The report, which covers the period from October 1, 2019, to September 30, 2020, saw a record number of suspect financial transactions reports to the FIU
The change over in the $100 notes from cotton to polymer led to a huge increase in the amount of suspicious transactions reported to the Financial Intelligence Unit of Trinidad and Tobago (FIUTT) and shows the need for changes in the legislation to limit cash transactions.
Acting Director of the Financial Intelligence Unit’s Nigel Stoddard said in the FIUTT Annual Report that last year’s demonetisation process increased the need for the introduction of new regulations concerning business transactions involving significant amounts of cash.
“It is evident, that coming out of the demonetisation exercise, the amount of cash exchanged or attempted to be exchanged, lacked transparency in certain instances to properly identify their source of funds,” he said, “Therefore, such cash-intensive environments increase the risk of money laundering and facilitate criminal conduct. Thus, the FIUTT continues to recommend that the authorities give serious consideration to introducing some form of cash threshold when conducting business transactions.”
The fact that the demonetisation process featured significantly in reports to the FIU was also acknowledged by Minister of Finance Colm Imbert as he addressed the Parliament in March.
During his address to the Parliament, Imbert revealed the vast majority of reports to the FIU were connected to tax evasion and money laundering.
“The most common suspected criminal conduct were tax evasion (539), money laundering (530), suspicious financial activity (401), fraud (205) and drug trafficking (92). These five suspected criminal conduct accounted for 97 per cent of the total number of Suspicious Transaction Reports/Suspicious Activity Reports submitted and 99.89 per cent of the total monetary value of all Suspicious Transaction Reports/Suspicious Activity Reports submitted,” the Finance Minister said in his statement to the Parliament.
Almost a year after the introduction of the new polymer $100 notes, instances of suspicious transactions related to the old cotton note continued to be reported to the FIUTT.
The report, which covers the period from October 1, 2019, to September 30, 2020, saw a record number of suspect financial transactions reports to the FIU.
Stoddard said, “At the operational level, the FIUTT received more STRs/SARs in this reporting year, indeed the most it has received throughout its ten years’ existence. The FIUTT received a total of 1,831 STRs/SARs which represented a significant increase of 80 perc cent over the 1,019 STRs/SARs received in the previous reporting period.”
These 1831 reports amounted to almost $27 billion dollars in shoddy transactions.
He directly connected this increase of reports to the change of the blue note, as over two fifths of the reports recorded during that period were connected to the changeover.
The new polymer note was introduced on December 9, 2019 while the old $100 bill officially lost value as of January 1, 2020. The new notes were hastily introduced as a national security measure.
Citizens were then given until March 30, 2020 to exchange the old notes with a grace period given to nationals who could prove they were out of the country and unable to present their notes for exchange by the deadline.
“The increase in STRs/SARS submissions can be primarily associated with the demonetisation of the cotton-based one-hundred-dollar bill process. 750 STRs/SARs or 41 per cent were received which were related to the demonetisation process. It must be noted, the FIUTT is currently still receiving STRs/SARs from Reporting Entities related to the demonetisation process,” he said.
The report revealed that the number of money laundering reports almost doubled last year, as 286 instances of money laundering were brought before the FIU the year prior. This represented a 185 per cent increase.
While there was an increase in reports, the FIU also recorded an increase in the number of suspicious transactions stopped by reporting entities with 314 in 2020 compared to 86 in 2019.
Not surprisingly, the emergence of several “sou sous” last year became a topic within the report as they were several instances of fraudulent activity connected to these arrangements, which became more and more prevalent from mid-2020 with many attracted to the high payouts promised particularly in the midst of employment uncertainty prompted by the pandemic.
The report acknowledged the increasing prevalence of online scams and the ponzi/pyramid scheme phenomenon’ as it stated, “There was also a noted increase in the incidence of ponzi/pyramid schemes being operated under the guise of “non-traditional sou-sou” and operated as “investments” schemes with the names of “Blessing Loom”, “Giving Circle” and “Blessing Bank” to name a few. “
According to the FIU, there were several romance scams taking place, whereby individuals were being lured into purported “relationships” so as to defraud them. This the report said, became more prevalent as more people turned to social media in the pandemic.
The FIU annual report also acknowledged a 215 per cent increase in Suspicious Transaction/Suspicious Activity Reports (STR/SAR) submissions by Reporting Entities, rising to 1516 compared to the 482 reported a year prior.
Stoddard noted that there was also an increase in the monetary value of these reports.
“The monetary value of STR/SAR submissions is TT$27,013,069,082; a dramatic increase from TT$1,777,596,583 in the previous reporting period. The completed suspicious transactions accounted for 1,517 STRs/SARs with a monetary value of TT$884,434,198. However, the attempted suspicious transactions, which was only 314 STRs/SARs had a monetary value of TT$26,128,634,884, a 2,710 per cent increase over the previous reporting period,” said the FIU’s acting director.
He explained, “While the number of attempted suspicious transactions is significantly less than the completed suspicious transactions as stated above, the main reason for the TT$26 Billion in attempted suspicious transactions are customers approaching the Banks with suspected fraudulent contracts and pending incoming wire transfers. These approaches to the Banks by the customers are usually based on emails received from unknown persons promising huge financial gains in foreign currencies.”
Analysis of the figures indeed revealed that the vast majority of the suspicious transactions indeed were conducted in banks. 1289 of those flagged were recorded in banks with 1057 of those transactions actually being completed.
Central Trinidad (Chaguanas/Couva/Cunupia) recorded the highest number of suspicious transactions for the period with 542, followed by Trinidad’s cities, Port of Spain with 432 and San Fernando with 411. Northern Trinidad (Grand Bazaar to Arima) accounted for 265 reports while West Trinidad tallied less than 100 reports with 98 while Tobago, East Trinidad (Sangre Grande, Mayaro and RIo Claro) and the South West peninsula accounted for 42, 24, and 17 reports respectively.
Stoddard said despite the COVID-19 pandemic, the FIU had made great strides in combating money laundering, financing of terrorism and proliferation financing. The FIU said this helped achieve Trinidad and Tobago’s removal from the Financial Action Task Force’s “grey list” of countries which required increased monitoring.
Stoddard said FIUConnect, which allowed entities to submit reports around the clock, contributed greatly to the implementation of anti-money laundering and counter terrorism financing measures.
However Stoddard noted that there were fewer requests from law enforcement to investigate instances of Money Laundering and Financing of Terrorism
“The FIUTT received 184 requests for financial intelligence on 598 subjects from Law Enforcement Authorities (LEAs) in 2020, as compared to the 221 requests on 636 subjects that were received in the previous reporting period. This represents a 17 per cent decrease in the number of requests for investigations into Money Laundering (ML)/Financing of Terrorism (FT) and other criminal conduct,” Stoddard said.
However when the FIU was called in by law enforcement, cash seizures relating to money laundering, was the most common reason with 61 instances.