MONEY laundering and terrorist financing activities can undermine the soundness and stability of financial institutions and systems, discourage foreign investment, and distort international capital flows, according to Minister of Tourism, Industry and Commerce Mr. Irfaan Ali.

Ali, in a statement issued by his ministry yesterday, said that “failing to pass these amendments will affect Guyana’s competitiveness and prevent us from improving our position on the World Bank’s Doing Business Index.”
Minister Ali’s statement was issued in the wake of the recent position adopted by the Alliance For Change (AFC) on the passage of the amendments to the Guyana Money Laundering laws, reminded that Government has been working assiduously to improve Guyana’s ranking on the ‘doing business index’.
The latest World Bank DBI Report stated that under the category Trading Across Borders, Guyana’s ranking rose from 155 in 2007 to 84 in 2013 and according to the ministry further improvements in this area will be stymied because local importers and exporters will be subject to more intense scrutiny when conducting business across borders should the amendments not be approved.
“This will affect the time and cost of doing business which will ultimate affect competitiveness at both the industry and national level,” Ali’s ministry stated.
The ministry also said a direct implication of failing to implement the legislation would be access to credit.
It noted that although Guyana’s ranking on the DBI under the category Getting Credit has been falling from 159 in 2007 to 167 in 2013, activities are presently ongoing to improving ranking in this area.
Guyana is in the process of establishing and operationalising a credit bureau.
Failure to have the amendments passed “would likely see any progress in operationalizing the credit bureau negated…The cost of getting credit and on the whole, all bank transactions wire transfers, remittances will become very expensive and this will pose a great deterrent to potential foreign investors.”
The ministry has also indicated that banking and several foreign financial service firms have withdrawn from blacklisted jurisdictions “rather than be tainted by association and suffer a decline in share prices.”
According to the missive released by the ministry yesterday, “once particular jurisdictions are listed, they may be placed as key terms on privately produced anti-money laundering software, designed to raise red flags and trigger enhanced scrutiny.”
This would be effected particularly with regards to wire transfer and correspondent banking and would mean that transactions are slowed, and banks and other financial intermediaries would have to spend resources applying extra scrutiny.
The ministry says that firms may simply refuse to process transactions from listed jurisdictions as such transactions become more trouble than they are worth.
The ministry cautions also that like many national lists, jurisdictions may not be removed from private lists even after being given a clean bill of health by the relevant international organisation.
The ministry has warned also, “blacklisting threatened to wreck not just the offshore sector, but also every other internationally-connected sector as well, from tourism to remittances from citizens working abroad.”
The ministry says also that other areas that can be affected as a result of being blacklisted would be investor perception.
“Foreign investor confidence will be negatively impacted as perceptions of non-transparency and corruption may be harboured by potential investors…This will constrict the flow of new investment, and precipitate capital flight, in turn causing a decline in government revenue and general economic activity.”
The ministry says that without the amendments in place, western nations may be prohibited from doing business in Guyana as this may violate their corporate governance rules.
The ministry used the opportunity to point out that with the amendments approved, it would also give the Central Bank governor the right to maintain a list of terrorists, terrorist groups or organisations based on information being provided by the UN.
The list would be circulated to financial institutions requesting information on whether they have funds in Guyana.
The Governor would as a result be able to determine whether to continue the transaction or business relationship or submit “suspicious” transaction report immediately and cease all business transactions or business relationship with such a person or entity.
The Attorney General will at this point be able to move to get the High Court to “freeze the funds of the designated entity.”
According to the ministry, Guyana can benefit from a more robust Anti Money Laundering and Countering the Financing of Terrorism, regime, as enhanced financial sector integrity and stability facilitates its integration into the global financial system.
“It also contributes to more transparent governance and effective fiscal administration.”
The ministry says that the amendment to the Anti-Money Laundering laws is of national interest and reminds that Guyana is signatory to several treaties internationally that specify the need for such legislation.
Sanctions will be imposed for non-compliance with obligations and requirements, if the amendments to this law are not passed by the stipulated deadline (May 27, 2013).
The ministry also pointed out that Guyana without the amendments, will be labeled as ‘delinquent’ and will be subject to sanctions which will include restrictions on how it conduct business internationally.
The Organisation of Economic Cooperation and Development is demanding that Guyana tightens its Anti-Money Laundering Act in order to comply with the recommendation of the Caribbean Financial Action Task Force.