I am well on my way to reading one book every week pursuant to my new year’s resolution. This week, I am exploring “The magic of Thinking Big by David Schwartz. In one chapter he narrates a story of an irate guest at a hotel who sent a telegram to reserve a room for a single occupant but who came to the hotel clerk requesting hotel room with double occupancy. The customer insulted the clerk threatening to have him fired and questioned his intelligence. The young clerk apologized but declared that he was merely following instructions.
The author was next in line to deal with the clerk but was pleasantly surprised when the clerk greeted him warmly. The author told the clerk that he admired the way that he dealt with the previous customer. The clerk stated that he refused to be infuriated by a customer like that, he empathised with the man and supposed that he was having marital problems and that the man used him as a scapegoat to feel superior. The clerk added that “…underneath he is probably a nice guy, most folks are…”
The author then suggested that we remember this statement the next time someone “declares war on us. He said the best way to deal with situations like this is to let the other person say their piece, then forget about it”.
We have nothing to lose by following this approach. Instead of responding to their insults , especially for those of us who work in the service industry, it is wise to hold our tongue. There is nothing to gain by charging with bitter words. The other person may in fact be experiencing some trying times and may simply want attention. Although you may find that your minimum wage does not pay you enough to take insults, I am sure by the following week that you will forget the exchange of words.
Non Profit Organisations are organisations that provide a public benefit such as furthering cultural, educational, religious, and professional or public service objectives.
There are three (3) main elements of a Non-Profit Organization;
A mission that focuses on activities that benefit society and whose primary goal is not profit. It is to be noted that these organizations are usually profitable, once revenue exceeds expenses. But instead of re distributing profit to owners/staff/investors, the Non-Profit pursues public benefit purposes recognized and approved by the Ministry of Finance in Trinidad bad Tobago.
No particular person owns shares of the company or interests in the company. The organization is not controlled by one person it is owned by the public.
The income must never be distributed to any directors but is recycled back into the Non Profit’s mission. Non-profits typically depend primarily on grants and mission-related earned income to fund its socially oriented activities.
DISTINCTIVE FEATURES OF NON-PROFITS
Staff in a NPO consists of volunteers and paid staff, the former usually out numbers the latter. Accounting for a Non Profit;
Non-Profits are focused on ensuring revenue is greater than costs;
Non-profits do not use balance sheets; they will compile a “statement of financial position”, which focuses only on assets and liabilities. Non Profits do not use income statements but prepare a statement of activities each quarter. This document lists the organization’s revenues minus expenses, plus net assets Exemption from taxes;
Non-profit organizations may be exempt from taxation once they are designated as charitable organizations by the Ministry of finance.
Filing of Annual Returns: Non-profits must file annual returns with MLA Opening a bank account- By-laws are extremely important to create here.
What is available on public record ?
The Articles of Incorporation discloses certain information such as the Name of the Non Profit, number of directors and intended employees, general nature of activities, the address of the principal office, name occupations and addresses of the first directors of the company.
The Mutual Evaluation Report 2016 and NPOs
Although NPOs are required to register with the Registrar General’s Department, there is no proper AML/CFT policy in relation to the management, supervision and monitoring of these entities. There is no targeted risk assessment for these entities nor are there adequate laws to address this which results in insufficient regulation of the sector.
The Assessors in the Mutual Evaluation Report 2016 considered NPOs to be Non Compliant for the following reasons:
There are no laws requiring NPOs Sector to be subject to an AML/CFT regime;
There is a lack of proportionate and dissuasive sanctions for violations of the standards of NPOs;
No evidence of outreach to the NPO Sector concerning Terrorist Financing issues;
There have been no adequate policies articulated concerning NPOs;
The non regulation of Non-Profit Organizations is cause for concern since these organizations could be used to facilitate ML/TF activity. Since the last mutual evaluation, the Assessors found that there were no AML/CFT measures in place to deal with NPOs. To date, there are still no measures in place to address AML/CFT.
NPOs traditionally enjoy an elevated level of trust by society at large. In light of this, NPOs must take precautions to avoid potential money laundering and terrorist financing abuse of the charitable donation process.2
Money Laundering , Terrorist Financing and Non Profits Organizations
Non profits can be used to launder corporate money. “The lack of transparency around NPOs provides the donors with unfettered funding opportunities while letting them hide their identities …”3
Why are Non Profit Organisations susceptible to being used by Money Launderers?
Non-profit organisations (NPOs) are defined by their purpose, their reliance on contributions from supporters and the trust placed in them by the wider community. They often process large amounts of cash and regularly transmit funds between jurisdictions. NPOs have also traditionally operated under less formal regulatory control and generally, a less rigorous form of administrative and financial management. It is argued that the combination of these factors exposes the sector to an elevated risk of criminal and terrorist abuse (Charity Commission 2009a; FATF 2004a, 2004b).4
Misuse of NPO funding to launder money
The misuse of NPO-generated funds may take any one of the following forms;
Funds may be collected in the name of a legitimate NPO but disbursed for terrorist rather than altruistic means;
NPOs may be used to launder money or provide legitimate means for the transmission of funds between multiple locations.5
NPOs may provide financial support to an organisation that provides humanitarian aid, for example, but that organisation may also provide succour to terrorist activities.
Alternatively, NPOs may raise funds for a particular cause but have those funds dispensed or support provided through a terrorist group.
Misuse of the notion of charitable status Criminal or terrorist entities may elect to establish a sham NPO (in this case, a charity) but one which is registered and engages in requisite regulatory requirements. The purpose of the NPO is ostensibly to collect and distribute charitable giving but it is in reality a front for the laundering of money, appropriation of terrorism funds or for the rallying support for terrorist activities.
Gurulé (2008) has suggested a general modus operandi for non-profit exploitation, based on sham NPOs in the United States. Such sham agencies were found to:
incorporate under state law;
apply for tax-exempt status as a charity or other type of NPO;
undertake fundraising activities;
open domestic bank accounts into which proceeds and donations are deposited; and
transfer funds to overseas financial institutions, diverting all or some of the funds to terrorist activity.7
FATF recommends the following best practices for non profits to prevent abuse relating to terrorist financing and money laundering 8:
Ensure good governance practices and strong financial management , including robust internal controls and risk management procedures;
Carry out proper due diligence on individuals and organizations that give money to, receive money from or work closely with your organization;
Enter into written agreements to outline expectations and responsibilities of grantors and grantees;
Undertake internal risk analysis to help better understand the risk you face in your operations and design appropriate risk mitigation and due diligence measures;
Establish strong financial controls and procedures and keep adequate and complete financial records of income expenses, and financial transactions;
Clearly state program goals when collecting funds and ensure funds are applied as intended;
Ensure information about the activities carried out by grantors and grantees is publicly available;
Ensure you are informed as to the sources of your income and establish criteria to determine whether donations should be accepted or refused.
Non Profit Organisations must be closely monitored in Trinidad and Tobago and elsewhere because of the abuse of same by money launderers and terrorist financiers.
The author is a certified Anti Money Laundering Specialist and an attorney at law in Trinidad. Website http://asydneygroup.com
According to the CFATF Mutual Evaluation Report June 2016 “there is no evidence that the legal profession complies with AML/CFT measures in Trinidad and Tobago. This is a serious deficiency having regard for the significant role played by these professional as financial intermediaries (gatekeepers) in introducing and facilitating such a large percentage of financial transactions”.
Gatekeepers are professionals who can facilitate the entry of illicit money into the financial system . These professionals include: Accountants, Auditors, Lawyers, Notaries, Company Formation Agents.
In AML CFT terminology, lawyers fall under the umbrella term DNFB-Designated Non Financial Businesses and Professions.
The First Schedule of the Proceeds of Crime Act (POCA) captures lawyers as listed businesses but states that the lawyer is only accountable when performing the following functions on behalf of a client:
a)Buying and selling real estate;
b)Managing of client money, securities and other assets;
c)Management of banking, savings or securities and other assets;
d)Organization of contributions for the creation, operation or management of companies;
e)Creation, operation or management of legal persons or arrangements, and buying and selling of business entities.
Lawyers are susceptible to being used as a conduit to money launderers to facilitate their nefarious purposes.1
It is therefore imperative that local attorneys understand their AML/CFT obligations and comply with the FIU to safeguard their practice and to retain their reputation.
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Which lawyers are at risk?
Sole practitioners, small firms and large firms are all plagued by the risk of being used by money launderers and perpetrators of other financial crimes. A risk assessment ought to be conducted to ensure that measures are put in place that are commensurate with the risks posed by the customer.
What are attorneys required to do?
Register with the FIU;
Create a Compliance Program;
Appoint a Compliance Officer;
Submit a Fit and Proper Form for the Compliance Officer to be approved by the FIU;
Train staff on the Compliance Program;
Receive internal suspicious activity and transaction memos from staff;
Report Suspicious Activity in the SAR/STR to the FIU;
Undergo Continuous training;
Conduct an annual internal review of the Compliance Program;
Conduct annual external review of the Compliance Program.
How do money launderers use the legal and professional services law firms and sole practitioners to launder their funds?
Creating corporate vehicles and complex legal entities such as trusts. These obscure the links between the proceeds of crime and the perpetrator.2
Buying and selling property can be used in the layering stage, or in the integration stage where the asset is purchased and retained.3
Performing financial transactions on behalf of a client (making deposits, issuing cheques, making and receiving wires, buying and selling stock).4
Providing financial and tax advice. Criminals may pose as wealthy individuals who need help sheltering wealth from tax.5
The issue of lawyers providing advice to their client is controversial, as they have a confidential relationship with their clients.6
According to the CFATF Mutual Evaluation Report June 2016 at paragraph 260 “Financial Institutions (FIs) have indicated that they have particular concerns with doing business with real estate entities and lawyers that buy and sell real estate due to concerns that there is inadequate AML/CFT understanding and application of the requirements such as CDD”.
The Evaluators at paragraph 282 of the MER requested that there be collaboration between the FIU and the Law Association to make the legal fraternity aware the AML/CFT legislative requirements as well as their obligations to implement these requirements.
The Evaluators noted at paragraph 317 of the MER that there appears to be a gap in the registration of lawyers. The majority of lawyers opined that they did not qualify for inclusion as a listed business since their services did not fall withAre Lawyers required to comply with Financial Intelligence Unit (FIU) in Trinidad and Tobago? clearly identify who should be registered.
For the offence of Money Laundering, the penalty :
On summary conviction, is a fine of $10M & to imprisonment for 10 years
On Indictment, to a fine of $25M & to imprisonment for 15 years under POCA, S 53 (1)
For the offence of the Financing of Terrorism the penalty,
On conviction on indictment for Individuals $5M & 25 years imprisonment;
On summary conviction Legal entities $5M & 5 years imprisonment under Anti Terrorism Act s 22 A (3) (4) .
When must legal practitioners conduct Customer Due Diligence(CDD)?
When the services provided to the client falls under those services described in the First Schedule of the POCA. This CDD must be applied on a risk sensitive basis when lawyers establish a “business relationship” with a client, when attorneys carry out an occasional transaction, when they suspect money laundering, when they suspect terrorist financing or when they doubt the veracity of identification documents.7
When must legal practitioners conduct Enhanced Due Diligence (EDD)?
For ongoing matters that present a higher risk of money laundering or terrorist financing, where the client has not been physically present for identification purposes or where the client is a Politically Exposed Person (PEP).8
Kevin Shepherd back in 2002 stated that “Some believe that the special relationship between lawyers and their clients gives lawyers an early inside view into crimes that could make their insights invaluable in the war on domestic and international criminal activity.”9
Lawyers as gatekeepers must start the Know Your Customer (KYC) process. “There is just no other current way of ensuring that the information an Financial Institution (FI) receives is not just a big cobweb of complexities created by a lawyer, helping the customer protect personal identification and corporate ownership information”.10
The time is coming when lawyers will be closely observed by the regulators as powerful and effective gatekeepers. Please get your affairs in order.
The author is an internationally certified Anti Money Laundering specialist and attorney at law in Trinidad .
The crazies have it. I have always wondered about the possibility of crazy people being sane ,and sane people actually being crazy. I question the substance of western medicine and the criteria used to deem a person to be mentally unstable. What if drug addicts are able to see the world as it really is? What if the homeless man ,high on his drug is really a tourist in paradise. It would be hilarious to learn how they view us,as the crazy ones,rushing to jobs that we hate ,staying in abusive relationships. We must be crazy.
It is a distinct honour to be labelled as crazy by your peers. It means that you are different and you are not confirming to their silly ideals .You are clearly different . All the greats have been called crazy before. People refer to you as crazy when they are unable to see things the way you do. A young man, who grew up in a deprived household,sleeping on the same mattress with his 6 siblings may be called crazy when he declares his intention to become a lawyer. That young man has used his imagination to create a version of reality where he can be anything that he wants to become.
The crazies are usually the ones in movies predicting the fate of mankind ,and they usually become hermits after realising how silly people can be. The majority of the time,the crazies are right, and their warnings were ignored. They are laughed at ,told that they should get a life. Once they get an understanding person to communicate with, they reveal their wealth of knowledge.
In the concluding pages of the Alchemist,when confronted by soldiers and asked about their journey ahead,the old man truthfully told of their purpose and where he and the young man were headed. The soldiers laughed in amusement and allowed the old man and young boy to continue. People judge you by your appearance,and when you tell them of your goals in life ,they ridicule you. The quote adapted from the Alchemist stands true. The crazies have it.
The author is an attorney at law based in the island of Trinidad,she is a certified specialist in Anti Money Laundering and Financial Crimes.