With the coming on-stream of the Anti-Money Laundering & Countering the Financing of Terrorism (AML/CFT) Act, day to day banking has become an increasingly complex and time consuming affair for regular customers in Guyana. The burgeoning bureaucracy involved in banking transactions, consequent upon the adoption of the AML/CFT Act, appears to have negatively impacted the most, those least likely to be involved in money laundering or terrorism financing.
Banks and other financial institutions now require proof of address and several different forms of identification in order for someone to open an account. Even persons who have been banking successfully with the institution for years are forced to “prove” their address, and even their identity with additional forms of identification, including a driver’s licence – which previously was spurned by the financial institutions as an acceptable form of identification.
Then there is often the need for the customer to identify the source of the funds being deposited, which one might be forgiven for thinking that this would be limited only to those doing large transactions. However, as reported by this newspaper a few days ago, a parent making a deposit into an account with less than $100,000, in trust for her eight-year-old child, was asked to provide proof as to the source of the cash. But according to the Bank of Guyana (BOG) Supervision Guideline number 13 which deals with the AML/CFT Act, a financial institution should give particular attention to cash transactions in excess of two million dollars, or to suspicious transactions, and on the face of it, one would think that a deposit of this nature fits neither category.
Guyanese have always exhibited a marked preference for cash in doing business and financial institutions have historically bemoaned this propensity. Over the years they have introduced products such as automated teller machines (ATMs), debit and credit cards, and online banking to reduce the public’s dependency on cash transactions. However, with the added bureaucracy attendant on the AML/CFT compliance issues, the unwelcome result could be an even higher dependence on cash as holders of legitimate money find it increasingly tedious and time consuming to process relatively small sums of cash through the financial system.
Young citizens, coming of age and entering the workplace often find themselves unable to open a bank account without expending considerable time and effort. Given the nature of the housing market for rented flats, apartments and rooms, producing a proof of address can be a frustrating endeavour for many young people. And one must wonder what the government’s position is on the National Identification card as legal form of identification in Guyana if the financial institutions do not consider it a sufficient proof of one’s identity, in itself. The effect of this is that an eighteen year old must now immediately consider acquiring a passport and driver’s licence in addition to a national ID card in order to be eligible to open a bank account. Such a necessity may discourage a fair number of new adults each year from trying to open a savings account.
All this calls into question whether the financial institutions have lost the plot as to why the AML/CFT Act was legislated. While the financial institutions drown in minutiae, the lines of customers are growing longer instead of shorter as the turnaround time for doing a basic transaction has become more protracted. Nevertheless, complaints by the suffering public are being made, and from appearances are also being heard to some degree. The Bank of Guyana recently announced that it is working with the financial institutions to “bring an ease” by initiating “some kind of standardized procedure” to afford relief to pensioners and minors.
Critical to the proper application of the AML/CFT Act is the principle of “know your customer” as highlighted in BOG Supervision Guideline 13, which states that, “It is important that the customer acceptance policy is not so restrictive that it results in a denial of access by the general public to banking services, especially for people who are financially or socially disadvantaged.” Contrary to this principle, however, it seems that financial institutions through their managers, supervisors and frontline staff, have disavowed the years of relationship with many of their customers, and have instituted a wall of documentation in order to avoid vouching for customers based on the “know your customer” principle.
Whether the financial institutions can be faulted for creating the wall of documentation and inquisition which many ordinary folk have to confront is not clear. The legislators themselves, and the BOG as the official Regulator of the financial system, must share blame for the manner in which the AML/CFT Act was implemented, if we are to assume that they have been paying attention and monitoring the situation. In accounting, the principle of “materiality” looks at the impact of a transaction on the financial statements as a whole. Therefore, for the financial institution to waste its resources treating small or immaterial transactions with equal scrutiny to much larger transactions is foolhardy. However, individual employees must have confidence in the support of the system and their superiors in order to be willing to act pragmatically while still being in compliance with the laws and regulations.
The intention of money launderers is to place illegally acquired funds into the financial system in an attempt to “clean” or legitimize the money, and third parties are often used to achieve this. Commercial banks and other financial institutions, therefore, have a moral and legal obligation to ensure they are not unwitting participants in this criminal activity, but this must be achieved without drowning the ordinary Guyanese citizen in a sea of banking bureaucracy.
