LEGAL VIEWPOINT: Regulatory supervisory powers to combat money laundering by Dr AbdelGadir Warsama Ghalib, Principal Legal Counsel, Bahrain

Dr AbdelGadir Warsama Ghalib, Principal Legal Counsel, Bahrain

Many new-collar crimes are primarily committed or attempted to be taken through banks and or other financial institutions. Later-on, in the process of committing crimes, the criminals move to other options away from banks and financial institutions. The crime never stops and likewise the criminals every new morning they show up with new crimes. Ultimately, the war goes on and on endlessly, particularly with reference to money laundering and terrorism financing or other white-collar crimes.

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Because of this, all countries are to ensure that banks and financial institutions should be subject to effective regulation and supervision. Supervisors should take necessary legal measures to prevent criminals from holding significant interest or management function in a bank or a financial institution. The establishment or operation, of shell banks or other types of shell companies shall be completely prohibited, as they may be the door for such crimes. Supervisors should have adequate powers to supervise or monitor, and ensure compliance by, banks and financial institutions with the required requirements to combat money laundering and terrorist financing, including the authority to conduct inspections, if any? They should be authorized to compel production of any information from banks and financial institutions whenever relevant to monitoring such necessary compliance, and to impose sanctions for failure to comply with such requirements. Supervisors should have all powers to impose a range of disciplinary and financial sanctions, including the power to withdraw, restrict or suspend the license.

Designated non-financial businesses and professions (DNFBPS) also should be subject to regulatory and supervisory measures. Casinos, for example, should be subject to comprehensive regulatory and supervisory system to ensures that they have effectively implemented the necessary legal measures that are required to fight money laundering and terrorism financing. In this respect, the casinos where ever they are accepted, they should be licensed. The competent authorities should take necessary legal or regulatory measures to prevent criminals from holding a significant or controlling interest or holding management function or being an operator of a casino. The competent authorities should ensure that casinos are effectively supervised for compliance with all legal requirements to fight money laundering and related crimes.

All countries should firmly ensure that all other categories of the designated non-financial businesses and professions (DNFBPs), including real estate agents, gold dealers…, etc., are to be subject to the effective systems for monitoring and ensuring compliance with the requirements as stipulated in all laws. This should be performed on a risk-sensitive basis and it may be performed by a supervisor or by an appropriate self-regulatory body (SRB), provided that such a body can ensure that its members comply with their obligations to fight money laundering and other related crimes. The supervisor or the self-regulatory body (SRB) should take the necessary measures to prevent criminals from being professionally accredited, or holding or being the beneficial owner of a significant or controlling interest or holding a management function, e.g. through evaluating persons on the basis of a “fit and proper” test and  also must have effective, proportionate, and dissuasive sanctions in line with the relevant laws and procedures.

As we can see above, there are tough enough regulations to combat money laundering and terrorism. However, having the toughest regulations will not help unless all countries stand firmly together to effectively comply and to apply such regulations. If, there is leakage in a single country, the tough regulations may not be effective nor operative. Let’s take care.