CARIBBEAN FINANCIAL ACTION TASK FORCE
MUTUAL EVALUATION REPORT ON
ANTIGUA & BARBUDA
SECOND ROUND
September 2002

TABLE OF CONTENTS

INTRODUCTION ……………………………………………………………………………………......3
The Drug Situation …………………………………………………………………………………….4
The Money Laundering ituation……………………………………………………………………..5
LEGAL SECTION ……………………………………………………………………………………....7
ANTI MONEY LAUNDERING (AML) REGIME ………………………………………………..........7
Money Laundering Prevention Act, 1996.............................................................................7
Money Laundering (Prevention) Regulations, 1996 'The Regulations' ................................... 10
Money Laundering Guidelines for Financial Institutions (the Guidance Notes) .......................12
Proceeds of Crime Act, 1993 ...........................................................................................13
Obligations of Financial Institutions .…………………………………………………………….14
The Office of National Drug and Money Laundering Control Policy .......................................15
INTERNATIONAL COOPERATION ………………………………………………………………....15
Mutual Assistance in Criminal Matters Act, 1993 (MACM) .................................................15
Extradition Act 1993 .......................................................................................................16
Other International Conventions/ MOUs ............................................................................16
REGULATORY REGIMES ……………………………………………………………....…………...17
Interactive Gaming and Interactive Wagering Regulations (IGIWR) .......................................17
FINANCIAL SECTION ……………………………………………………………………………......17
LEGISLATIVE AND REGULATIONS COMPONENT …………………………………………......17
The Money Laundering (Prevention) Act, 1996 17
The Money Laundering (Prevention) Regulations, 1999 19
SUPERVISORY/REGULATORY AGENCIES ………………………………………….…………..20
OFFICE OF NATIONAL DRUG AND MONEY LAUNDERING CONTROL POLICY ....……….20
FINANCIAL SERVICES REGULATORY COMMISSION ……………………………..………….21
EASTERN CARIBBEAN CENTRAL BANK ……………………………………………..………….27
LAW ENFORCEMENT SECTION ………………………………………………………....………..29
JUDICIAL / PROSECUTORIAL AUTHORITIES ………………………………………..…………29
Office of the Director of Public Prosecutions / Magistrates .................................................29
The Registrar of the High Court .......................................................................................30
LAW ENFORCEMENT INSTITUTIONS …………………………………………………………...30
The Office of National Drug and Money Laundering Control Policy.......................................30
The Royal Police Force of Antigua and Barbuda ...............................................................32
The Customs and Excise Department .............................................................................33
The Antigua and Barbuda Defence Force .........................................................................35
The Antigua and Barbuda Coast Guard ............................................................................35
The Immigration Department ...........................................................................................36
LAW ENFORCEMENT COOPERATION …………………………………………………………...36
Domestic Cooperation ....................................................................................................36
International Cooperation ................................................................................................36
CONCLUSIONS ……………………………………………………………………………………....38
RECOMENDATIONS …………………………………………………………………………….......39
Annex 1. Compliance with the FATF 40 ..……………………………………………………...40
Annex 2. Compliance with the CFATF 19 Recommendations .……………..……………..41
Annex 3. Compliance with the FATF NCCT 25 point Criteria..……………………………..42
Annex 4. Program of Interviews ………………………………………………………….……...43

INTRODUCTION

1. The twin island state of Antigua and Barbuda is located in the middle of the Leeward Islands in the Eastern Caribbean. With 108 square miles, Antigua is the largest of the Leeward Islands and has a population of 65,000. Approximately 48 square kilometres to its north is the sister island of Barbuda, a flat coral island of 68 square miles, with approximately 1,500 inhabitants. The capital is St. John's, which is located in Antigua. Antigua and Barbuda became an Associated State of the United Kingdom in 1967 and achieved full independence in 1981. Antigua and Barbuda has a democratically elected government.

2. Antigua and Barbuda is strategically situated in the Leeward Islands near maritime transport lanes of major importance and also serves as a hub for air transportation into the Caribbean area and out to US and European destinations.

3. Pursuant to the Schedule for the Second Round of Mutual Evaluations adopted by Plenary X and sanctioned by Council Meeting V, the Mutual Evaluation of the Antigua and Barbuda took place from September 16-20, 2002.

4. This report is based on best practices, international and regional standards as enunciated in the forty (40) recommendations of the Financial Action Task Force (FATF), the nineteen 19 recommendations of the Caribbean Financial Action Task Force (CFATF) and the FATF Twenty-five (25) criteria for defining Non-Cooperative Countries or Territories.

5. The Team of Examiners selected to conduct the Mutual Evaluation comprised Ms. Louise Mitchell, the Legal Examiner, Saint Vincent & the Grenadines; Mr. Adrian Saunders, the Financial Examiner, Trinidad & Tobago; and Mr. Philsbert Alfred, the Law Enforcement Examiner, Dominica. The Team was led by CFATF Deputy Executive Director, Mr. A. Antonio Hyman-Bouchereau. Unfortunately, the Law Enforcement Examiner did not turn up for the exercise without any prior notice or excuse to the CFATF Secretariat. The Secretariat was unable to obtain the presence of Mr. Alfred for the Mutual Evaluation Exercise because, according to the Commissioner of Police of Dominica, he was attending another event in Washington, D.C.

6. At the request of the authorities of Antigua and Barbuda, the CFATF Secretariat Law Enforcement Expert, Mr. Russell Ursula, was brought in to take on the Law Enforcement Examiner's responsibilities. He joined the Mutual Evaluation Team for interviews on 19th and 20th September.

7. The Law Enforcement section of this Mutual Evaluation is based on these interviews, resource material available at the CFATF Secretariat, and information provided by the Government of Antigua and Barbuda in their responses to the CFATF Mutual Evaluation Questionnaire.

8. During the last 2 years, the government of Antigua and Barbuda has shown a clear commitment to a regulatory anti-money laundering regime that meets international standards. It has devoted a considerable amount of resources to combating money laundering and terrorist financing. The implementation and enforcement of this anti money laundering framework is starting to show results at this point in time. The Antigua and Barbuda Government has criminalized terrorism financing specifically with the adoption of a new Terrorism Act in 2001. The Act provides for the freezing and confiscation of assets in the case of terrorism financing. Together with its Money Laundering Prevention Act and the Proceeds of Crime Act, Antigua and Barbuda has in place strong anti-money laundering and counter terrorism financing regime Antigua and Barbuda has also been very instrumental in delivering significant proposals to combat crime on a regional level (CARICOM Crime Task Force) during the years 2001 and 2002.

The Drug Situation

9. Like other Caribbean island States Antigua with its many beaches, bays, inlets, and a relatively isolated Barbuda are being used as transhipment points for those persons involved in the international drug trade. While the country is not a significant producer of marijuana, it is strategically located close to Puerto Rico (US) and serves as a regional air hub with direct connections to Europe (UK) and North America (Canada)). The severe actions against drugs transportation from Jamaica to the UK by UK officials during 2001 and 2002 seems to be shifting the regional drug trafficking routes and are seemingly aggravating the situation of Antigua being used as a hub for transportation of drugs to US and Europe. However, actions by ONDCP drug intelligence staff and the Police Drugs squad utilising modern profiling techniques have led to a vast increase in interceptions of drug couriers to the UK. Drugs transports by air are mostly done by "body-packers" who frequently also come from the UK as tourists and afterward return with their cargo.

10. The involvement of citizens of Antigua and Barbuda as participants in the drugs trade is usually in connection with the transportation process, either as the operators or crew of speedboats; and sometimes as couriers carrying drugs concealed on their person, in false bottomed suitcases or internally. Approximately 15 % of cannabis seized is locally grown product while the rest is imported. Marihuana for domestic consumption is mostly imported from St. Vincent. Antigua and Barbuda is also a major yacht mooring location, which is also a means to transhipment of illegal drugs. The Antigua airport, as mentioned before has also one of the most extensive networks of connections in the region.

11. As in other parts of the Region, South American traffickers are developing their own transport infrastructure and therefore depend less on local providers of logistical support. Intelligence sources suggest that some of these suspected South American traffickers have regularized their immigration status in Antigua and Barbuda and operate small businesses here amongst other members of the Spanish speaking community. The language barrier and the local close knit Spanish-speaking community make it difficult to develop intelligence on the activities of these people.

12. Recent intelligence reports, suggest that narcotics traffickers have attempted to use the names of legitimate businesses to smuggle moderate quantities of drugs through airport cargo without their knowledge. The most frequent points of origin of drugs transiting through Antigua and Barbuda according to officials of Antigua and Barbuda are: Colombia, Trinidad and Tobago, Grenada, St Vincent and the Grenadines, St Maarten (cocaine and cannabis) and Jamaica (Cannabis).

13. Statistics of seized drugs from January to December 2001 and January to September 2002 reveal the following figures:

The Money Laundering Situation

14. The anti-money laundering authority for Antigua and Barbuda is the Office of National Drug and Money Laundering Control Policy (ONDCP). Like every other country in the world, which has a vibrant domestic and international financial sector, and a flourishing Internet gaming industry Antigua and Barbuda is potentially vulnerable to money laundering. The first Round of Mutual Evaluation of Antigua and Barbuda was conducted during March 10-13, 1998. Since then, extensive amendments have been made to Antigua and Barbuda's anti-money laundering program. Between 1998 and 2000, 35 offshore banks were closed either as a result of their involvement in money laundering or Canadian and US based Ponzi scheme operators, or because of the stringency of the regulatory regime. At the time of the evaluation, only twenty-two (22) banks were providing offshore banking services.

15. As a consequence of the wide-ranging efforts to improve financial regulations and the money laundering regime, financial advisories imposed by the USA and the UK in 1999 were withdrawn in July 2001. Antigua and Barbuda was not listed by the FATF as a Non-Cooperative Country during its year 1999 exercise. During the CFATF Plenary XIV and Council VII meeting in the Dominican Republic in October 2001, the Council concluded that Antigua and Barbuda had complied with all the recommendations of the 1998 Mutual Evaluation.

16. The 2001 amendments in the MLPA are operating effectively in the area of conviction-based forfeiture. While no one has been convicted in Antigua and Barbuda of money laundering offences, persons have been convicted in the USA with evidence adduced from Antigua which has resulted in the forfeiture of funds frozen in Antigua. This is because Antigua and Barbuda has taken the step of allowing foreign money laundering convictions, as well as local ones, to trigger its confiscation laws. The amendments in any case added new industry groups to the definition of "financial institutions" contained in the Act. The most notable is the offshore gaming industry. These financial institutions operate quite differently from the banking sector. The amendments in the International Business Corporation Act (IBCA) in October 2000 require resident agents to ensure the accuracy of the records and registers that are kept by them. Failure to do so is an offence and the agent is liable, on conviction, to a fine of fifty thousand dollars ($50,000.) Agents must also know the identity of the beneficial owners and be in a position to disclose this information to the Authorities upon request.

17. Antigua and Barbuda introduced Internet Gaming regulations in 2001 (Interactive Gaming and Interactive Wagering Regulations 2001). An Offshore Gaming Directorate to supervise Internet Gaming has also been established to this end. This Directorate has issued Internet Gaming Technical Standards and Guidelines. The 2000 and 2001 amendments to the MLPA expand its coverage to include all types of gambling entities and impose financial limit reporting on the gambling entities. These reports are to be sent to the ONDCP.

18. The Government of Antigua and Barbuda has also established the Supervisory Authority (SA) as mandated by the Money Laundering Prevention Act (MLPA). The Supervisory Authority is also the Director of the ONDCP which is the national central Financial Intelligence Unit that receives all suspicious transactions reports from financial institutions (CFATF Recommendation No. 1 / FATF Recommendation No.15-23 / NCCT Criteria No. 25 not met). The Supervisory Authority has also issued regulations that implement suspicious transactions reporting systems. The latest guidelines were issued on the 9th of September 2002 and a copy was handed to the Mutual Evaluation examiners on their arrival in Antigua. The new ONDCP headquarters, funded by the seized asset fund (CFATF Recommendation No. 9), also houses the National Joint Headquarters, the Drug Intelligence Unit, the Financial Intelligence Unit, The Financial Investigations Unit and the Government's Drug Control Policy Unit.

19. At the time of the evaluation, the Antigua and Barbuda government had drafted legislation to amend the MLPA so as to augment the existing conviction based forfeiture provisions with civil forfeiture laws. This development will allow Antigua and Barbuda to take action against assets suspected of having been derived from unlawful sources, both domestically and internationally. Antigua and Barbuda enacted anti terrorism and anti terrorist financing legislation in 2001.

20. An ONDCP Bill was also presented to Parliament in the spring of 2002. An unofficial version (dated 17/9/02) was handed over to the CFATF examiners. It is proposed that, with the passage of this new Bill, the ONDCP will cease to be an arm of the executive and will become a statutory institution with special responsibility for the enforcement of Antigua and Barbuda's anti money laundering legislation. The new Bill provides for the appointment of a Director, a Deputy Director and Investigation Officers with sufficient powers to enable them to investigate money-laundering offences.

LEGAL SECTION

ANTI MONEY LAUNDERING (AML) REGIME

21. The Antigua and Barbuda anti money laundering (AML) framework comprises the Misuse of Drugs Act 1993; Money Laundering Prevention Act, 1996 as amended in 2001, 2002; the Money Laundering Prevention Regulations, 1996; the Proceeds of Crime Act, 1993; the Prevention of Terrorism Act, 2001; the Prevention of Money Laundering Guidance Notes; the Mutual Assistance in Criminal Matters Act, 1993; the Extradition Act 1993; the International Business Corporations Act, 1982 as amended from time to time and the International Business Corporations Regulations made thereunder.

Money Laundering Prevention Act, 1996

22. The Money Laundering Prevention Act (MLPA) is the key piece of legislation in the Antigua and Barbuda legal AML Regime. It has been continuously updated, with many amendments in 2001 in particular, in line with international recommendations. It now stands as a very strong piece of AML law, particularly in the area of conviction based forfeiture.

23. Section 3 makes it an offence to engage directly or indirectly in a transaction that involves money or other property, knowing or having reasonable grounds for suspecting that the money or other property is derived, obtained or realized, directly or indirectly from some form of unlawful activity. It is also an offence to receive, possess, manage, invest, conceal, disguise, dispose of or bring into Antigua and Barbuda any money or other property having the same knowledge, reasonable grounds or suspicion that the money or property is likewise from unlawful activity. Section 5 makes it an offence to aid, abet, counsel or procure or conspire to commit money laundering

24. The MLPA presents a wide definition of money laundering to include the proceeds of any unlawful act or omission that would constitute an offence in Antigua and Barbuda. The definition also extends to acts or omissions committed outside of the State, subject to the dual criminality principle. This definition is fully compliant with FATF Recommendation No. 4.

25. The mens rea scienter requirement for the money laundering offence stands at 'knowing or having reasonable grounds to suspect' that the money or other property derived from unlawful activity. This allows the court to infer knowledge from surrounding objective factual circumstances, in line with FATF Recommendation No. 5. In fact the Act specifically goes on to state that 'knowledge, intent, purpose, belief or suspicion required as an element of any offence under this Act may be inferred from objective, factual circumstances.'

26. The Act specifically states that money laundering offences can be committed by a body corporate and empowers the State to try for that offence any person who acted for that corporate body, as director, manager, secretary or other officer, in compliance with FATF Recommendation No. 6.

27. The Act is applicable to any Property, whether or not it is situated in Antigua and Barbuda as well as any interest in such property.

28. It should be noted that the Act provides for the conviction of persons who have absconded. This provision applies to persons who have been charged with money laundering in Antigua and Barbuda and have fled the jurisdiction.

29. The Act also provides for a Supervisory Authority, appointed by the Minister and whose powers and obligations are set out in section 11 of the Act. (PART III) These include:

- to receive and to process STRs;
- to enter, search, question and take copies of records of financial institutions;
- to provide information to law enforcement authorities;
- to instruct financial institutions to take steps to facilitate investigation;
- to seek the assistance of government departments on Investigation;
- to disseminate AML information and make AML recommendations/issue guidelines to financial institutions;
- to provide training for financial institutions;
- to consult and share information with any person or organization in exercise of its powers;
- to share information on STRs with any government agency or regulatory authority for the purposes of a criminal investigation or prosecution. (The Law Revision (Miscellaneous) (Amendments) (No. 3) Act, 2000).

30. The Supervisory Authority, which in Antigua and Barbuda is also the Director of the ONDCP also has the power to make certain applications to the court under the Act. In other words the ONDCP enjoys certain law enforcement powers. The Authority can make an application for a search warrant of a financial institution where there are reasonable ground to believe that the said institution has breached a provision of the Act. The Authority can also apply for a property tracking or monitoring order. Such an order would allow the Authority to track property where there is reasonable belief that the person has committed or is about to commit a money laundering offence, or for the purposes of determining to whom any property belongs.

31. The Authority may also apply to the Court for a mandatory injunction against an employee of a financial institution in order to enforce compliance with their obligations under the Act. These applications can be made either by the Supervisory Authority, or by a law enforcement agency, such as the Director of Public Prosecutions. The Authority can also apply to the Court for the forfeiture of currency seized pursuant to this Act.

32. The Act provides strong freezing and forfeiture provisions, all of which can be prosecuted by the Supervisory Authority (ONDCP). In fact the property of a person may be frozen upon a money laundering conviction, or where someone is or is about to be charged for money laundering. The strength of this provision is in the fact that it applies to a person who is not yet charged. The court must be satisfied only that the person is 'about to be charged.' Also in order to link the property with the person convicted, charged or about to be charged, the court need only be satisfied that there is a 'reasonable suspicion' that the defendant has an interest in the property.

33. The Act is very clear on the powers of the court to deal with the frozen property, including the very practical provision of directing a trustee to take control of the property.

34. Property frozen under this Act may be forfeited to the Crown if: (1) a person has been convicted of a ML offence and (2) a freeze order has been made over property (which can occur pre or post conviction) AND (3) property the subject of the freeze order has not been made the subject of an exclusion order - the property will be forfeited automatically 90 days after conviction or the freeze order, whichever is later. In the absence of a conviction, the onus is on the person with an interest in the property to apply to the court for the property to be released. That person must prove to the court that the property was not in fact linked to money laundering. If the person fails to discharge this burden, the property will forfeit to the crown upon the passage of 90 days. This provision is compliant with FATF Recommendation No. 7.

35. It is extremely useful that such law enforcement powers rests with the Supervisory Authority itself. It is likely that the organization that deals with AML compliance will be most highly sensitised to its importance and consequently will be well placed to ensure the proper implementation/enforcement of the AML regime. It is clearly evident that the ONDCP is a highly motivated and sensitised organization.

36. This Act also places obligations and responsibilities of AML compliance on financial institutions. The list of financial institutions subject to this Act is set out in the First Schedule. Financial institutions involved in the following activities are covered:

Banking business and financial business as defined in the Banking Act and the Financial Institutions (Non- Banking) Act

International offshore banking business as defined in the

International Business Corporation Act

Venture Risk Capital

Money Transmission Services

Issuing and administering means of payment

Guarantees and commitments

Trading for own account or for account of customers in -
(a) money market instruments
(b) foreign exchange
(c) financial and commodity based derivative instruments
(d) transferable or negotiable instruments

money broking;

money lending and pawning;

money exchange;

real property business;

casinos;

building societies;

trust business;

credit unions;

internet gambling;

sports betting.

37. The list of financial activities meets Recommendations 8 and 9 of the FATF.

38. There is a duty on all financial institutions to report suspicious activities to the Supervisory authority, where there is reasonable suspicion that the transaction could be related to money laundering. This is in keeping with FATF Recommendations No. 14 and 15.

39. This Act also requires that a declaration be made where a person transfers in or out of Antigua and Barbuda currency not less than ten thousand US dollars ($10, 000.) Failure to report this transfer is an offence. This is consistent with FATF Recommendation No. 22 and CFATF Recommendation No. 12.

40. The Act also addresses the issue of international cooperation in Part V. In particular this section provides for the rendering of assistance to foreign countries in accordance with any mutual legal assistance treaty. This section empowers the Supervisory Authority to use its powers to freeze and forfeit property connected to money laundering offences upon a request from a court or competent authority of another state. This is a very powerful tool for international cooperation and is fully compliant with FATF Recommendations No. 37 and 38.

41. In addition to this exchange of information within the confines of a mutual legal assistance treaty, the Act also provides for the sharing of information related to STRs with any government agency or regulatory authority within or outside Antigua and Barbuda for the conducting of a criminal investigation or prosecutions. (Section 25, 2). This ability to share information at the investigative stage with foreign authorities is crucial to the fight against international crime and is in compliance with FATF Recommendation No. 32.

Money Laundering (Prevention) Regulations, 1996 'The Regulations' and associated Laws and Regulations (IBC Act Section 241 and IBC Regulations 1998, sections 15 and 16)

42. In making the following comments on the Regulations, it is acknowledged that the Antigua and Barbuda authorities are currently conducting a review of the Regulations, with a view to remedying their deficiencies. The fact that these Regulations are subject to review is documented in the Guidance Notes.

43. These Regulations are made pursuant to the AML Act and set the standards for due diligence and record keeping of financial institutions. They set out four 'cases' that trigger certain identification, record keeping and internal reporting procedures under the Regulations:

Case 1 relates to negotiations between parties with a view to the formation of a business relationship;

Case 2 relates to a situation where a person handling a particular transaction suspects that the applicant for business is engaged in money laundering;

Case 3 refers to a 'single large transaction' of EC$13,000 or more;

Case 4 refers to a series of smaller transactions that together amount to EC$13,000.

44. The Regulations define an applicant for business as someone seeking to form a business relationship or carry out a transaction.

45. The Regulations state that proper identification procedures would entail ensuring the production by the applicant for business of 'satisfactory evidence of his identity.' In circumstances where satisfactory evidence is not produced, the business can proceed provided that a report is lodged immediately with the Attorney General.

46. The Regulations impose record keeping procedures with a minimum retention period of five (5) years. This is in keeping with FATF Recommendation No 12. They also impose an obligation to maintain internal reporting procedures, including the appointment of a compliance officer, which meets FATF Recommendation 19(i).

47. In the legal examiner's opinion, the Regulations do not specify what would constitute 'satisfactory evidence' of identity. They provide no 'schedule' or checklist of items that would constitute satisfactory evidence. There is nothing in the Regulations that would suggest that persons need to declare their source of funds or the potential account activity as part of the identification criteria. This may not be a problem as the Guidelines, which have the force of law, in particular paragraphs 2.1.2 - 2.1.6 offer guidance on knowing your customer. The Guidelines show what constitutes evidence of identity, although without detailing what instruments could be used as evidence of such identity. The guidelines also address the issue of when identity must be verified. However among the different circumstances listed as requiring the verification of identity, there is specific requirement relating to circumstances where doubts arise as to the identity of the client.

48. It is also the Legal Examiner's opinion that it would appear to be more appropriate if a report is to be made, that it be made to the Supervisory Authority and not the Attorney General, as is required by the MLPA.

49. While there is nothing in the Money Laundering (Prevention) Regulations that addresses the existence of anonymous accounts and transitional provisions to deal with the disclosure of the beneficial owners of such accounts, if they exist, Section 241 of the IBC Act provides that though the accounts maintained by a banking corporation may be identified in any manner, a record of the account that identifies the beneficial interests in the account must be maintained. In addition, sections 15 and 16 of the IBC Regulations 1998 prescribe obtaining the identifying information of the actual account holder through visual document examination at the time of the establishment of account and further identifying information at the time of all subsequent transactions. These provisions, therefore, adequately address the issue of anonymous accounts.

Money Laundering Guidelines for Financial Institutions (the Guidance Notes)

50. The Guidelines issued on September 9, 2002 by the ONDCP provide a clear and concise summary of the issue of money laundering as well as of the offences created under the MLPA.

51. In Antigua and Barbuda the Money Laundering Prevention Act, in addition to the Regulations, addresses the issues of identification and verification procedures, record keeping, recognition and reporting of suspicious activities and training. In this regard it is a very comprehensive, stand alone Act. The Guidance Notes are modelled on and provide guidance on the application of the Money Laundering Prevention Act.

52. The Guidelines indicate that the Regulations are currently under Review. In fact the Guidance Notes conflict greatly with the Regulations (e.g. the Regulations refer to a significant transaction of thirteen thousand EC dollars (EC$13,000) whereas the Guidance Notes refer to a one-off transaction of ten thousand EC dollars (EC$10, 000). They refer to a record retention period of six (6) years, which is consistent with the MLPA but inconsistent with the Regulations.) The authorities provided the explanation that while the MLPA has consistently been updated and amended, the Regulations have not. Therefore the standards adopted in the MLPA reflect best practices and it is for this reason why the Guidance Notes use the MLPA as the standard to be applied.

53. The Guidelines are written in very clear language and cover a wide range of practical issues relating to identification and reporting procedures. They offer practicable guidance on identification procedures in a variety of different circumstances relating to the different categories of personal customers that deposit taking institutions are likely to encounter: personal customers resident in Antigua and Barbuda; minors, students, elderly and disabled people; face to face applications; non face to face; non residents; internet and cyber banking.

54. The Guidelines also presents practicable guidance on dealing with the verification of identity of institutions, with separate treatment of different entities, ranging from clubs and societies to fiduciary and client accounts. The fact that this guidance is so tailored to specific institutions makes it much more user friendly.

55. The Guidelines deal separately with identification procedures for the Internet gaming sector. They explain generally how the Interactive Gaming and Interactive Wagering Regulations 2001 are intended to operate in relation to the identification requirements of the MLPA. (It is said that the basic identification procedures for the opening of a players' account will be akin to those of deposit taking institutions. See discussion of the IGIWR). There is a proviso in the Guidelines that says that 'there are a number of differences which justify the creation of special guidelines for such financial institutions. The Guidelines also offer explanation of the application of the IGIWR, which operate in addition to the requirements of the Regulations.

56. In the Appendices to the Guidance Notes there is a list of potentially suspicious transactions, which will be a very practicable and useful guide for deposit taking institutions, and Internet gaming businesses, which is in full compliance with FATF Recommendation No. 28.

Proceeds of Crime Act, 1993

57. The Proceeds of Crime Act, 1993 (POCA) provides for the forfeiture or confiscation of the proceeds of crime.

58. Under this Act the 'proceeds of the crime' must be linked to the proceeds of a 'scheduled offence.' The Schedule sets out these offences as the following exhaustive list-

(a) Possession of controlled drugs for the purposes of supply under the Misuse of Drugs Act 1973;
(b) Trafficking controlled drugs, contrary to s 19A of the Misuse of Drugs Act;
(c) Assisting the above offence;
(d) Organised fraud contrary to section 63 of this Act;
(e) Money laundering contrary to section 61 of this Act;
(f) Possession of property derived from unlawful activity in relation to paragraphs. 1 - 4 of this Schedule and contrary to section 62 of this Act.

59. The Act sets out the confiscation and forfeiture provisions under Part II. Under the Act the DPP can apply for a forfeiture or confiscation order where a person is convicted of a scheduled offence. The DPP is required, under section 6 to give notice of the application for a period of 14 days. This notice is intended to protect persons who may have an interest in the property.

60. There is a strong provision in section 9 of this Act that allows for the forfeiture of assets to proceed in the absence of a conviction where the defendant has absconded. Where someone attempts to effect a transfer of property that is subject to such a court order, there are provisions to void such transfers. There are however, provisions under section 13 for the protection of third party rights. The Court also has the power to substitute a fine for a forfeiture order.

61. The Act provides for a confiscation order to be made in respect to a conviction of a scheduled offence, with an allowance for the appeal procedure to be first used. The Act allows the court to make certain inferences in determining the benefit that the convicted person has derived from the property obtained. The POCA makes provision for the lifting of the corporate veil in assessing the value of the benefits derived from the commission of a scheduled offence.

62. Part III of the Act provide for 'law enforcement' police powers, such as search and seizure. The Act empowers a police officer who has reasonable grounds to suspect that tainted property is, or may be within seventy-two (72) hours on any land, premises etc. apply to a magistrate for a search warrant. This warrant may authorize the police to enter the land/premises and to search and seize property that the officer 'reasonably believes' to be tainted property.

63. The DPP can apply to the court for a Restraining Order to prevent any person from dealing with property named in that order. This order can be made where a person has been convicted of or charged with a scheduled offence. It is particularly useful measure to preserve property where a person is merely charged but not yet convicted. This complies with FATF Recommendation No 7 and CFATF No.8.

64. The Act also allows for production orders where a person has been convicted of a scheduled offence or where there is reasonable belief that a person has committed a scheduled offence coupled with the belief that they have in their possession relevant documents. The Act states that where a Court is of the opinion that to grant notice would result in the disappearance or dissipation or reduction in the value of the property, the notice will not be granted.

65. Section 42(6) excludes from being subject to a production order, accounting records used in the ordinary business of banking including ledger, day-books, cash books and account books. Such records are however accessible under the MLPA and the IBC Act.

66. Section 44(3) of the POCA provides that persons cannot be excused from producing documents on the grounds that to do so would be self-incriminating.

67. The Act makes provision for police officers to apply to a Judge in Chambers for orders directing financial institutions to provide to them certain information. These monitoring orders are however restricted to transactions taking place in a restricted period of time surrounding the order. Monitoring orders are available at the investigative stage, for example to investigate a suspicious transaction report provided that a Judge is satisfied that there are reasonable grounds for suspecting that the person is, or is about to be, involved in the commission of a scheduled offence under Section 48 (5) of the POCA.

Obligations of Financial Institutions

68. Sections 50-54 address the obligations of financial institutions, which duplicate similar provisions of the MLPA, while introducing an element of inconsistency. For example in the MLPA financial institutions are obliged to keep records for six (6) years, while under this Act the period is seven (7).

69. The Act provides for the DPP to make an application to the Court for the disclosure of income tax information by the Commissioner of Inland Revenue. The DPP must show evidence of the scheduled offence under investigation; name the person being investigated; specify the type of information; and the information must relate to a substantial value.

The Office of National Drug and Money Laundering Control Policy

70. The most powerful tool of the AML regime in Antigua and Barbuda is the concentration of resources in the centralized unit of the Office of National Drug and Money Laundering Control Policy, the 'ONDCP'. It is most unusual that such a powerful and effective organization does not have its legislative basis in a freestanding statute. Rather its powers are from its designation as the 'Supervisory Authority' under the MLPA and the powers conferred on the Supervisory Authority by the MLPA. While the Director of the ONDCP is the designated Supervisory Authority, the entire resources of the ONDCP have been put behind the Director, thereby creating a very powerful Supervisory Authority.

71. Given that the ONDCP does not have a freestanding statute; it will be examined in more detail in the section of this report that deals with law enforcement and financial services. The Examiners were informed at the time of the review that an ONCDP Draft Bill had been written and was currently being reviewed.

72. However, it does not appear that the lack of a freestanding statute has in any way inhibited the development of the ONDCP. In fact it appears that the ONDCP, having functioned for over two years without being governed by a comprehensive Act, has given it great flexibility to develop into the strong centralized AML enforcement mechanism that it is today. However, for the sake of transparency and clarity it will be useful for the ONDCP to have a separate Act governing its affairs.

INTERNATIONAL COOPERATION

Mutual Assistance in Criminal Matters Act, 1993 (MACM)

73. The MACM Act makes provision for mutual assistance in criminal matters with Commonwealth as well as non-Commonwealth countries. Section 29 provides for the application of the Act to countries other than those of the Commonwealth. 'Criminal matter' is defined in the Act to mean (a) an investigation certified to have been commenced or (b) criminal proceeds that have been instituted. This wide definition critically allows for international cooperation at the investigative stage.

74. This Act allows for assistance in obtaining evidence; locating or identifying person; obtaining article by search and seizure, arranging the attendance of person to give evidence; transferring a prisoner and in serving documents.

75. Of importance the Act does not require the naming of an individual for the purposes of a request for information. It specifically provides for the granting of assistance even where the identity of the person is unknown, Section 8.

76. The Act also provides for mutual assistance in relation to serious offences, which include assistance in tracing property and in relation to a restraining order. Serious offence in Antigua and Barbuda is one that carries a sentence of death or imprisonment of not less than 3 years or where the value of the proceeds of the offence is not less than twenty-five thousand EC dollars ($25,000). For a Commonwealth country the serious offence must be one that carries a similar penalty as in Antigua and Barbuda.

77. Requests for assistance made of Antigua and Barbuda must comply with the requirements of the Schedule to the Act, which are largely procedural and are not restrictive.

78. This Act is a very important tool for the law enforcement authorities in Antigua and Barbuda as well as its foreign counterparts and is in compliance with the principles of the Vienna Convention and is in compliance with Recommendations No 37 and 38 of FATF and Recommendation No. 7 of CFATF.

Extradition Act 1993

79. This Act provides for the extradition from Antigua and Barbuda for crimes committed in a foreign jurisdiction. An extraditable offence means conduct which, if it were committed in Antigua and Barbuda, would be punishable with a term of imprisonment of twelve months or more. It also must meet the following technical conditions: the country bases its jurisdiction on the nationality of the defendant; the conduct occurred outside of Antigua and Barbuda. Given that money laundering carries a term of imprisonment of more than 12 months it would qualify as an extraditable offence. Thus there is compliance with FATF Recommendation No. 40.

Other International Conventions/ MOUs

80. Antigua and Barbuda has signed and acceded to the Vienna Convention. It has fully implemented Articles 3-9 of the Convention. This satisfies FATF Recommendation No. 1.

81. Also, in 2001 it entered into a Tax Information Exchange Agreement (TIEA) with the USA. This bilateral treaty is in compliance with FATF Recommendation No. 34. Antigua and Barbuda has informed the USA that it has completed all the requirements to bring the Agreement into operation. It is awaiting notification from the USA that its (the USA's) requirements have been met.

82. There is also in place a TIEA with the UK.

83. Because one of the major players in the Antigua and Barbuda banking sector is from the State of Texas, Antigua and Barbuda entered into a Memorandum of Understanding with the state of Texas for the sharing of information in regulatory matters. It has entered into a similar agreement with the Republic of Panama.

REGULATORY REGIMES

Interactive Gaming and Interactive Wagering Regulations (IGIWR)

84. The IGIWR set out the requirements for players of internet games and sports betting. The initial registration of the player requires that the player confirm his identity, date of birth and place of residence. There are certain activities that will then trigger further requirements to be met. For example for payments of five thousand US dollars ($5,000) or more out to a player a player's age must also be disclosed.

85. There is a difference in the identification procedures that must be followed between internet gaming companies and deposit taking institutions. Deposit taking institutions must verify identity at the time of, or shortly after, opening an account. Internet gaming companies may defer this process until the time that any significant (US$5,000 or more) payout from the player account is requested.

FINANCIAL SECTION

86. The financial evaluation of the Anti-Money Laundering Framework of Antigua and Barbuda focuses on the assessment of the following components of the framework as they pertain to financial institutions: Legislation and Regulations, Anti-Money Laundering Guidelines and Supervisory/Regulatory Agencies.

LEGISLATIVE AND REGULATIONS COMPONENT

87. In this section the focus will be on the money laundering laws contained in the MLPA 1996 and the MLP Regulations 1999.

The Money Laundering (Prevention) Act, 1996

88. Section 7 of the MLPA makes "tipping-off" an offence, that is, where a person knows or suspects that a money laundering investigation is taking place, to divulge that fact or other information such as to prejudice the investigation. A person guilty of an offence under this section is liable on conviction to a fine of one hundred thousand EC dollars ($100,000) and to imprisonment for three (3) years. This is consistent with the requirements of FATF Recommendation 17.

89. Section 8 makes it an offence for a person to falsely conceal, destroy or otherwise dispose of or cause or permit the falsification, concealment, destruction or disposal of any document or material which is likely to be relevant to an investigation into money laundering or to any order made in accordance with the provisions of the Act.

90. Under Section 12, a financial institution shall keep a business transaction record of any business transaction for a period of six (6) years after the termination of the business transaction.

91. Financial institutions are also required to comply with any instructions issued to it by the Supervisory Authority pursuant to Section 11 and permit any member of the Supervisory Authority or a person authorized by the Supervisory Authority upon request to enter into any premises of the financial institution to inspect business transaction records, to make notes, take copies and ask questions.

92. The financial institutions are further required to comply with the guidelines and training requirements issued by the Supervisory Authority. The above are in keeping with the requirements of FATF Recommendation 12.

93. Under Section 13 Financial Institutions are required to pay special attention to all complex, unusual or large business transactions, whether completed or not and to all unusual patterns of transactions and to 'insignificant but periodic transactions', which have no apparent economic or lawful purpose and to relations and transactions with persons, including business and other financial institutions, from countries that have not adopted a comprehensive anti-money laundering programme. This is consistent with the requirements of FATF Recommendations 14, 20 and 21.

94. Upon reasonable suspicion that the transactions described above could constitute or be related to money laundering, a financial institution shall promptly report the suspicious transactions to the Supervisory Authority. Consistent with the requirements of FATF Recommendation 15.

95. Financial institutions shall not notify any person, other than a court or other person authorized by law, that information has been requested by, or furnished to, a court or the Supervisory Authority. Consistent with the requirements of FATF Recommendation 17.

96. When a report is made under reasonable suspicion in good faith, financial institutions and their employees, staff, directors, owners and other representatives as authorized by law shall be exempted from criminal, civil or administrative liability, as the case may be, for complying with this section or for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, regardless of the result of the communication. Consistent with the requirements of FATF Recommendation 16.

97. Section 26 of the MLPA was amended in 2000, by renumbering the Section as Section 26 (1) and by inserting thereafter the following: -

"(2) The Supervisory Authority may share any information relating to suspicious transactions reported to it in a suspicious activity report submitted by a financial institution, with any governmental agency or regulatory authority in or outside Antigua and Barbuda for the purpose of assisting such agency or authority in conducting criminal investigations or prosecutions".

The Money Laundering (Prevention) Regulations, 1999

98. Regulation 3 deals with the systems and training to prevent money laundering. Any person who contravenes the provisions of this regulation commits an offence and shall, on conviction, be liable to a fine not exceeding fifty thousand EC dollars ($50,000) or to imprisonment for a term not exceeding two years.

99. Regulation 10 deals with internal reporting procedures. Any official or employee who discloses to the person concerned or to a third party that an investigation is being carried out pursuant to the provisions of this regulation, commits an offence and is liable on conviction to a fine not exceeding one hundred thousand EC dollars ($100,000) or to imprisonment for a term not exceeding 3 years or to both such fine and imprisonment.

100. In the opinion of the Examiner, the legislative and regulatory components adequately meet the regional and international anti-money laundering standards. .

101. The guidelines of the ECCB were assessed as being compliant with international and regional standards.

102. It is recognized that ECCB is a sub-regional and not a national organization and that the authorities in Antigua and Barbuda cannot implement recommendations in relation to the ECCB. However, it is suggested that Antigua and Barbuda bring this recommendation to the attention of the ECCB Board of Governors.

103. However the guidelines of the ECCB can be further enhanced by inclusion of a system where financial institutions would report all domestic and international currency transactions, above a fixed amount, to a national central agency with a computerized data base - FATF Recommendation 23. In addition, improvement can be achieved through global exchange and dissemination of information regarding international currency flows, through the services of appropriate international or regional organizations, or an existing international network - CFATF Recommendation 15 and FATF 30.

104. The ECCB conducted an anti-money laundering compliance review of the eight banks and three non-banks under its supervision in July 2002. Some of the findings are as follows:

SUPERVISORY/REGULATORY AGENCIES

105. The principal supervisory/regulatory agencies are: the Office of National Drug and Money Laundering Control Policy (Supervisory Authority for financial institutions under the MLPA); the Financial Sector Regulatory Commission (FSRC), responsible for the supervision and regulation of the international/off-shore banks, trusts, insurance companies and other international business companies and the Eastern Caribbean Central Bank (ECCB) is responsible for the supervision and regulation of the domestic/on-shore banks and finance companies. These three institutions provide the supervisory umbrella required for achieving compliance with CFATF Recommendation 11.

OFFICE OF NATIONAL DRUG AND MONEY LAUNDERING CONTROL POLICY

106. The ONDCP is the primary agency responsible for anti-money laundering law enforcement and the co-ordination of the country's anti-money laundering efforts.

107. The following are details of the number of Suspicious Activity Reports (SARs) received by the ONDCP in its role as a Financial Intelligence Unit: -

108. While the current level of SARs is higher than in many other Eastern Caribbean jurisdictions, it was not regarded as satisfactory by the ONDCP. The ONDCP expects that the issuance of the anti-money laundering guidelines as well as a training programme for compliance officers recently appointed to the internet gaming companies will result in more SARs. The ONDCP will also expand its coverage to include the proper supervision of all financial institutions defined as such in the First Schedule to the MLPA.

109. Of the fifty-seven (57) Suspicious Activity Reports which were received by the ONDCP during the period 1999 to 2002, two (2) are current, twenty have were made the subject of a preliminary investigation and then closed, while thirty-five were referred to the Investigation Branch of ONDCP for a full investigation. Nine (9) of the thirty-five (35) are still being investigated.

110. The staff of the ONDCP has been receiving ongoing training in areas relevant to the performance of their duties as a Financial Intelligence Unit. The necessary support in terms of equipment and technology is also being made available. The review and investigative process of the SARs was assessed as adequate.

111. The ONDCP and the FSRC meet quarterly to discuss issues applicable to the anti-money laundering framework, in order to achieve a multi-sectorial approach to the management of the framework. The Financial Secretary also provides a supporting role to the ONDCP and facilitates the integration of the financial system.

FINANCIAL SERVICES REGULATORY COMMISSION

112. The International Financial Services Regulatory Authority, a statutory body, was established in November 1998. Its name was changed in 2002 by legislation to the Financial Services Regulatory Commission (FSRC). The FSRC is responsible for the administration of the International Business Corporations Act (IBC Act), including but not limited to, issuing certificates of incorporation to international business corporations, regulating international business corporations, licensing and regulating international financial institutions. By an amendment in May 2002, the Commission was made responsible for regulation and supervision of the domestic insurance companies, non-bank financial institutions and cooperative societies. The Commission is headed by a Chairman who presides over a board of directors. An Administrator, who is also a member of the board, is the administrative and technical head of the Commission. FSRC is also responsible for the regulation and supervision of the Internet Gaming industry through its division, the Directorate of Offshore Gaming.

113. The commission shall, in performing any of its functions under the Act, take any necessary action required to ensure the integrity of the international business corporations sector.

114. Pursuant to the IBC Act, international trade or business comprise the following: -

· International banking
· International trust business
· International insurance
· International manufacturing
· Other international trading or commercial activities

115. The purposes of the Act are: -

· To encourage the development of Antigua and Barbuda as a responsible off-shore financial, trade and business centre.
· To prevent the international financial, trade and business centre from being utilized for money laundering and other activities illicit under the laws of Antigua and Barbuda.
· To provide incentives by way of tax exemptions and benefits for off-shore business carried on from within Antigua and Barbuda.
· To enable the citizens of Antigua and Barbuda to share in the ownership, management and rewards of business activity resulting thereafter.

116. Section 259 of the Act states that the appropriate official or an Examiner appointed by the Board shall examine the affairs of every bank, trust or insurance corporation at least once a year. It further states that when the Board has reasonable grounds for believing that a bank, trust or insurance corporation is not in a sound financial condition, or is not operating in a reasonable and prudent manner, or is otherwise not operating in compliance with this Act, it shall immediately appoint one or more Examiners from within or outside the Commission to examine the affairs of the corporation, and notify the corporation in writing of the examination, the purpose of the examination, the reasonable grounds for the examination and the names of the Examiners appointed. This is in keeping with CFATF Recommendation 11.

117. Section 260 of the Act states that a corporation shall, at such time as the Examiner fixes, produce for the examiner all books, minutes, cash, securities, vouchers, customer identification, customer account and transaction records, and all other documentation and records relating to its assets, liabilities and business generally, or to any bank, trust or insurance activity, and shall give the Examiner such information concerning its affairs, business and activities as the Examiner requests of it. It further states that if the Examiner has reasonable suspicion that accounts or transactions could constitute or be related to money laundering, he shall immediately file a written report of the suspicious activity with the Supervisory Authority through the Administrator, identifying the account by name and number and reporting the basis for this suspicion. The suspicious activity report filed shall be treated in the same manner and have the same legal effect as a suspicious report filed by a financial institution under the MLPA.

118. The Business Act and the Regulations made thereunder further provide that: -

· No international bank shall carry on banking business from within Antigua and Barbuda, unless the bank is in possession of a valid licence authorizing it to carry on such business.

· No international trust corporation shall carry on trust business from within Antigua and Barbuda, unless it is possession of a valid licence authorizing it to carry on such business.

· The applicant must also submit the following: -

- Names of all the shareholders and the number of shares held or to be held by each;

- Names and addresses of the directors or the proposed directors; the Commission has the authority to verify their character and experience, and the licence is revocable if the licensee is convicted of prescribed offences including offences under the MLPA.

· The Regulations provide for an annual on-site examination of the licensee to ensure compliance with the MLPA and its Regulations as well as compliance with the IBC Act and its Regulations. Further, if the FSRC thinks that the corporation is engaged in fraudulent or unlawful activity or is acting in a manner that is unfair or prejudicial to the interest of a security holder it can apply to a court for an order for an investigation of the corporation (Section 341)

119. The above are in keeping with FATF Recommendation 29 and CFATF Recommendation 11.

120. The International Business Corporations Regulations, 1998 state that the Commission shall not issue a licence to an institution whose ownership is held directly or indirectly in "bearer shares" or is otherwise unknown - Consistent with FATF Recommendation 29.

121. A licensed institution and its owners, directors, officers and agents, shall provide all information requested as to the ownership and management of the institution within thirty days of the demand from the Commission - Consistent with FATF Recommendation 29.

122. The Commission shall not issue a licence to any business proposing to engage in international banking, trust or insurance business, which is a subsidiary or branch of an institution located in a foreign country: -

· where the Commission determines that the foreign country does not have adequate procedures for supervision of such institution - Consistent with FATF Recommendations 20 and 21;

· where the Commission has not received necessary information concerning the ownership, management or operation of the institution so located in the foreign country.

123. A foreign subsidiary or branch of a licensed institution shall maintain appropriate records as determined by the Commission concerning the ownership, management and operations of the foreign subsidiary or branch and the records shall be made available for examination by the Commission or their designee.

124. No licensed institution shall make a change to its directors or the direct or indirect, legal or beneficial owner of five percent or more of a class of shares in that institution, without prior approval from the Commission.

125. A licensed institution shall obtain customer identification information as prescribed in the regulation - Consistent with CFATF Recommendation 12.

126. A licensed institution shall designate a person to be known as a "compliance officer" who shall be responsible for ensuring that the institution complies with the Money Laundering (Prevention) Act and its Regulations and for filing suspicious activity reports with the Supervisory Authority appointed under the MLPA with simultaneous copies to the Administrator of the Commission - Consistent with FATF Recommendation 19.

127. The suspicious activity report shall set out all required information that is available relative to the transactions or patterns of transactions deemed by the "compliance officer" to be suspicious including the facts arousing his suspicion - Consistent with FATF Recommendation 18.

128. A licensed institution shall be subject to on-site examinations by the Commission at its head office, its local office and any other office deemed appropriate by the Commission at least once a year to ensure that the institution is in compliance with the Money Laundering (Prevention) Act and its Regulations and this Act and its Regulations - Consistent with CFATF Recommendation 11.

129. The cost of the evaluation by the Commission shall be borne by the institution being examined.

130. The supervisory approach used by the FSRC includes but is not limited to: -

· Assessment of quarterly reports on the balance sheet and loan portfolio and annual financial statements;
· Safety, soundness, and compliance audits;
· Audits of anti-money laundering systems;
· Generation of written reports on the analysis and audits; and
· An examination cycle of 1 year.

131. The anti-money laundering review process of the FSRC includes but is not limited to the following: -

· Awareness of and ensuring compliance with the relevant legislative and regulatory framework;
· On and off site reviews of compliance with relevant policies and procedures by the international banks and trust corporations;
· Generation of compliance reports that are sent to the Chairman of the bank/trust, the FSRC's Board and the ONDCP; and
· Training programmes - Programmes have been done with three banks for 2002.

132. The Financial Secretary provides a supporting role to the FSRC. Formal Memoranda of Understanding (MOUs) exist between the ONDCP and the FSRC and these two regulatory agencies meet quarterly to discuss matters applicable to their anti-money laundering objectives.

133. The supervisory/regulatory arms of the FSRC are as follows: -

· Supervisor of International Banks and Trusts
· Manager of International Business Corporations and Non Bank Financial Institutions.
· Directorate of Offshore Gaming
· Superintendent of International Insurance

134. While there is no CFATF of FATF Recommendation for the licensing of service providers, the Antigua and Barbuda Government indicated that there was currently a draft bill to amend the international business corporation act that would allow for the licensing of service providers by the FSRC. The new bill will also allow for the licensing and as such the regulation of non-bank financial institutions. These developments will greatly enhance the strength of the anti-money laundering regulatory framework of Antigua and Barbuda.

135. The supervisory/regulatory arms report to an Administrator, who reports to the Board. As at the evaluation date, Examiners were only assigned to the Supervisor of International Banks and Trusts (5 Examiners). However, they will be available for the examination of other financial institutions under the fold of the Commission, as and when their examination is undertaken.

136. Between 1998 and 2000, 35 offshore banks were closed either as a result of their involvement in money laundering or because they were unable to comply with the increasingly stringent regulatory regime which was being applied to financial institutions.

137. At the time of the evaluation, there were twenty-two (22) international/offshore banks and six (6) international/offshore trust companies. The onsite examination of these institutions started in May 2001 and as at the evaluation date, eighteen banks had been examined. Seventeen (17) of the banks were assessed as 80% compliant with the anti-money laundering requirements. No trust corporations have been examined, but the first onsite examination of a trust corporation was scheduled for October 2002. The examination cycle of one year was assessed as achievable.

138. All licensed offshore banks and trust corporations have been advised that by the end of October 2002, they must have a physical presence in Antigua and Barbuda. They must also have sufficient records in Antigua and Barbuda that will allow an appreciation of their operations and an understanding of their activities. A senior officer, who must be a national of Antigua and Barbuda, must also be responsible for accounting for the operations of the entity.

139. The Examination Manual for the international banks has been completed. The Manual for the trust corporations was still being finalized.

140. Domestic insurance is regulated under the Insurance Act, 1969 and the Insurance Regulations, 1969. The designated regulator under the Insurance Act is the Registrar of Insurance who falls under the Ministry of Public Works. In April 2002, the IBC Act was amended to empower the FSRC to administer, inter alia, the Insurance Act. However, corresponding amendments to the Insurance Act to harmonize it with the IBC Act are still outstanding. Meanwhile, a new draft Insurance Act, prepared by the ECCB for regulation of the domestic insurance sector has been presented in Parliament.

141. There are twenty-two (22) domestic insurance companies. The Director of the ONDCP, as the Supervisory Authority under the MLPA, with his extensive anti-money laundering expertise, is encouraged to assume the responsibility for the training, implementation and supervision of an anti-money laundering framework for this sector.

142. The international or offshore insurance is regulated under the IBC Act, which is administered by the FSRC. The designated regulator is the Superintendent of International Insurance Corporations, who works under the direction and control of the Administrator of the FSRC. As at the evaluation date there were no active international insurance companies. When the amendments in the Insurance Act to harmonize it with the IBC Act are passed, the Superintendent would be able to focus on integrated regulation of both the domestic and international insurance sectors including safety, soundness and compliance issues, in addition to the anti-money laundering issues.

143. There are MOUs with Panama and Texas to facilitate cross border supervision. MOUs were being contemplated with Venezuela and Canada.

144. Under Section 3 of the International Business Corporations (General Control of International Bookmaking) Regulations 1995, any company proposing to engage in the business of international betting and bookmaking in respect of sporting events, including horse-racing and dog-racing, shall be required to apply for licence under these regulations. A licence may be granted to a company that can satisfy the Minister that the company's directors and officers have the necessary knowledge, experience and resources, financial and otherwise, required for engaging in international betting and bookmaking. This is in keeping with CFATF Recommendation 11. There are two categories of licence fees for Internet gaming companies. Interactive Wagering, attracting a fee of fifty thousand US dollars ($50,000) per annum and Interactive Gaming attracting a fee of seventy-five thousand US dollars ($75,000) per annum.

145. As at the evaluation date, there were thirty-nine gaming companies. These companies are classified as IBCs and are governed by the IBC Act and the Gaming Regulations. They are regulated by the Directorate of Offshore Gaming which was established in 1997 and which is now a division of the FSRC.

146. Under Section 14 of the Interactive Gaming and Interactive Wagering (IGIW) Regulations, the applicant shall follow policies and take affirmative steps to prevent money laundering and other suspicious transactions.

147. Under Section 38 of the Regulations, the Commission may suspend or revoke a licence upon finding that the licence holder has taken insufficient steps to report suspicious transactions that could indicate money laundering; or has failed to verify the identity of a potential player, or has accepted cash payments to a player's account, or is involved in any transaction which, in the opinion of the Commission, is either illegal or improper.

148. Under Section 127, a report on payments exceeding twenty-five thousand US dollars ($25,000) made to a player from the player's account must be made to the Supervisory Authority under the MLPA within forty-eight (48) hours of being made.

149. Under Section 150, a licence holder must keep a gaming record for the period referred to in Section 12 of the MLPA.

150. Under Section 186, in the event a licence holder, or an agent of the licence holder becomes aware or reasonably suspects, that there is a fraudulent or suspicious transaction which may involve money laundering, or an activity similar to money laundering, the licence holder or its agent shall within 24 hours or as soon as practicable, report in writing the suspicious activity to the Supervisory Authority, or other appropriate officer, designated under the MLPA. The licence holder or its agent shall also report the fraudulent or suspicious transaction to the Commission within 24 hours or as soon as practicable. The Commission may suspend or revoke the licence of any person who fails to comply with this regulation.

151. Officers from the Directorate of Offshore Gaming visit the gaming companies on a monthly basis to review compliance with the anti-money laundering requirements. The compliance officers at the companies are the principal point of contact for such reviews. Under Part XI of the Regulations, the officers have the power to request any and all information. Due diligence is done annually on individuals holding 5% or more of the shares of a gaming company.

EASTERN CARIBBEAN CENTRAL BANK

152. The Eastern Caribbean Central Bank (ECCB) is responsible for the supervision and regulation of the domestic/onshore commercial banks and finance companies. There are eight commercial banks (two of which are indigenous) with total assets of approximately two and a half billion EC dollars ($2.5 billion) and three (3) finance companies with total assets of approximately one hundred and fifty-six million EC dollars ($156 million).

153. The institutions supervised by the ECCB are licensed by the Minister of Finance upon the advice of the ECCB. The mandate of the ECCB is provided under the Banking Act 1991. The Financial Secretary of Antigua and Barbuda is a board member of the ECCB, as are the Financial Secretaries of the different Eastern Caribbean countries. The ECCB's supervisory process entails onsite examinations and offsite reviews of the operations of the institutions under its supervision. The onsite examination cycle is approximately 18 months.

154. The examination reports of the ECCB are sent to the board of the institutions and the Minister of Finance who forwards a copy to the Financial Secretary. Where information in the report is relevant to the FSRC or the ONDCP, the Financial Secretary ensures that they are informed. The ECCB also directly interfaces with the FSRC and the ONDCP.

155. The Banking Act 1991 limits the sharing of information arising from ECCB's review process. As a result formal consultation with other regulatory and supervisory agencies is also limited. However amendments are being proposed to address this constraint within the Act. The Ministry of Foreign Affairs is currently working on two Memoranda of Understanding with the ECCB to: -

· Establish a collaborative relationship between the ECCB and the FSRC for the exchange of information and training; and

· Formalize the relationship between the ECCB and the ONDCP under which the ECCB will report suspicious activities to the ONDCP and will also provide for information sharing.

156. The anti-money laundering guidelines of the ECCB are superseded by the guidelines issued by the ONDCP.

157. In July 2002 the ECCB conducted an anti-money laundering compliance review of the eight banks and three non-banks under its supervision. The branch banks and non-banks of foreign entities were assessed as approximately 75% compliant with the anti-money laundering requirements, while the indigenous banks and non-banks were assessed as 60% compliant.

158. Responsibility for the money laundering supervision of non-bank financial institutions has been assigned to the ONDCP only recently as a result of amendments to the MLPA. This should result in improvement in the supervision of these institutions. Seminars are being planned for these entities as an initial step in improving their anti-money laundering framework.

LAW ENFORCEMENT SECTION

JUDICIAL / PROSECUTORIAL AUTHORITIES

Office of the Director of Public Prosecutions / Magistrates

159. The examiners on this 2002 Mutual Evaluation were pleased to establish the heightened awareness within the DPP's Office concerning the threat of money laundering involving Antigua and Barbuda's financial framework in the interview conducted with the current DPP.

160. The DPP is of the opinion that due to the awareness of his office with the existing anti money laundering legislation and availability of four (4) full time and a fifth (5th) part-time legally trained prosecutors, it currently has enough qualified staff to be able to handle a money laundering prosecution. . To date there have not been any money laundering convictions. However a case conducted with the Canadian authorities based on an STR directed to the ONDCP has resulted in a major success. This has also been reflected in the shared assets with Canada resulting from the Canadian convictions, and also in the handing over to the USA of three million US dollars ($3,000,000) in 1999 of forfeited funds.

161. As shown in the table below and according to additional information received from the officials of Antigua and Barbuda, thirty-seven (37) investigations commenced by the Investigation Branch of the ONDCP since 1999. Of these 37 investigations, nine (9) were still ongoing during the Mutual Evaluation.

162. It was experienced by the Office of the DPP, and also during other interviews of the Mutual Evaluation examiners, that the Magistrate, the Magistrate Court Office and the Police prosecutors are in need of more understanding and appreciation of Money Laundering cases and their role in the fight against money laundering. The existing impression is that the legal /judicial mechanisms available to combat drug trafficking and money laundering were being under-utilised because of a lack of training of the Magistrates and possibly the Judiciary. The high turnover in Judges appointed in Antigua and Barbuda is considered one of the contributing factors to this situation. Punishment for trafficking in large amounts of cocaine was also considered to be relatively low. The imposition of mostly large fines instead of jail sentences was giving wrong "class justice" signals to the community according to Antigua and Barbuda officials.

163. While the DPP welcomed the Attorney General's policy to use the office of the DPP for the prosecution of complex cases, the DPP felt that this would still not alleviate the problem of delay. The DPP felt that Magistrates should refuse adjournments if they are unreasonable.

164. The DPP considered the formal investigative boundaries and cooperation between the Police, Customs and the Office of the DPP to be quite structured but suggested that it could use more streamlining in daily practice. The DPP expressed a concern that while there is a close relationship between the DPP and the ONDCP, this relationship needs to be more structured.

The Registrar of the High Court

165. The Registrar of the High Court said that she treats the applications by the ONDCP for hearings as urgent matters and ensures that they receive a hearing date as soon as possible.

166. However, the ONDCP indicated that there was considerable difficulty in securing a hearing on time. There is the impression in the ONDCP that the Office of the Registrar does not treat any differently a freeze order or a production order than any other civil application. It is felt that these applications are not given the priority treatment that they deserve, as matters that impact national security.

167. Concurrently with the Mutual Evaluation there was a meeting between the ONDCP and the Registrar of the High Court addressing these issues and there was considerable optimism on the part of the ONDCP that the meeting would lead to a substantial improvement in the problem of the delays in getting hearings.

168. It was the impression of the ONDCP that the Registrar could work in partnership with the judges to ensure that matters related to money laundering are given the priority and security treatment that they deserve.

LAW ENFORCEMENT INSTITUTIONS

The Office of National Drug and Money Laundering Control Policy

169. ONDCP is the Department responsible for money laundering and illegal drugs intelligence and investigations. It was first established administratively by Cabinet in 1996 and is currently headed by a special advisor to the Prime Minister. The operational units of the ONDCP comprise: a Financial Investigation Unit (4 investigators), a Financial Intelligence Unit (3 analysts), a National Joint Headquarters Unit (2 officers) and a Drugs Intelligence Unit (3 officers). The ONDCP also has a legal department consisting of 2 experienced lawyers and an office manager with 5 supporting staff members. The total numbers of persons working in the ONDCP now stands at 23. The investigative officers are seconded from the immigration, police, customs and defence force. A British Advisor with Customs background is currently seconded to the ONDCP to assist with the organization of the various units and the training of personnel.

170. The ONDCP is the specialized central agency responsible for receiving, requesting, analysing and disseminating to competent authorities, disclosures of information relating to financial transactions. A Senior Financial Intelligence Officer screens all reports reaching the ONDCP and in conjunction with the Director ONDCP determines if any further investigation is merited. The Financial Investigation Unit within the ONDCP can undertake such investigations, or it can be referred to another agency.

171. The ONDCP functions as a mixed model FIU and operates from a purpose-built office building constructed on the premises off the Antigua and Barbuda Defence Force in 2001. All workstations in the ONDCP building are computer equipped and connected to a central server by means of a LAN, while Analyst Notebook software is provided. The ONDCP hosts a multi-agency task force (NJHQ), which co-ordinates the passage of drug intelligence information in and out of the country. The Drug Intelligence Unit of ONDCP is responsible for the gathering of domestic drug intelligence.

172. The ONDCP building costs approximately EC$ 1,000,000 and was financed by seized assets in a combined Canada-Antigua and Barbuda investigation in 1999. The computer equipment was donated by the US Department of State and the UK Government donated telephone and radio equipment.

173. The ONDCP now also has responsibility for initiating proceedings for freeze orders, forfeiture orders, production orders, search warrants and other investigative procedures. Over the period 1999-2002 the ONDCP has obtained 30 production orders from the High Court. It also receives and acts upon MLAT requests from foreign countries relating to anti-money laundering matters and the collection and dissemination of drug intelligence. The ONDCP is also mandated to implement and adjust the National Drug and Money laundering Control Policy (approved by cabinet in 1996) and is also mandated to coordinate Government's drug and anti money laundering policy and drug demand reduction programs.

174. The Chief Investigator within the ONDCP is a superintended of Police trained in intelligence work and financial investigations. The Financial investigators within the ONDCP are also experienced police officers knowledgeable on the latest version of the "analyst notebook", (an automated analytical tool used in financial investigations). Currently the ONDCP has plans to have all suspicious transactions registered in an independent database. This database will also be available to police units such as the criminal branch of the Police Force and Customs and Excise Department. ONDCP is also in the process of developing Memoranda of Understanding with banks to facilitate the process of information exchange.

175. As illustrated in the Financial Section, fifty-seven SARs have been reported since 1999. During the Mutual Evaluation two (2) of these SAR reports remained current. The rest of the SAR reports have been made the subject of a preliminary investigation and then closed (20) or referred to the Investigation Branch for a full investigation (35). A number of the received SAR reports have been referred for investigation to foreign law enforcement agencies.

176. There is however no uniform formats for the reporting of SARs and up to now the SARs are being submitted in writing. Antigua and Barbuda officials informed that forms for SAR's are being developed in regulations now being drafted. According to ONDCP officials they also would like to see more SAR's and consequently have issued new anti-money laundering guidelines (issued 9 September 2002) and have started a new program to train compliance officers. It is noteworthy that there has been a high rate of success resulting from the SARs.

177. It can be concluded that the ONDCP is adequately resourced to fulfil its day-to-day requirements (CFATF Recommendation No. 1 complied/ NCCT Criteria No. 23 not met). However, additional workload created by the implementation of the Prevention of Terrorism Act and the expansion of the categories of financial institutions which are now subject to its supervision, are creating a strain on the existing resources of the office. The investigation of Ponzi schemes (of which the promoters are usually located in the US or Canada) is also proving to be a complex and time-consuming exercise and is absorbing a significant proportion of the resources of the ONDCP.

The Royal Police Force of Antigua and Barbuda

178. The Royal Police Force of Antigua and Barbuda (RPFAB) are responsible for the investigation of financial crime and drug trafficking offences, but money laundering investigations is the sole responsibility of ONDCP. The RPFAB has a total of 683 officers (2000 est.).

179. There is a good working relationship between the RPFAB and the DPP's office. The RPFAB has within its organization a legal attaché that has been working closely with the DPP's office over the last year giving support to more complicated investigations. The RPFAB police prosecutors are trained in Barbados however, the Commissioner of Police is of the opinion that these officials can use more legal training. The police see the recent arrangement installed by a letter of directives of the Attorney General for police prosecutors to hand over more complex cases to the DPP's office as a suitable solution to this shortage of training. However, according to the police some refinement in this arrangement between the Police and DPP's office is still needed. There was concern that the DPP's office needs to strengthen its manpower to handle the increased workload. The RPFAB is one of the most important deliverers of seconded officers to the ONDCP. A total of 5 police officers are seconded to the ONDCP. According to the commissioner of police he is happy with the division of tasks between the ONDCP and the RPFAB. The boundaries of this division are not perceived to be formal but generally there is a good understanding between the RPFAB and the ONDCP. The RPFAB supports the ONDCP and the ONDCP also has good communication with the RPFAB with regard to the transferring of investigations and dissemination of intelligence on money laundering. The Mutual Evaluators are of the opinion that this good relationship a