Currently, no official is commenting on whether money-laundering investigations are ongoing in the case of the Belize Telecommunications Limited (BTL), though the sentiment abounds that an investigation needs to be afoot.
The recent controversy over the parallel market transactions of BTL, which erupted last month, have led some to speculate that the company was being used to launder dirty money?that is, the proceeds of criminal activity, such as drug trafficking or the mega-theft of public funds.
How could BTL have traded US$100 million on the parallel market and pass it into the formal banking sector undetected? Former Chief Executive Officer and head of finance of BTL, Gaspar Aguilar, told our newspaper that the authorities knew, but simply turned a blind eye.
The United States Drug Enforcement Agency (DEA) quotes an IMF estimate, indicating that money laundering related to the illicit drug trade amounts to 2% to 5% of the world?s Gross Domestic Product, or about $600 billion.
Of course, money laundering does not always relate to the drug trade, but a wide range of illegal activities (See box: Offenses associated with money laundering) from which money is earned. In the recent case of United States House member, Tom DeLay, he was accused of funneling almost US$200,000 in corporate contributions to Texans for state elections, when state law outlaws it. He is accused of disguising the source by channeling it through national Republican campaign committees.
Offenses tied to money laundering:
– Arms trafficking
– Blackmail
– Counterfeiting
– Drug Trafficking and related offences
– Extortion
– False accounting
– Forgery
– Fraud
– Illegal deposit-taking
– Robbery involving more than $10,000.00
– Terrorism
– Thefts involving more than $10,000.00
United States Senator Susan M. Collins said in a March 1, 2001, statement on how US banks are used in international money laundering, that ??the perpetrators of criminal schemes have succeeded in moving their ill-gotten gains around the world ahead of law enforcement officials, in many cases ultimately returning these funds to the United States in a ?laundered? form that they can enjoy with impunity.?
She further notes that, ?Regrettably, the source of such monies was often fraudulent scams perpetrated by Americans, against Americans.?
While there is a global scope to money laundering, we turn our focus to what it means under Belizean law and what systems are in place that should prevent dirty money from filtering into the banks.
In July 1996, legislators established the Money Laundering Prevention Act (MLPA), Chapter 104 of the Laws of Belize.
Money laundering (See Box) is defined above, essentially as funneling dirty money into establishments where they appear to have been the proceeds of legitimate business. Offshore and onshore banks can be vehicles, though some believe offshore banks are more widely used.
Financial institutions are urged to adopt a ?know your customer? policy. They also have the responsibility to report unusual transactions, either withdrawals or deposits, and to pay special attention to ?unusual or large business transactions, or unusual patterns of transactions?? They have a duty to report to the Financial Intelligence Unit (FIU), and the FIU has a duty to investigate.
Under Belizean law, banks and their employees shall be fined $50,000 for failure to fulfill their obligations and a bank?s license may be suspended or revoked.
In the case of the BTL transactions, our newspaper was informed that millions of Belize dollars were repeatedly withdrawn from a bank, traded on the parallel market for United States dollars, and those United States dollars were in turn deposited into another commercial bank, and not in the same bank from which the withdrawals were made.
According to BTL, the US dollars were needed to pay for equipment and services, receipts from oversees suppliers, satellite and cable rental charges, maintenance and support charges and debt services.
It means that if indeed the US dollars on the parallel market were the proceeds of criminal offenses, those US companies who were paid were also netted inside the money-laundering ring.
Under the MLPA, it is the responsibility of the FIU to investigate the BTL parallel market exchanges, to determine whether the company was indeed used in a money laundering scam.
The FIU is also vested with the authority to temporarily freeze relevant funds and financial assets to facilitate their investigation, until it can get an order from the court.
Authorities in the United States can also freeze money in the account of the correspondent bank under the Patriot Act, if they believe that they are the proceeds of money laundering.
This was done in the case Carib Sports, an Internet gaming operation based at Data Pro, Belize, and in Antigua. The accounts held in United States correspondent banks for Provident Bank & Trust of Belize Ltd. and Atlantic International Bank Ltd. were frozen in the United States.
In another case, an American coupe had fled to Belize with the proceeds of an investment scam, and the funds were frozen at Hibernia, the correspondent bank for Provident Bank and Trust.
POWERS OF THE FIU
Prior to September 2002, the Governor of the Central Bank of Belize or any person authorized by him in writing was the authority that was responsible for anti-money laundering supervision. The Financial Intelligence Unit (FIU) was set up in September 2002 to carry out the anti-money laundering supervisory role.
Keith Arnold, the former Governor of the Central Bank, became the Director of the FIU. At the same time, Arnold was a Government-appointed director on the board of BTL, which was carrying out the parallel market transactions.
?The [Financial Intelligence] Unit is given broad powers to investigate and prosecute financial crimes and to ensure coordination among law enforcement, regulatory bodies, government agencies, and private institutions in the prevention and suppression of financial crimes,? says an August 2004 IMF Belize country report titled, Assessment of the Supervision and Regulation of the Financial Sector.
The report further notes that the FIU?s powers include authority to require parties to provide information for investigations and prosecutions, as well as search authority, and authority for temporary restrain and requests to the court to freeze assets.
According to information posted on the Central Bank?s website (www.centralbank.org.bz), ?The FIU has the power to investigate and prosecute financial crimes, to coordinate the cooperation between law enforcement agencies, government departments and other regulatory bodies in evolving methods and policies to prevent and suppress financial crimes; and to process all requests for legal assistance from foreign countries relating to financial crimes. Financial crimes include those set out in the MLPA but also include more complex financial crimes, such as Internet fraud, pyramid schemes, and illegal deposit taking.?
There are regulations that govern the inflow and outflow of foreign currency. The Central Bank licenses what are described as ?authorized dealers? and ?authorized depositories? of foreign currency. They are the various commercial banks, the Post Master General, the Accountant General and Belize Global Travel Services.
Between April 2002 and July 2005, the Central Bank of Belize also licensed Casas de Cambio to conduct smaller scale foreign exchange transactions.
The BTL transactions took place on the parallel market between 2001 and 2005, according to the company?s former CEO.
Penalty for Money Laundering:
Section 6 (MLPA): A person guilty of an offence under the provisions of section 3, 4 or 5 of this Act shall be punishable on conviction with a fine which shall not be less than twenty-five thousand dollars but which may extend to one hundred thousand dollars, or with imprisonment for a term which shall not be less than three years but which may extend to six years, or with both such fine and term of imprisonment.
(Penalty for tip-off that would prejudice an investigation: up to $50,000 or three years in jail.)
Current Money Laundering Trends
?Drug traffickers use various methods to launder their profits both inside and outside of the United States. Presently, some of the more common laundering methods include: the Black Market Peso Exchange, cash smuggling (couriers or bulk cash shipments), gold purchases, structured deposits to or withdrawals from bank accounts, purchase of monetary instruments (cashier?s checks, money orders, traveler?s checks, etc.), wire transfers, and forms of underground banking, particularly the Hawala system. (US DEA)
NOTE: The Hawala System: an underground banking system based on trust whereby money can be made available internationally without actually moving it or leaving a record of the transaction; ?terrorists make extensive use of hawala; (also known as hundi) is an informal value transfer system used primarily in the Middle East, Africa and Asia.