– Money Laundering Investigation
– Figure plucked out of the sky; unrealistic, illogical and impossible.
The Minister of Legal Affairs, in his recent budget presentation, made a bold assertion that the Special Organised Crime Unit (SOCU) is investigating cases of money laundering amounting to some $900 billion. It was further stated that, “SOCU, in relation to financial crimes, has conduct of investigations of offences deriving from forensic audits of Government ministries, departments and agencies under the last Administration, involving billions of dollars of taxpayers’ money”.
Before crafting this article, it should be mentioned that the author of this column was careful to clarify with key reporters from the media houses the figure cited by the minister of $900 billion. It was presumed by this column that it might have been an error in reporting, or perhaps the minister erred with the numbers. This position is based on the fact that it is absolutely unrealistic and illogical that Guyana could have $900 billion in money laundering cases, simply because Guyana’s Gross Domestic Product (GDP) as at the end of 2016 was recorded at $711.7 billion, and aggregate expenditure was $775 billion (Bank of Guyana Annual report, 2016, pg. 13).
Therefore, it is impossible to have money laundering cases to the tune of $900 billion, which is $188.3 billion or 126.4 % more than the size of Guyana’s economy in terms of GDP. On what basis was such a figure derived?
Given the aforesaid highlighted fact, can this figure be substantiated? There was no reference made, pointing to any empirical evidence in the presentation. Was it an error? The plausibility of probably US$900 million, which is equivalent to Gy$185.4 billion, is more practical, given that one of the known cases SOCU is currently investigating involves US$500 million. But it certainly cannot be Gy$900 billion (US$4.36 billion). Does SOCU even has the resources, including the intellectual capacity, to investigate cases of such magnitude?
Even if it is insinuated that this amount of money was not reflected through the real economy, this also is very unlikely. How could they (SOCU) determine that figure without a sum of such magnitude passing through the system and thus being captured in the GDP? More importantly, if, as he stated, this is money laundering under the previous Administration, then that statement in itself lends validity to the notion of the $900 billion having to be reflected in the GDP. Such an assertion is therefore suggesting that Guyana’s economy is more than a Gy$1.5 trillion economy — which is evidently not the case, as Guyana’s economy is less than a $900 billion economy.
In the interest of lending greater sensibility to the position taken within the context of this article, a definition of Money Laundering and an overview of the money laundering process is hereunder stated.
The Financial Action Task Force (FATF) has defined Money Laundering as “the processing of criminal proceeds to disguise their illegal origin in order to legitimise the ill-gotten gains of crime”. The process of Money Laundering constitutes five stages, as illustrated in the table below.
The objective of the second stage (placement) is to deposit the criminal proceeds into the legitimate financial system. The objective of stage 3 (layering) is to conceal the criminal origins of the proceeds. The objective of stage 4 (integration) is to create an apparent legal origin for the criminal proceeds; and the objective of the final stage (integration investment) is to use the criminal proceeds, having laundered (wash) same to make it appear as clean money, for personal benefit.
Hence, having outlined the process by which Money Laundering practices are generally conducted, one can understand clearly that the proceeds — in this case, the claim of $900 billion — would have had to be reflected in the financial system; otherwise, an investigation into Money Laundering cases of this magnitude is virtually impossible, implausible and baseless.
It is within this contextual framework that this column conclusively is of the strongly held view that the $900 billion claim is clearly a gross error on the part of the Minister of Legal Affairs/SOCU. Or suffice it to state that it is a deliberate excessive exaggeration of the numbers for whatever political reason(s).
The Author is the holder of a MSc. Degree in Business Management, with concentration in Global Finance, Financial Markets, Institutions & Banking from a UK university of international standing.
