1. In accordance with the CFATF Procedures for the Fourth Round of AML/CFT Mutual
Evaluations and the CFATF ICRG Procedures for the 4th Round of AML/CFT Evaluations (hereafter the CFATF Procedures) as amended, this report presents the CFATF Group of Experts’ analysis of The Bahamas’ 5th follow-up report (FUR).
2. The mutual evaluation report (MER) of The Bahamas was adopted in May 2017, during the XLV Caribbean Financial Action Task Force (CFATF) Plenary held in Trinidad and Tobago and published in July 2017. Since it met the thresholds of having eight (8) or more NC/PC ratings for technical compliance and a low or moderate level of effectiveness for seven (7) or more of the eleven (11) effectiveness outcomes, The Bahamas was placed under the enhanced follow-up process1.
3. This FUR analyses the progress of The Bahamas in addressing the technical compliance requirements of the recommendations being re-rated. Technical compliance re-ratings are given where sufficient progress has been demonstrated.
4. This report does not analyse any progress The Bahamas has made to improve its effectiveness.
5. The assessment of The Bahamas’ request for technical compliance re-ratings and the preparation of this report was undertaken by the Group of Experts consisting of, Ms. Shana Donovan (Financial Expert), Chief Risk & Policy Officer, AML/CFT Division, Cayman Islands Monetary Authority, and Mr. Javone Rogers (Legal Expert), Crown Counsel, Department of Public Prosecutions, Bermuda, with the support from Mr. Loxly Ricketts of the CFATF Secretariat.
6. Section IV of this report summarises the progress made to improve technical compliance. Section V contains the conclusion and a table illustrating The Bahamas’ current technical compliance ratings.
In keeping with the CFATF Mutual Evaluation Procedures, this FUR considers progress made up until 27 May 2022. In line with the ME Procedures and FATF Methodology, the Group of Experts’ analysis has considered progress to address the deficiencies identified in the MER and the entirety (all criteria) of each Recommendation under review, noting that this is cursory where the legal, institutional, or operational framework is unchanged since the MER or previous FUR.
9. This section summarises the progress made by The Bahamas to improve its technical compliance by:
a) addressing the technical compliance deficiencies identified in the MER, and
b) implementing new requirements where the FATF Recommendations have changed since the MER was adopted.
Progress to address technical compliance deficiencies identified in the MER
Recommendation 8 (originally rated PC)
1. In its 4th Round MER, The Bahamas was rated PC with R.8. The technical deficiencies were inter alia, The Bahamas had not developed regulation, guidance and other measures for the NPO Sector. Also, sanctions were not sufficiently dissuasive.
2. In its 1st FUR, The Bahamas was rated PC with R.8. In light of the revisions to R.8, the technical deficiencies were, inter alia, there was no risk-based approach to the supervision, administration and management of financial activities of NPOs. There was no cooperation between the competent authorities and the NPOs to develop best practices, and while there were sanctions in place, there were no measures for a competent authority to monitor compliance. There was no indication of the expertise of law enforcement to investigate terrorist financing abuse of NPOs. There was no present framework for information sharing and cooperation among relevant authorities holding information on NPOs.
3. In its 4th FUR, The Bahamas was rated PC with R.8. The remaining technical deficiencies were, inter alia, though there is a requirement, there was no evidence to demonstrate work with NPOs to develop and refine best practices to address terrorist financing risk and vulnerabilities. The Bahamas had not yet completed a risk assessment of the NPO sector and risk-based monitoring was not evidenced.
4. Criterion 8.1(a): The Bahamas completed a TF risk assessment of its NPO sector in May 2022. The Bahamas used a wide array sources of information, which include: Registrar General’s Department and Compliance Unit, specifically the NPO Register/Registration, which provided information about NPOs’ name, address, telephone and email, identification documents for directors, controllers, members, and officers; place of residence of directors (including those residing in a foreign jurisdiction); purposes and objectives; cross border movement of cash and activities (overseas branches/affiliation); and annual turnover. Verification of address and identification was also obtained from the registration data.
The range of relevant authorities involved in the risk assessment included: Department of Inland Revenue; Central Bank of The Bahamas; Securities Commission of The Bahamas; Insurance Commission of The Bahamas; Compliance Commission; Department of Public Prosecutions (DPP); Customs Department; Royal Bahamas Police Force (RBPF); Financial Intelligence Unit (FIU).
Sector specific information from the NPOs was obtained through questionnaires regarding the nature of operations, administration, structure, purpose, activities, and procedures of the NPOs. Surveys, interviews and open-source social media were also used to obtain information from the NPOs.
The Group of Experts (GOE) considers that the sources of information are sufficient to identify the features and types of NPOs that are likely to be at risk of terrorism financing abuse.
In The Bahamas all NPOs that fall within the subset of FATF NPOs are required to register, and all NPOs which do not fall within that subset are exempt. Regulation 3(2) of the Non-Profit Organisations (Anti-Money Laundering and Countering Terrorism Financing (No.2) Regulations, 2022 do not explicitly state that NPOs that do not fall within the FATF definition are exempt but instead refers to an exhaustive list contained in Schedule 3 of those Regulations. Exempt NPOs are required to submit an NPO application Form together with supporting documentation for review by the Registrar. The Registrar considers the documents submitted and will issue a letter advising the NPO that they are exempt from registering. The fact that there are some NPOs that are exempt is not considered an issue in the context of The Bahamas. NPOs that fall within the subset of FATF NPOs are required to register and all NPOs which do not fall within that subset are exempt. The list of NPOs that may be exempt is made up of NPOs that do not solicit funds from or disburse funds to the public and therefore do not fall within the FATF definition.
5. Criterion 8.1(b): The Bahamas has now assessed the nature of threats to its NPO sector in its completed sector risk assessment. The Bahamas conducted a National ML/TF Risk Assessment exercise in 2015-2016 where no threats associated to TF were identified in the country. The 2022 NPO TF risk assessment confirms that the threat situation in The Bahamas remains the same.
Based on information obtained from the relevant agencies reveal no indications that NPOs registered in The Bahamas were involved in TF activities in the period 2018-2021 or any other period.
There were also no intelligence or suspicious transactions reported involving NPOs and the International Legal Cooperation Unit – Attorney General Office (ILCU) has reported that there were no requests emanating from or going out to foreign jurisdictions relating to terrorism, or NPOs registered in The Bahamas. No open-source information identified NPOs involvement in terrorist financing in The Bahamas.
The Bahamas is aware of the inherent risks of TF as an international financial centre (IFC). The specific threats The Bahamas identified as potentially posing a risk to at-risk NPOs in The Bahamas given the country’s nature as an IFC and the activities and nature of its at-risk NPOs are as follows: i. there can potentially be diversion of funds; ii.NPOs or directing officials can potentially maintain an affiliation with a terrorist entity, either knowingly or unknowingly; iii. NPOs could be abused to provide support to recruitment efforts by terrorist entities; iv. NPOs can also be targeted for abuse of programming. The resources may flow from legitimate sources, but NPO programmes can potentially be abused at the point of delivery; iv. terrorist entities can potentially abuse the NPO sector through false representation.
The Bahamas’ NPO Risk Assessment Report demonstrates that the country has sufficiently analysed the nature of threats posed by terrorist entities to the NPOs which are at risk and whether there are TF methods that abuse NPOs in development in the country.
December 25, 2022 Published by The Caribbean Financial Action Task Force. (Download the PDF report)