Some weeks ago, I came upon an article that was published on Demerara Waves Online News on December 16, 2016.
In that news item, the Central Bank Governor, Dr. Gobind Ganga stated that while the Bank does have the capacity to track the informal sector, it does not “know about any” dirty money (money obtained unlawfully or immorally and needs money laundering for it to be used in normal business transactions).
I was flabbergasted at this position, to say the least, for two main reasons: The first is that the Bank, based on its governing laws, has a responsibility to track dirty money in the system; and the other is the simple fact that dirty money is part and parcel of an informal sector.
Therefore, if it has the capacity to track the informal sector, then what on earth prevents the Central Bank from monitoring “dirty money”?To get greater clarity on this matter and what the Central Bank Governor said in full, I managed to secure a copy of the recording of his end of year press conference.
After stating that the Bank does not know about any dirty money, Ganga said, “We do have the capacity to track the informal sector of the economy but we don’t know about the dirty money per se.” He said that if one were to take a simple look at the GDP and the money supply, the figures are in sync with each other.
Questioned about if he was suggesting that there is little or no dirty money circulating in the system he added: “No I cannot answer that question. That is difficult to answer. There are many studies which have been done and I think that I indicated that even in the BLOC countries there are informal sectors and they can range up to about 30 to 40 percent …we do have an informal sector here …but for us to indicate some estimate it would be difficult because you would have to get other agencies involved that are equipped with identifying these kinds of activities. Obviously we don’t have that capability…”
We do not know if Ganga was talking about the size of the informal sector, but would remind him of the several studies of the size of the informal sector in Guyana; and in particular, to refer him to the latest but now dated “estimate” of G$188B provided by Dr. Clive Thomas. But putting aside the glaring ambiguities and ellipses in Ganga’s utterances, there is another bout of confusion. Dr. Ganga stated that on one hand, the BoG has the capacity to track the informal economy but then on another, it lacks the capacity to track the informal economy on its own to even provide a mere estimate. Then one begs to ask, what sort of capacity do you really have at the Central Bank if you cannot provide an estimate of the percentage it makes up in the economy?
But more worrying than this is the fact that the Central Bank head has related to the media corps that he is unaware of dirty money.
In fact, this is one of the tasks bestowed unto this financial institution which is elucidated in the Bank’s supervisory guidelines specifically, No. 13 – Anti-Money Laundering and Countering the Financing of Terrorism. <https://www.bankofguyana.org.gy/bog/images/Publications/supervisionguidelines/sg13.pdf>
That document outlines that there is no one single method of laundering money. Despite the variety of methods employed, the report makes it clear that money laundering is generally accomplished in three stages, which may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity. These stages are placement, layering and integration.
Placement refers to the placing of “dirty money” or unlawful cash proceeds into the financial system without arousing suspicion for example via deposits and purchases of monetary instruments such as cheques, or bank drafts.
In the case of Layering, this speaks to the movement of the money, often in a series of complex transactions crossing multiple jurisdictions designed to disguise the audit trail and provide the appearance of legitimacy. These transactions may include purchasing investment instruments, insurance contracts, wire transfers, money orders, traveller’s’ cheques and letters of credit.
With regard to Integration, this deals with the attempt to legitimize wealth derived from criminal activity. The illicit funds re-enter the legitimate economy by way of investments in real estate, luxury assets and business ventures, until the laundered funds are eventually disbursed back to the criminal.
That in mind, the document which guides the Central Bank, states in no uncertain terms that, “The most common form of money laundering that a financial institution will encounter during the ordinary course of business, takes the form of accumulated cash transactions which will be deposited in the banking system or exchanged for value…Additionally, financial institutions as providers of a wide range of services are susceptible to being used in the layering and integration stages of money laundering…A financial institution’s AML programme should seek to ensure that appropriate methods exist for identifying and reporting money laundering at each of the three stages.” <https://www.bankofguyana.org.gy/bog/images/Publications/supervisionguidelines/sg13.pdf>
Additionally, in that document, it says, “Money laundering and the financing of terrorism prevention should not be viewed in isolation from an institution’s other business systems, but rather as an integral part of its overall risk management strategies. Consequently, it is essential that the board of directors (board) and senior management of a FI (Financial
Institution) ensure that policies, procedures and monitoring mechanisms are put in place to prevent the FI from being used as a conduit for money laundering and terrorist financing.”
Given the aforementioned, the Bank of Guyana’s Governor should really rethink his position and come clean on what it has done in terms of tracking dirty money. It has a responsibility to do so. And it is either that the capacity is there to do it, or it never was to begin with.
Ganga’s nonchalant response to the media makes me wonder how serious he is about limiting the opportunities for the financial system to be used as a conduit for laundering dirty money.