss of control of economic policy: Money laundering can cause inexplicable changes in demand for money, increased volatility of money flow, misallocation of resources due to investments designed to hide assets rather than earn dividends. Such unpredictable effects of money laundering may make sound economic policy difficulty to achieve.
- Tarnished financial reputation: If a country’s financial institutions acquire a reputation for facilitating money laundering, confidence in the financial markets will be eroded, and there may be a flight of investment capital.
- Social costs: Money laundering allows criminals to expand their operations, in response to which there are increases in the amount of financial and other resources that have to be committed to fight its effects rather than being put into social programs; it transfers power from governments and legitimate businessmen to criminals; it has a corrupting effect on society: where criminals have enough money to rival a national budget or simply large enough amounts of money, if given the chance they are likely to exercise their financial muscle to achieve political ends that are convenient to their illegitimate aspirations. If this was allowed to go unchecked some say that in extreme situations it could lead to the virtual take-over of legitimate government.
Terrorist financing: The ONDCP supervises financial institutions to determine whether they are being used as depositories for funds (legitimate or criminal) that are intended for use in carrying out acts of terror or in supporting terrorist infrastructures. Facilitating or turning a blind eye to such funds would cause reputational damage to a financial institution as well as to the country. Constant reporting by financial institutions to the Director of ONDCP as to whether they are in possession or control of funds of known terrorist groups is required by law; this together with constant vigilance by the ONDCP is working to undermine any attempt to use financial facilities in this country for such purposes.
In closing I hope that these few remarks have provided a better understanding of the negative impact that drug trafficking and money laundering have on our society. The threat to financial stability and by extension to national security is real and all within the financial sector need to remain vigilant and to report any suspicious transactions or activity to the appropriate authorities. I also wish to encourage every citizen to take notice that they too have the power to contribute to financial stability and by extension national security by reporting to the ONDCP or the Police any odd, irregular or suspicious financial activity.