When selecting a jurisdiction to operate from or invest into, there are many things to consider. For instance, what is the infrastructure like? Is the government stable? Is there a qualified workforce? Is the economy sound? The last question has many variables to consider. An important one is the legitimacy of the economy, the regulatory landscape and specifically, how does the country deal with its reputation for the prevention of money laundering? When considering Barbados, be rest assured that this is well under control.
Money Laundering is a term that originated with the gangster Al Capone – he funneled his ill-gotten gains through launderettes in an effort to create the impression of legitimacy. Since then, money laundering schemes have evolved to a whole new level. Now purported to be the third largest business in the world, these schemes reap an estimated USD $2.85 trillion per year according to John Walker, the CEO of Crime Trends Analysis in Australia – a well respected name in the anti-money laundering industry.
This activity at, at any level, is guaranteed to be the direct or indirect result of a crime. Without money laundering there would be little to gain from drug dealing, child trafficking, fraud, kidnapping, etc. Money laundering will also contaminate the economy of a country. Money launderers have an unfair advantage in terms of their spending power. This leads to unfair competition and elevated pricing in the property market as well as the squeezing out of legitimate businesses. A country that is known for turning a blind eye to money laundering will have a more difficult time attracting international businesses. As a result, there will be less tax collected and fewer jobs created for the residents.
In the late 80s money laundering was recognized as a worldwide problem that posed a significant threat to the banking system and to financial institutions. As an answer to this need the Financial Action Task Force (FATF) was established by the G7. The FATF has since expanded its scope along with its membership and now acts as the “standard setting body” for the prevention of money laundering worldwide. The FATF maintains a list of recommendations that are used by countries to draft legislation and regulations. It tracks the type of money laundering schemes, manages and ranks the mutual evaluation of countries and acts as a central agency to let the world know who is on or off “the list”.
Barbados values its reputation and its international brand and knows that attracting high quality business depends on how the rest of world ranks the island. Barbados is one of the leading jurisdictions in the Caribbean to create AML legislation and guidance to support updated Anti-Money Laundering policies set by The Financial Action Task Force (FATF). Barbados has also received excellent scores on the Transparency International Corruption Perceptions Index. Additionally, it is listed by the OECD as a jurisdiction that has mostly implemented tax standards and it is working through the Financial Action Task Force’s (FATF) compliance requirements.
This legislation further ensures that the island’s economy isn’t infiltrated with tainted money coming through channels outside of those directly related to financial services. Two of the sectors included in the new legislation are real estate and professional service providers such as attorneys and accountants.
Criminals are known to invest their illicit gains into luxury properties or development projects around the world. This occurs in locations where the sellers or developers look the other way when transactions take place with money from cloudy sources. Another simple way criminals launder a real estate transaction is to place a cash deposit with their lawyer for the down payment on a property. Then, after a short period of time, they cancel the transaction. Since the law office has already deposited the original down payment into their trust account, it is necessary to issue the refund via cheque. The money has now been laundered (filtered through a legitimate legal office). While cash from an unknown source may be king elsewhere, in Barbados, because of the AML legislation, this type of transaction would raise a red flag for legitimacy.
Employees now have to be trained on the new legislation to ensure that these new entrants understand the legislation and their responsibility to comply. Employers have many options to train their staff so that they understand the need and process for confirming identity and the source of funds, how to identify a suspicious transaction and the process and their responsibility in terms of reporting it.
So, don’t be surprised if, when buying a house or conducting another transaction, your real estate agent or lawyer asks you to provide documentation that will establish the origin and legitimacy of the funds. Just know that these efforts will help to keep the Barbados economy sound and your investment here safe and secure.