By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Domestic financial crime threats are “broadening” and “represent substantial areas of concern” after $250m worth of illegal drugs were seized in The Bahamas during the six-year period through 2022.

This nation’s latest financial crime national risk assessment, newly-unveiled this month, disclosed there has been “a notable increase” in suspicious transactions reports (STRs) filed by Bahamian financial institutions and other gatekeepers in relation to suspected tax, corruption and bribery offences that have occurred in the domestic economy rather than the so-called ‘offshore’ or international sector.

It added that the laundering of criminal proceeds generated by drug trafficking, human and gun smuggling, and other crimes such as ‘romance’ and employment scams was on the rise with the value of fraud cases reported to the Royal Bahamas Police Force between 2017 and 2022 hitting $35m.

While the report acknowledged that “the bulk” of the money laundering and financial crime threats to The Bahamas originate from offences committed by international clients based outside the jurisdiction, it added that the handling, concealment and washing of drug trafficking and dealing proceeds so as to make them appear legitimate poses “a major domestic threat”.

Data contained in the report showed that, between 2017 and 2022, Bahamian law enforcement seized some $250m worth of illegal narcotics with close to $200m of this sum representing cocaine. The balance consisted of marijuana and hydroponic marijuana.

“Based on the information received from the police and the Financial Intelligence Unit (FIU), drug trafficking followed by fraud were the primary predicates identified as money laundering threats domestically,” The Bahamas’ national risk assessment found.

“The value of drugs seized over the 2017-2022 period amounted to more than $250m. The value of fraud cases amounted to $35m. In the 2020-2022 period, cyber crime surpassed fraud due to the significant number of suspicious transaction reports (STRs) filed as a result of the FTX Digital Markets operations.” That entity was the Bahamian subsidiary of the collapsed FTX crypto currency exchange.

“Further, there was a notable increase in STRs filed in the categories of tax matters, corruption and bribery. It is apparent that the threats domestically are broadening to include the aforementioned offences,” The Bahamas’ national risk assessment added.

“Examination of the period 2017 to 2022 revealed notable trends in relation to financial crimes and identified a prevalence of bank transfer fraud, business e-mail compromise, romance scams, job scams, credit card fraud and, more recently, cheque fraud.”

Delving deeper into the data, The Bahamas’ national risk assessment added: “The primary threats of domestic origin within The Bahamas include fraud, human, gun and drug trafficking. Based on the statistics received, drug trafficking and fraud are the number one and two, respectively, most prevalent money laundering predicate offences committed in The Bahamas.

“Law enforcement agencies advised that fraud cases included fraud by false pretences, stealing by reason of employment, possession of forged documents, counterfeit currency and forgeries. The total number of fraud cases reported to law enforcement for 2017 to 2022 is 2,747.

“Further, analysing the STRs received for the period, the Financial Intelligence Unit (FIU) indicated that fraud, particularly Internet fraud, posed a higher risk within the jurisdiction. For the period of 2017 to 2022 there have been a total of 2,771 financial crime matters reported to the Royal Bahamas Police Force. For that same period, the value of reported financial crimes is approximately $34.62m.”

And, pointing to the thousands of drug-related cases brought before the Bahamian judicial system during the same six-year period, the national risk assessment report said: “As a result of intelligence gathered for the period in review, 2017 to 2022, numerous search warrants were executed on persons suspected to be involved in drug use/sales and, on several occasions, officers discovered large quantities of cash.

“Money laundering investigations have been initiated in such instances, which can result in either criminal or civil proceedings. Over the 2017 to 2022 period, in connection with drug trafficking there were 9,309 persons interdicted, 7,675 persons charged, 8259 cases prepared with 5,832 cased prosecuted.

“The predicate categories of armed robbery, robbery, stolen vehicles and firearms, cyber crime, bribery and corruption, based on statistics received from the Royal Bahamas Police Force and FIU, also represent substantial areas of concern and present medium to high potential money laundering threats.”

As for the international business segment of the Bahamian economy, the national risk assessment report said the Attorney General’s Office and Ministry of Finance received several hundred requests for help from other countries during that six-year period under Mutual Legal Assistance (MLAT) treaties and Tax Information Exchange Agreements (TIEAs).

“Over the review period, 2017-2022, there were 204 requests for information regarding cases inclusive of 11 tax fraud cases. Further, for the period 2017 to 2022, the legal unit of the Ministry of Finance received 395 exchange of information requests from 26 TIEA partners,” the document said.

“As such, tax fraud from non-resident clients poses a significant potential money laundering threat to the Bahamian financial centre This assessment is based on the number of international letters of request and exchange of information requests received by the Government coupled with the number of requests received from foreign FIUs on tax matters.

“Material statistics for 2017 to 2022 on other predicate money laundering threats identified from the foreign FIU requests were noted as corruption (58 cases), fraud (78 cases), money laundering (97 cases) and bribery (16 requests),” the national risk assessment continued.

“The major portion of the mutual legal assistance requests received by the Attorney General’s office for the period were submitted by France, Spain, Peru and the US, while the foreign FIU requests primarily hailed from the US, Ecuador, Argentina, Germany and the United Kingdom.”

With The Bahamas’ exchange control regime placing a “firewall” between the domestic and international business segments of this nation’s economy, the national risk assessment added: “Over the last ten years, the country has commenced a series of steps to liberalise the regime.

“Owing to the vast volume of business conducted for international clients, and The Bahamas’ openness as an international transshipment hub, the country is exposed to inherently high cross-border money laundering risks. The more vulnerable sectors are those which are internationally oriented and cash-intensive on the domestic level.

“These include retail and private banks, trust companies, credit unions, money transmission providers, financial corporate service providers, securities firms [such as administrators and brokers], casinos and gaming house operator,” it said.

“The bulk of The Bahamas’ exposure to money laundering risks arises from predicate offences initiated overseas. The Bahamas is not known for the financing of terrorism and there have been no reports of domestic terrorist incidents.

“The Bahamas, as an international transshipment hub and financial centre, is a potential transit point for illicit drugs and smuggling of migrants and firearms. Therefore, The Bahamas has an important part to play in the global effort against money laundering.”