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Financial sector huddles over money crimes

Spotlight on Jam-Dex, real estate, lawyers, used-car and hardware trade

Published:Friday | October 14, 2022 | 12:40 PMHuntley Medley - Associate Business Editor
Selvin Hay, chief technical director of the Financial Investigation Division.
File Selvin Hay, chief technical director of the Financial Investigation Division.

Some used-car dealers, hardware merchants, and real estate agents and developers are again being singled out as facilitators of breaches of the million-dollar limit for cash transactions in Jamaica, and possibly participating in, or at least leaving the door open to other financial crimes, including money laundering.

The latest charge comes from Selvin Hay, chief technical director of the Financial Investigation Division, FID, as he spoke at the annual Anti-Money Laundering/Counter-Financing of Terrorism, or AML/CFT, conference, hosted by the Jamaica Bankers Association and the Jamaica Institute of Financial Services.

Hay urged financial sector representatives to step up their reporting of suspicious transactions.

“I know [that] law enforcement needs to do more in terms of intelligence gathering — and I have been speaking about this, because a lot of intelligence is on the ground that we are not capturing — but we all have a role to play in this fight against money laundering,” he told the conference, held October 11-12.

Property developers are not included in Jamaica’s AML/CFT legislative regime. Neither are lawyers, who are fighting their inclusion with a case now before the United Kingdom Privy Council, challenging amendments to the Proceeds of Crime Act 2007 and regulations. They are also objecting to changes to the Legal Professional Act and Canons, and the issuance by the General Legal Council of Jamaica, of anti-money laundering guidelines that compel attorneys to report money laundering and other possible financial crimes by their clients or face imprisonment.

The absence of these to groups from the AML/CFT legal framework is said to be responsible, in large part, for Jamaica being included in the so-called blacklist of non-compliant jurisdictions and the greylist of jurisdictions under increased monitoring by the Financial Action Task Force that polices AML/CFT compliance globally.

Jam-Dex warning

This week, Hay said technology has enabled lawbreakers, such as scammers and hackers, to reduce their risk profile by limiting their apparatus to simply a mobile phone or laptop. He had a dire warning about the possible rise in cybercrimes in Jamaica with the advent of Jam-Dex, the central bank digital currency or CBDC issued by the Bank of Jamaica.

“Jamaica has entered another threshold on the financial system. It has now become one of the countries with a higher risk by virtue of the fact that we have a digital currency. It’s very good to have a digital currency that will enable people to transact business easily, but the vulnerabilities that are associated with it will allow us to be looked at in that (high-risk) category,” he said.

The FID chief noted that fraud against financial institutions is on the increase, with credit card fraud being rampant as perpetrators become more efficient.

This has forced financial companies to beef up security for online transactions. Scotiabank Jamaica, for example, has advised clients that as of Wednesday this week it ended the optional use of debit card numbers as part of the authentication process for accessing bank accounts online. All account holders now require a unique username and password.

Hay pointed to some staff of outsourcing firms, banks and telecommunications companies, and some account holders, as being part of cyberfraud networks.

He cited what he described as the delay, or lag time, in addressing legislative weaknesses and legal loopholes, noting that attorneys representing persons accused of financial crimes are increasingly focusing on what he called “peripheral weaknesses of the law”, rather than challenging the evidence against their clients.

Hay also identified the need for financial institutions to standardise their security and compliance practices, as well as to take a less adversarial approach to cooperating with institutions like the FID to stamp out financial crimes. He is of the view that laws designed to prevent and punish financial crimes should be made more robust and resilient, in order to reduce damage to financial institutions and Jamaica’s international reputation.

The FID chief said the US-instigated anti-scamming task force, known as the Jamaican Operation Linked to Telemarketing, or JOLT, is being revived. It is said to include the Major Organised Crime and Anti-Corruption Agency of the Jamaica Constabulary Force, Jamaica Customs, US Immigration and Customs Enforcement, the US Postal Service, BPOs, remittance companies and banks.

Meanwhile, a BOJ representative used the occasion of the conference to defend Jam-Dex, reiterating the central bank’s position that in the design and roll-out of the digital wallet, significant consideration was given to ensuring that it would not compromise the country’s AML/CFT regime.

BOJ Chief Prudential Officer Major Keron Burrell said the central bank also made its best efforts to ensure that the CBDC aligned with global best practices.

He noted that even as the central bank was strengthening its own cyber framework with more in-house technology staff and consultants, it is urging the financial institutions it supervises to invest in advanced technology, including artificial intelligence and machine learning, to strengthen their digital platforms, data security and processes. Technology, he pointed out in his presentation on Wednesday, also improves customer experience and enhances required ‘know your customer’, or KYC, procedures, while increasing risk assessment and due diligence.

Burrell gave the thumbs up to the impending National Identification System, NIDS, opining that it will improve authentication and reduce identity theft, while assisting KYC systems and helping to onboard new customers, leading to more legitimate business for financial institutions.

He said that the BOJ is considering relaxing requirements for new account holders to provide financial institutions with references when NIDS comes on stream. This is expected to be done through revisions to the guidance notes issued to the institutions.

The document, which is now being redrafted taking into account local and global changes, and evolving best practices, should be circulated to the financial sector by early next year as a consultation paper, Burrell said.