COVID-19 Will Test The Bahamas' Risk Based Approach
In Financial Action Task Force (‘FATF’) President’s statement issued on April 1, 2020, President Xiangmin Liu admonished worldwide supervisors, financial intelligence units and law enforcement agencies to continue sharing information with the private sector to prioritize and address key money laundering (‘ML’) risk relating to fraud and terrorist financing (‘TF’) risk linked to COVID-19. This statement is aligned with FATF’s leadership in the AML and financial crimes space as the article further added that FATF stands ready to provide further AML/CFT guidance to support the current global efforts to tackle the COVID‑19 crisis and its effects.
Locally, regulators updated their respective Registrants and Licensees regarding extensions to pre-established deadlines and provided illustrations on how criminals are attempting to exploit the COVID-19 pandemic. The actions by our regulators are encouraging and highlights the responsiveness of our supervisory bodies and how in sync they are with international standards. Notwithstanding, the exceptional guidance by international and local regulatory authorities – COVID-19 will test Registrants and Licensees’ design, implementation and strength of their risk-based approach (‘RBA) which was ushered with the suite of regulatory changes within the last eighteen to twenty-four months. Additionally, it will further evaluate the supervisory bodies monitoring tools. For the financial services industry, being the second strongest pillar of our economy accounting for nearly 20% of Gross Domestic Product (‘GDP’), it is imperative that Supervised Financial Institutions (‘SFI’) and Designated Non-Financial Businesses and Professions (‘DNFBPs’) adhere to international standards, local statute and guidance provided by our respective regulators.
The COVID-19 pandemic will most definitely, energize criminals to exploit known or inadvertent weaknesses within our (laws, guidance and private practice) anti-money laundering/counter-financing of terrorism (‘AML/CFT’) systems. Therefore, Compliance and AML/CFT professionals will now transform from being the generally accepted ‘legal necessity’ to an ‘essential and vital’ component to ensuring an institution’s reputational and financial risks are mitigated during these uncharted times within business. AML/CFT professionals must appreciate and utilize the simplified, standard and enhanced due diligence process while thoroughly evidencing any needed changes due to established business continuity plans (‘BCPs’). Messaging to relationship managers must be clear and concise to ensure our clients receive the best possible experience considering the global environment.
I am assured that The Bahamas has the adequate combination of risk, compliance and AML/CFT professionals to navigate financial services through, conversely, what is visibly missing is law regarding Digital IDs. FATF recently called for countries to explore as an appropriate aid regarding financial transaction while managing ML/TF. I hereby, echo this position. To further enhance our ability to provide cutting edge services and maintain our leadership position within the Financial services space, our country must establish our legal position regarding Digital IDs as a ‘business as usual’ feature in an effort to enhance our customer service experience in an industry that has seen shrinkage annually.
With potential shutdowns around the world being prolonged and our Deputy Prime Minister, K. Peter Turnquest signaling the pandemic may last beyond 2Q2020, risk-based supervision and enforcement will become more critical than ever seen before.