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Can Guyana emerge as a hotbed for financial and related crimes?

Can Guyana emerge as a hotbed for financial and related crimes?

As Guyana’s economy steams ahead on the back of its bourgeoning oil sector, buoyed by a flood of foreign investments, the potential for an increase in financial and related crimes in areas such as money laundering, corruption, narcotics and human trafficking, illegal logging, and illicit gold trading is rising.

 

While the country has adequate laws to prevent financial crimes, it lacks the resources to enforce its laws, and in some cases, the political will to follow through on persecuting alleged criminals. And in some cases, allegations of wilful blindness persist, enabling criminal behavior to flourish under the watchful eyes of the regulatory infrastructure.

 

For instance, the Transparency Institute Guyana Inc. (TIGI) noted last year that the history of petroleum licensing and contracting transactions in Guyana presents extraordinary exposure to corruption.

 

It explained that the theft of resources of astronomical value can occur in as simple a way as the deliberate failure to enforce a law where such a law exists, or where it is deliberately misinterpreted in favor of private financial interests, adding that “since the benefit of such an action is conferred upon the private interests as a benefit in kind, it is easy in its conceptualization, as it is difficult to trace.”

 

The same analogy can be applied to the dramatic increase in the issuance of procurement contracts which have come under a deluge of questions.

 

It would seem that a lot of questionable issues are swept under the rug because development activities are continuing at a dizzying pace in the country. Incidentally, the World Bank forecasts that Guyana’s economy will grow by a staggering 49.7% this year, making it the fastest growing economy in the world.

 

Economic growth, combined with opportunities offered by the oil and a range of other sectors – such as real estate sales and development, manufacturing, agro-processing, hotels and tourism, mining, and tertiary oil industries – have resulted in the country benefitting from US$1.8 billion in foreign direct investments (FDI) in 2000, up from $1.7 billion in the previous year – according to UNCTAD’s World Investment Report (2020).  This is in addition to private investment flows, as well as those that bypass the formal banking system, which are typically not recorded in official statistics.

 

The risk of an increase in financial crimes arises from the country’s large informal economy which facilitates criminal activities having a close nexus with narcotics and human trafficking, illegal logging, and the illicit gold trade, states the US Bureau of International Narcotics and Law Enforcement Affairs (INCSR), Volume 2, published on March 1, 2022.

 

In addition, the report states that “loosely regulated currency exchange houses, casinos, and dealers in precious metals and stones pose risks to Guyana’s anti-money laundering/combating the financing of terrorism (AML/CFT) regime.”

 

Other sectoral vulnerabilities, states the report, include the banking industry and unregulated attorneys, accountants, real estate agents, used car dealers, and charities.

 

It was noted that while Guyana has laws to tackle money laundering, “the government devotes minimal resources to enforcing existing laws,” adding that “a lack of technical expertise constrains the government’s ability to successfully investigate and prosecute financial crimes.”

 

Historically, the primary sources of laundered funds have been narcotics trafficking and real estate fraud. However, common money laundering typologies include use of money transfer agencies to move illicit funds, large cash deposits using forged agreements of sale for non-existent precious minerals, cross-border transport of concealed precious metals to avoid payment of the relevant taxes and duties, and wire transfer fraud using compromised email accounts.

 

More recently, suspected illegal funds have been transferred via international financial institutions under the guise of making purchases for COVID-19 medical supplies, states the INCSR.

 

In 2017, Guyana was blacklisted by both the US and UK for having inadequate AML/CFT controls. Since then, the country has put measures in place to regain its place in the international financial network. In June 2021, the government completed its second National Risk Assessment (NRA) but the results have not yet been published. The first NRA was completed in 2017, when the country was blacklisted by both the US and the UK.

 

The 2021 NRA focused on money laundering threats, including those related to the emerging oil and gas sector, the banking and insurance sectors, non-bank financial institutions, and the illegal wildlife trade, along with terrorism financing and proliferation financing risks.

 

More recently, suspected illegal funds are transferred via international financial institutions under the guise of making purchases for COVID-19 medical supplies.

 

The US INCSR states that the government has shown some progress on the AML/CFT front but that the country still needs to increase its training for the judiciary on the investigation and prosecution of financial crimes.

 

It recommended that a national strategic plan for combatting money laundering should be developed and implemented, and legislation passed for the facilitation and regulation of secure electronic communications and transactions. Reporting and investigating entities should also improve their interagency coordination, and the GRA should report suspicious transactions to SOCU.

 

On the drug front, the 2022 INCSR–Volume I: Drug and Chemical Control, also published on March 1, 2021 noted that Guyana is a transit country for cocaine destined for the United States, Canada, the Caribbean, Europe, and West Africa. Cocaine originating in Colombia is smuggled to Venezuela and onward to Guyana by sea or air.

 

Smugglers also transit land borders and the shared river network with Brazil, Venezuela, and Suriname. Cocaine is concealed in legitimate commodities and smuggled through commercial and private air transport, maritime vessels, human couriers, “go-fast” boats, and postal systems.

 

Drug traffickers exploit the country’s poorly monitored ports, remote airstrips, intricate river networks, porous land borders, and the permissive environment resulting from corruption and the under-resourced security sector.

 

It was found that Guyana also has a growing domestic drug consumption problem. Despite these challenges, the Government of Guyana has demonstrated some political will to combat drug trafficking in and through Guyana.

 

However, the report stated that Guyanese authorities are aware of unlicensed airstrips in the interior of the country that facilitate the movement of drugs, but have not taken action against them.

 

As well, the government does not have a robust container inspection program in place at its seaports and has not addressed the increasing amount of high-value cocaine trafficking between Colombia, Venezuela, Brazil, and Suriname, which takes advantage of remote airstrips in Guyana’s interior, by conducting enhanced monitoring and/or destruction.

 

To achieve results, it was recommended by the INCSR that Guyana should invest more in its security sector, enhance the entrance requirements, professionalism, and training levels of its personnel, combat corruption, and focus on greater interagency coordination and information sharing. Counterdrug activities should focus on improving port security and enhanced container inspections, and on building skills in complex transnational investigations. Political will is needed to dismantle trafficking networks which are linked to corrupt individuals in the public and private sector.

 

Guyana’s failure to enforce its State Asset Recovery Laws is also an encouragement for corruption. For instance, the massive investigation by the former APNU+AFC coalition into corrupt activities by the PPP when it was in government prior to 2015, proved to be an exercise in futility.

 

Following some 50 audits of various government agencies and institutions over a 16-month period ending in August 2016 at an estimated cost of $133 million, it was found that numerous incidences of improprieties existed but insufficient evidence to lay criminal charges.

 

In similar vein, allegations by the PPP/C against the APNU coalition have failed to achieve material results.

 

In the meantime, the United States’ Federal Bureau of Investigations (FBI) is planning to work more closely with Guyana to pursue perpetrators of organized crimes such as drugs traffickers, money launderers and human traffickers; as well as to enforce financial crime laws.

Dwarka Lakhan

Dwarka Lakhan

Dwarka Lakhan is a pioneer in emerging markets journalism in Canada. His first emerging markets article, “Africa Joins Ranks of the Emerging,” appeared in Investment Executive, Canada’s leading newspaper for financial advisors, in September 1994. Since then he has written hundreds of articles on the full spectrum of emerging markets and has conducted more than two thousand interviews with emerging and frontier markets investment professionals.


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