Small money transfers and online gaming sector highly vulnerable

Despite the recent enactment of key legislation strengthening the Anti-Money Laundering/Counter the Financing of Terrorism (AML/CFT) framework in The Bahamas, there are still lingering concerns from the United States (US) Department of State.

“The Bahamas faces money laundering challenges in its casinos and online gaming industries. The central bank reports that from January to September 2021, casinos generated $856 million in sales and $131 million in gross revenues,” the State Department has said.

In fact, the US Department of State’s Bureau of International Narcotics and Law Enforcement Affairs is of the view that traditional forms of financial services still pose a significant enough risk. The bureau singled out the small money transfers and online gaming sectors, which need greater focus given their vulnerabilities.

The bureau pointed to the fact that, “the international bank and trust sector has over $442 billion in assets and $11 trillion in cross-border flows, while the domestic banking sector has $18 billion in assets and $70 billion in deposit flows.”

High money laundering risks

Banks and trust companies in The Bahamas face high money laundering risks, as they conduct a high volume of transactions, handle significant wealth, utilise wire transfers and provide banking services through channels that vary in anonymity and complexity. In addition, trust companies in particular, the bureau argues, may be used to conceal beneficial ownership.

As of December 2020, there were 48 licensed fund administrators, 712 licensed funds and 342 licensed financial corporate service providers in The Bahamas. Only four convictions resulted from the 20 money laundering charges reported in 2021, the bureau has reported.

The real estate sector posed equal risks, with the report pointing to a high volume of transactions, particularly by foreign nationals.

According to the bureau, “The Bahamas identifies its real estate sector, valued at $1.65 billion in 2020, as highly vulnerable given the high demand by foreigners and large sums associated with the market. Less AML focus is given to the smaller money transmission sector, which remains vulnerable given the large number of transactions, high numbers of one-off and non-resident customers, and usage by undocumented migrants.”

Though it highlighted the appointment of five new magistrate judges and four new Supreme Court justices last May in 2021, as well as an improved court structure and information technology systems to help address AML/CFT deficiencies, the US Department of State said the number of filed suspicious transaction reports is low compared to the size and scope of the financial sector.

Roughly 20 per cent of the country’s gross domestic product is generated from financial services each year, second only to the tourism sector.