RESPONSE TO THE US INCSR REPORT 2015

BY

THE ONDCP

The US INCSR REPORT2015 (United States International Narcotics Control Strategy Report) recently issued by the U.S. State Department has, for many years, listed Antigua and Barbuda as a “Jurisdiction of Primary Concern”. Its most recent Report states that “Antigua and Barbuda remains a significant or substantial offshore center which continues to be vulnerable to money laundering and other financial crimes.” This finding by the USA has been repeated continually from 2011 – 2015 and even in previous years.

According to the US INCSR REPORT 2015: “A major money laundering country is defined by statute as one ‘whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking’ (FAA § 481(e)(7))…Additionally, money laundering activity has moved beyond banks and traditional financial institutions to other non-financial businesses and professions and alternative money and value transfer systems.”

It states further, that “a government (e.g., the United States or the United Kingdom) can have comprehensive anti-money laundering laws on its books and conduct aggressive anti-money laundering enforcement efforts but still be classified a major money laundering jurisdiction.” It also states, that “this analysis is not based on an assessment of the country’s or jurisdiction’s legal framework to combat money laundering; its role in the terrorist financing problem; or the degree of its cooperation in the international fight against money laundering, including terrorist financing.”

That assessment methodology appears to be inconsistent and prejudiced. Given the resources invested in anti-money laundering efforts by Antigua and Barbuda, and the small size of currency transactions emanating from Antigua and Barbuda, it is not possible for any reasonable adjudicator to declare Antigua and Barbuda “a major money laundering jurisdiction”.

There remain significant concerns about how the US INCSR Report chooses to portray Antigua and Barbuda, which is a country that, as confirmed by the FATF and the CFATF has two international authorities, has made and is continuing to make very significant steps in improving its anti-money laundering infrastructure, and committing resources to the fight against money laundering. The U.S. INCSR Report has always appeared to reach its conclusions with a significant degree of subjectivity and to promote a view of this jurisdiction without needing to substantiate its statements.

Antigua and Barbuda was in February, 2014 removed from the FATF ICRG Review process. After an onsite visit by the ICRG reviewers, the published report states:

“The FATF welcomes Antigua and Barbuda’s significant progress in improving its AML/CFT regime and notes that Antigua and Barbuda has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2010. Antigua and Barbuda is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. …….”

Meanwhile, the Caribbean Financial Task Force (CFATF) states its satisfaction with the progress Antigua and Barbuda has been making towards complying with the CFATF Recommendations for improvement of its AML/CFT system. The latest report of 2014 states:

“… Antigua and Barbuda has no outstanding deficiencies with regard to its Core and Key Recommendations in that all the Core and Key Recommendations that were rated ‘PC’ or ‘NC’ have been addressed. With regard to Key Recommendations, R. 23 has been fully met and therefore all Key Recommendations that were rated ‘PC’ or ‘NC’ have been addressed. For non-Core and Key Recommendations, R. 33 has been partially complied with and R. 34 and SR. VIII have not been met. It is recommended that Antigua and Barbuda remain in regular one year follow-up and report to the May 2015 Plenary.”

It is noted that the US INCSR 2015 Report claims that Antigua and Barbuda “remains a substantial offshore center.” That cannot possibly be accurate. It is an established fact that the offshore sector—comprising of a handful of banks and a few Gaming companies—is considered as one of the smallest “offshore centers” within the Caribbean and the World.

The important perspective is that money laundering takes place to varying degrees in virtually every country that has financial institutions which offer deposit-taking or money transfer services. It appears to be unavoidable, and the degree to which it appears to be occurring here is not something that can begin to compare with what takes place in financial centers elsewhere such as New York, or the City of London, or Chicago where the total proceeds involved far exceeds the GDP of Antigua and Barbuda. Rather, what needs to be assessed is how the regulators, supervisory authority and law enforcement authorities in partnership with financial institutions are responding to the threat which, though it cannot be eradicated immediately, can nonetheless be deterred, disrupted and prosecuted.

Whereas the ONDCP, in the course of its anti-drug and anti-money laundering investigations, has uncovered money laundering in which U.S. currency was involved, that is not enough to say that what it has encountered and can verify, constitutes a condition that significantly affects the United States.

Although the ONDCP, through more insightful and more effective investigations, has been able to detect more money laundering, that fact does not translate into increased occurrences of money laundering. The former relates to greater detection of criminal conduct, while the latter would require comparison to a baseline.

The comment that: “There are few successful investigations, prosecutions, and convictions”, gives no context or baseline against which this is to be measured. Antigua and Barbuda has secured a number of money laundering convictions which are significant, given the size of the jurisdiction. During the past three years, fifty six matters have been referred for investigations; fifteen remain under investigation; sixteen are before the courts; three have been dismissed, seven have been shelved, one withdrawn, and fourteen both criminal and civil have been successfully completed.

Over the past several years, counter narcotics efforts have seized over 8,500 lbs of Cannabis and prevented more than 1.6 tonnes of Cocaine from transiting our shores, destined for other markets.

It must also be borne in mind that financial investigations are complex, time-consuming and potentially expensive. Therefore, when law enforcement tackles financial crime and money laundering, it is important to note that it is fighting to uncover deliberately hidden and obfuscated assets, strewn across multiple accounts and over multiple jurisdictions, in ways that often do not easily suggest an illegitimate transaction. In addition, Antigua and Barbuda in its efforts to pursue money laundering leads also has to deal with uncooperative jurisdictions.

The Antigua and Barbuda money laundering laws are comprehensive and are up to international standards; further, examinations of financial institutions for AML/CFT compliance by the Financial Compliance Unit and the FSRC reveal a satisfactory degree of rigour with which the law is being implemented.

It is significant that Antigua and Barbuda is now undergoing a National Risk Assessment for money laundering, supported by the World Bank which is providing technical assistance. The end result of this exercise will be a valid and realistic appraisal of the money laundering risk in Antigua and Barbuda. This process will be objective and put the country in a better position to determine the threats and vulnerabilities, to develop and apply necessary mitigating factors to reduce the risks, and to develop an action plan which will allow for the risks to be reasonably addressed within a proper legal framework and timeline. The end result will be a policy document able to guide the government in tackling the problem of money laundering, terrorist financing and organized crime.

It remains baffling why the U.S. continues to keep Antigua and Barbuda on its list of “Jurisdictions of Primary Concern”, given that Antigua and Barbuda has successfully addressed most of the deficiencies and concerns noted by CFTAF and FATF. Additionally, when considering its size as a financial centre, and its successful efforts against drug trafficking, money laundering and organized crime, it is evident that the country does have an effective AML/CFT regime.