Latin American corruption index reveals increasing business risks amid pandemic

Editor’s note: The webcast of “The State of Anti-Corruption in Latin America: The 2020 CCC Index Launch” event above was live-streamed Tuesday morning.

SAN JUAN – The Americas Society/Council of the Americas (AS/COA) and consulting firm Control Risks have published the “2020 Capacity to Combat Corruption (CCC) Index” to assesses Latin American countries’ ability to “uncover, punish, and deter corruption,” they said.

The Americas Society (AS) is a forum dedicated to fostering inter-American relationships through education and analysis of political, social and economic issues confronting Latin America, the Caribbean and Canada; while the Council of the Americas’ (COA) membership consists of companies from various sectors that assure a commitment to “economic and social development, open markets, the rule of law, and democracy.”

“COVID-19 is posing unprecedented challenges to Latin America, including its efforts to combat corruption. All countries in the region have been forced to swiftly mobilize massive resources to fight the virus and to mitigate its economic fallout. In this environment of emergency spending, relaxed controls, and remote working, the risk of corruption and mismanagement of funds has increased,” the AS/COA said.

“The Index shows in detail how the anti-corruption wave that was advancing in Latin America a few years ago has lost steam and, in some places, is dangerously receding. Even more concerning, this is happening while COVID-19 is increasing the risk of corruption across the region,” said Roberto Simon, senior director of policy at AS/COA.

The new CCC Index evaluates and ranks 15 Latin American countries based on how effectively they can combat corruption. Countries with a higher score are deemed more likely to see corrupt actors prosecuted and punished. 

The index looks at 14 variables, including the independence of judicial institutions, the strength of investigative journalism and the level of resources available for combating white-collar crime. These variables are divided in three sub-categories: legal capacity; democracy and political institutions; and civil society, media and the private sector. Countries’ overall scores are a weighted aggregate of these three sub-categories.

The countries were ranked as follows:

  • Uruguay (7.78 out of 10)
  • Chile (6.57)
  • Costa Rica (6.43)
  • Brazil (5.52)
  • Peru (5.47)
  • Argentina (5.32)
  • Colombia (5.18)
  • Mexico (4.55)
  • Ecuador (4.19)
  • Panama (4.17)
  • Guatemala (4.04)
  • Paraguay (3.88)
  • Dominican Republic (3.26)
  • Bolivia (2.71)
  • Venezuela (1.52)

(Screen capture of https://www.as-coa.org/anti-corruption-working-group)

“The index relies on extensive data and a proprietary survey conducted among anti-corruption experts from Control Risks, academia, civil society, media and the private sector,” reads the AS/COA Anti-Corruption Working Group’s (AWG) website. The network convenes anticorruption advocates and corporate leaders who it “are determined to see the historic crackdown” on graft.

“The findings of the 2020 CCC Index have significant implications for those doing business in Latin America. They reveal an uneven and changing enforcement landscape, underscoring the need for companies to update their Risk Assessments and, consequently, adapt their compliance programs to manage corruption risks most effectively,” added Geert Aalbers, partner at Control Risks.

See the CCC Index report here.




Former Ambassador to UN Rice to Speak About Her New Book

Susan E. Rice (Screen capture of www.prliveevents.com)

SAN JUAN — The former U.S. Ambassador to the UN and former National Security Advisor Susan E. Rice will be speaking in Puerto Rico Thursday about the launch of her new book, “Tough Love: My Story of the Things Worth Fighting For.”

The event will take place Thursday, Feb. 13, at the Puerto Rico Museum of Art’s Raúl Juliá Theater, at 7:30 p.m.

After serving on President Barack Obama’s cabinet as ambassador to the UN and national security adviser, Rice is currently a distinguished visiting research fellow at the School of International Service at American University, a non-resident senior fellow at the Belfer Center for Science and International Affairs at Harvard’s Kennedy School of Government, and a contributing opinion writer for the New York Times.

During her conversation with Erin Pelton, founder of Puerto Rico Live, Rice will share stories of “juggling parenting with high-profile jobs, of caring for aging parents while being responsible for the nation’s security, and how to accept offers of Tough Love and see them as the gifts that they are,” the event’s page reads. “Rice will offer an insider’s account of some of the most complex issues confronting the United States over three decades – from ‘Black Hawk Down’ in Somalia, to a secret channel to Iran, the Ebola epidemic, and the opening to Cuba during the Obama years. She will reveal previously untold stories behind recent national security challenges, including confrontations with Russia and China, the U.S. response to Russian interference in the 2016 election, and the surreal transition to the Trump administration.”

Puerto Rico Live hosts moderated talks related to personal and professional development in order to inspire and contribute to the island’s economic growth.

Puerto Rico Live founder Erin Pelton (Screen capture of www.prliveevents.com)

Pelton was a career U.S. Foreign Service Officer until 2014, and served in senior roles in the Obama administration, including as director of communications and spokesperson to the U.S. Mission to the UN, and communications director and assistant press secretary at the White House National Security Council. She moved to Puerto Rico in 2018 with her husband, Puerto Rico Live co-founder Miguel Estien, and their children.

“Puerto Rico Live is a platform that introduces the island to the circuit of ideas and book tours that are taking place all over the world today,” said Estien, who returned in 2018 to support the island’s recovery efforts after two decades with GE Capital.

“We are honored to be able to bring a guest of Susan Rice’s caliber to the island and we hope her participation will serve as a source of knowledge and inspiration for everyone,” said Pelton.

All $50.00 tickets will include a signed copy of the book. There will be a cocktail reception following the on-stage conversation for all ticketed guests.

For more information, visit www.prliveevents.com




Big Business Says It Will Tackle Climate Change, but Not How or When

FILE — A local farmer harvests seaweed near Beniamina Island in Solomon Islands on June 6, 2018. Islands in the area, predominantly inhabited by seaweed farmers, are eroding due to rising sea levels, infringing on the landmass of settled islands and forcing communities to relocate to larger islands. (Adam Ferguson/The New York Times)

By David Gelles and Somini Sengupta

DAVOS, Switzerland — Business titans who for decades brushed off warnings about climate change arrived at the annual World Economic Forum this week ready to show their newfound enthusiasm for the cause.

Having previously played down the need for the reform that scientists had urged, finance leaders and company chiefs conspicuously rallied around a consensus that accelerating global temperatures pose a significant risk to society — and to business.

Missing, though, was a clear answer to the question of what exactly they would do about it and how quickly.

“It’s an increase in rhetoric, absolutely,” said Alison Martin, who leads the Europe, Middle East and Africa divisions of Zurich Insurance. “Will we see a walking of the talking? The jury is out.”

After months of global climate protests that drew millions of young people, a raft of companies said this week in Davos that they would aim to lower their emissions of planet-warming gases to net zero by 2050 or earlier. A coalition of major financial institutions, representing $4.3 trillion in assets, said it would take steps to minimize carbon-heavy investments in its portfolios and lobbied other investors to join it.

A group of 140 of the world’s largest companies pledged to develop a core set of common metrics to track environmental and social responsibility. And companies and government leaders, including President Donald Trump, who has rolled back dozens of environmental and climate policies, said they would aim to plant 1 trillion new trees around the world, at the behest of Marc Benioff.

“The tree is a bipartisan issue,” said Benioff, a co-founder and the co-chief executive of Salesforce. “No one is anti-tree.”

The window of time to avert the worst effects of climate change is rapidly closing, according to numerous scientific reports. And while critics blame big business for decades of inaction, as well as the active suppression of climate science, many major companies now acknowledge the immediate need for change.

“The measurements all show that we are clearly not doing enough yet,” Feike Sijbesma, chief executive of DSM, a Dutch health company, said at Davos.

The pledges were the latest in a string of climate-related announcements in recent weeks.

BlackRock, the world’s largest institutional investor, said it would place climate change at the center of its investment strategy. Microsoft said it would not only go carbon negative — reducing more greenhouse gases than it adds to the environment — but also somehow remove all the emissions the company has ever produced. Lloyds, the British financial group, pledged to cut by “more than 50%” the carbon emissions generated by the projects it finances by 2030.

Larry Fink, BlackRock’s chief executive, showed up to meetings wearing a wool scarf that represented the decades of warming since the industrial age, a Christmas present from a nonprofit organization that works on climate issues.

“I’ve never seen a social issue explode like this,” said Paul Tudor Jones II, an investor and founder of Just Capital, which ranks companies based on sustainability factors. “Every single CEO and board is having to figure out what their carbon footprint is and what they’re going to do about it.”

Behind this flurry of corporate commitments is a growing concern about tangible risks to the bottom line, including the prospect that ratings agencies will factor in climate risk, pressure from younger employees, changing consumer preferences and government regulations like a carbon tax.

Extreme weather events are already causing economic havoc. The California wildfires last year were estimated to have caused $25.4 billion in damage. Pacific Gas & Electric, the largest energy producer in the state, has filed for bankruptcy.

Jesper Brodin, chief executive of Ikea, said his company was already feeling the impact. Severe flooding in the U.S. temporarily closed many of its stores. Energy prices in Sweden skyrocketed during a recent heat wave. Fires in Australia have disrupted business there.

Arne Sorenson, chief executive of Marriott, said the hotel chain was also feeling the brunt. “We have hotels in Puerto Rico that are still closed,” he said. “We’re going to see the impact of fires and storms.”

A report this week from the Bank for International Settlements, which represents central banks, said climate change could cause the next financial crisis. Mark Carney, the departing Bank of England governor who has spearheaded efforts to get central banks to carry out stress tests assessing climate impacts on sectors, said companies needed to examine and disclose their strategies and timelines for lowering their carbon footprints.

“This is a whole-of-economy transition. In every sector, there will be companies that will be part of the solution,” Carney said. “Those who lag are going to be punished.”

Despite talk of the risks, few companies and investors provided details at Davos on how they would rapidly transition away from an economy based on fossil fuels. Just a fraction of global businesses currently disclose the financial risks posed by climate change. Even fewer have set their own targets and timetables to do what the science demands: Reduce total greenhouse gas emissions by half over the next decade.

While global investment in renewable energy hit $289 billion in 2018, far exceeding the investment in new fossil fuel power, wind and solar remain a small portion of total energy production.

Martin, of Zurich Insurance, said the real evidence of change would come when investors started exiting carbon-heavy companies, especially those with no transition plan. “What is going to cause the change?” she added. “If capital actually does start to fly, if it does actually make choices.”

Treasury Secretary Steven Mnuchin ridiculed calls for fossil fuel divestment, singling out teenage climate activist Greta Thunberg, who called on the Davos crowd Tuesday to immediately halt investments in oil, gas and coal.

Speaking to reporters Thursday, Mnuchin belittled Thunberg. “After she goes and studies economics in college, she can come back and explain that to us,” he said.

Thunberg responded tartly on Twitter, saying that “it doesn’t take a college degree in economics to realise that our remaining 1.5° carbon budget and ongoing fossil fuel subsidies and investments don’t add up.”

Mnuchin also played down the need for new regulation. “We don’t believe there should be carbon taxes,” he said on CNBC. “We want to cut taxes. We think that industry can deal with this issue on its own.”

The World Economic Forum’s annual global risk report this year ranked climate and environmental hazards as the top five concerns facing the world in the next decade for the first time. But a separate survey of business executives about the top 10 risks in the next 12 months made no mention of climate.

One measure of a newfound awareness, said Stefan Rahmstorf, a climate scientist at the Potsdam Institute for Climate Impact Research, was how many invitations that researchers like him were now receiving from the titans of global capital. Rahmstorf said that while he was frustrated that the business community had for decades blocked efforts to address rising greenhouse gas emissions, he was also hopeful about the change he was witnessing.

“The business community is increasingly not trying to lobby against decarbonization and solving the climate crisis,” he said. “They are realizing something has to be done and something has to change.”




U.S. bans travel to Cuba

In an effort to prevent island government's enrichment, backing of Maduro in Venezuela
(Photo by AussieActive on Unsplash)

In an effort to prevent island government’s enrichment, backing of Maduro in Venezuela

SAN JUAN — The U.S. State Department said the administration of President Trump took action Tuesday to prevent U.S. travel to Cuba “from enriching the Cuban military, security, and intelligence services” by announcing new restrictions on travel to the island.

Starting Thursday, June 5, when the regulations are published in the Federal Register, U.S. travelers will be indefinitely prohibited from going to Cuba under the educational travel authorization implemented by the Obama administration, and the United States will no longer permit visits to the island via passenger or recreational vessels, including cruiseships and yachts, nor private or corporate aircraft.

According to a State Department release, the Trump administration “holds the Cuban regime accountable for its repression of the Cuban people, its interference in Venezuela, and its direct role in the man-made crisis led by Nicolas Maduro. Despite widespread international condemnation, Maduro continues to undermine his country’s institutions and subvert the Venezuelan people’s right to self-determination. Empowered by Cuba, he has created a humanitarian disaster that destabilizes the region.”

The State Department said the Cuban tourism industry has strong economic ties to the Cuban security, military, and intelligence sectors.

“Veiled tourism has served to line the pockets of the Cuban military, the very same people supporting Nicolas Maduro in Venezuela and repressing the Cuban people on the island. In Cuba, the regime continues to harass, intimidate, and jail Cubans who dare to voice an opinion different from the one the regime wants them to have. The United States calls on the regime to abandon its repression of Cubans, cease its interference in Venezuela, and work toward building a stable, prosperous, and free country for the Cuban people,” the State Department wrote.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) presented amendments Tuesday to the Cuban Assets Control Regulations (CACR), along with changes to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) Export Administration Regulations (EAR).

The regulatory changes were announced April 17, and “mark a continued commitment towards implementing the National Security Presidential Memorandum signed by the President on June 16, 2017 titled ‘Strengthening the Policy of the United States Toward Cuba,'” the Commerce Department said in its release.

Among the changes in the revised regulations are:

Ending Group People-to-People Travel

  • In accordance with the newly announced changes to non-family travel to Cuba, OFAC is amending the regulations to remove the authorization for group people-to-people educational travel. OFAC’s regulatory changes include a “grandfathering” provision, which provides that certain group people-to-people educational travel that previously was authorized will continue to be authorized where the traveler had already completed at least one travel-related transaction (such as purchasing a flight or reserving accommodation) prior to June 4, 2019.

Ending Exports of Passenger Vessels, Recreational Vessels, and Private Aircraft

  • BIS, in coordination with OFAC, is amending its EAR to make passenger and recreational vessels and private and corporate aircraft ineligible for license exception and to establish a general policy of denial for license applications involving those vessels and aircraft.




Report: Clean Energy Must Not Rely on Dirty Mining

Pit of Codelco’s Chuquicamata copper mine outside Calama, Chile.

Research exposes extent of mineral demand for clean technologies

SAN JUAN – Earthworks published new research detailing projected minerals demand to build the electric vehicles, solar arrays, wind turbines and other renewable energy infrastructure needed to meet the goals of the Paris Climate Agreement and avert the most disastrous impacts of climate change.

The research, conducted by the University of Technology Sydney’s Institute for Sustainable Futures (ISF), shows that as demand for these minerals skyrockets, “the already significant environmental and human impacts of hardrock mining are likely to rise steeply as well. It shows the need for a broad shift in the clean technologies sector towards more responsible minerals sourcing,” reads a release by Earthworks, a nonprofit dedicated to exposing the health, environmental, economic, social and cultural impacts of mining and energy extraction.

“We have an opportunity, if we act now, to ensure that our emerging clean energy economy is truly clean–as well as just and equitable–and not dependent on dirty mining,” said Payal Sampat, director of Earthworks’ Mining Program. “As we scale up clean energy technologies in pursuit of our necessarily ambitious climate goals, we must protect community health, water, human rights and the environment.”

Research highlights:

  • Under a 100 percent renewable energy scenario, metal requirements could rise dramatically, requiring new primary and recycled sources.
  • Clean technologies rely on a variety of minerals, principally cobalt, nickel, lithium, copper, aluminum, silver and rare earths.
  • Cobalt, lithium and rare earths are the metals of most concern for increasing clean tech demand and supply risks.
  • Batteries for electric vehicles are the most significant driver of accelerated minerals demand.
  • Recycled sources can significantly reduce primary demand, but new mining is likely to take place and new mining developments linked to renewable energy are already underway.
  • Responsible sourcing is needed when supply cannot be met by recycled sources.

Earthworks commissioned the research as part of its new “Making Clean Energy Clean, Just & Equitable” project, “which aims to ensure that the transition to renewable energy is powered by responsibly and equitably sourced minerals, minimizing dependence on new extraction and moving the mining industry toward more responsible practices,” the organization said.

“The responsible materials transition will need to be scaled up just as ambitiously as the 100 percent renewable energy transition,” said Dr. Sven Teske, Research Director at the UTS Institute for Sustainable Futures.

The report found that the transition will require businesses and governments to “dramatically scale up” the use of recycled minerals, use materials more efficiently, require mining operations to “adhere to stringent, independent environmental and human rights standards, and prioritize investments in electric-powered public transit,” Earthworks said.

“The renewable energy transition will only be sustainable if it ensures human rights for the communities where the mining to supply renewable energy and battery technologies takes place,” said Elsa Dominish, Senior Research Consultant at the UTS Institute for Sustainable Futures. “If manufacturers commit to responsible sourcing this will encourage more mines to engage in responsible practices and certification. There is also an urgent need to invest in recycling and reuse schemes to ensure the valuable metals used in these technologies are recovered, so only what is necessary is mined.”

The nonprofit stressed that the extraction of minerals already fuels conflict, human rights violations, water pollution and wildlife and forest destruction.

“Most of the world’s cobalt, used in rechargeable batteries for electric vehicles and phones, is mined in the Democratic Republic of Congo, often by hand in unsafe conditions using child labor,” Earthworks pointed out. “Earlier this year in Brazil, the collapse of two tailings dams at Vale’s Brumadinho iron ore mine killed hundreds of workers and local residents. Independent research that analyzes decades of data on mine waste dam failures reveals that these catastrophic failures are occurring more frequently and are predicted to continue to increase in frequency,” the report’s release reads.

Access the full report here.




National Puerto Rican Chamber of Commerce among entities pushing for passage of North American trade agreement

National Association of Manufacturers, Domino’s Pizza and Dow also join Pass USMCA Coalition

The The Pass USMCA Coalition logo (Screen capture of www.passusmca.org)

SAN JUAN – The Pass USMCA Coalition, an alliance advocating for the passage of the United States-Mexico-Canada Agreement, welcomed the National Association of Manufacturers, Domino’s Pizza, Dow, and the National Puerto Rican Chamber of Commerce as its newest members.

Pass USMCA is an effort led by Democrat Gary Locke, former ambassador to China, secretary of commerce and governor of Washington; and Republican Rick Dearborn, who has served two presidents and six senators.

The deal promotes “U.S. exports, enhances intellectual property protections for U.S. creative industries, and boosts resources for America’s small businesses,” the group group of trade associations and businesses says, stressing that its provisions will “defend American jobs, cultivate innovation, and encourage business development, spurring growth for local, state, and national economies.”

Trade with Canada and Mexico supports 14 million U.S. jobs, the coalition says. “In 2017, the United States exported more than $275 billion in goods to Mexico and nearly $350 billion in goods to Canada.”

In announcing the newly joined entities, the coalition described the National Association of Manufacturers as “the largest manufacturing association in the United States”; Domino’s as the “world’s largest pizza seller, with more than 16,000 stores”; Dow as the “world’s leading materials science company”; and the National Puerto Rican Chamber of Commerce as “a vital advocate for entrepreneurship and innovation within Puerto Rico’s economy.”

Trade with Canada and Mexico “supports two million U.S. manufacturing jobs,” the coalition stressed, adding that “Puerto Rico’s economy and businesses are overwhelmingly dependent on North American trade,” and that “chemical exports to Canada and Mexico have tripled since NAFTA went into effect” in 1994.

“We’re thrilled to add four more well-respected organizations to our coalition,” said Joe Crowley, honorary co-chairman of Pass USMCA and a former congressman from New York. “Our coalition is exceedingly diverse–and that speaks volumes about the widespread support for USMCA.”

Rick Dearborn, Pass USMCA Coalition’s executive director, summarized the need for the agreement’s passage by Congress by stating that “North American trade supports millions of jobs and generates billions in economic output.”

Gary Locke, honorary co-chairman of Pass USMCA, added that it was “terrific to have four more leading businesses and groups making the case for USMCA,” and that “the new trade pact with Mexico and Canada isn’t a partisan issue,” the “deal benefits every American,” and would “improve our trading relationships” with those countries.




EU Council withdraws support for dirty money blacklist

After 27 of 28 EU countries objected, general EC secretariat said it ‘was not established in a transparent and resilient process’

(Screen capture of www.consilium.europa.eu)

Editor’s note: A version of the following was first published in the March 7 – 13, 2019, issue of Caribbean Business.

The executive director of the Fiscal Agency & Financial Advisory Authority of Puerto Rico (Aafaf by its Spanish acronym), Christian Sobrino Vega, and the commissioner of the Financial Institutions Office (OCIF in Spanish), George Joyner, reported that 27 of the 28 countries that comprise the European Union (EU) objected to finalizing the list of high-risk jurisdictions for money laundering, which includes Puerto Rico, and was recently published by the European Commission. The list included several U.S. territories, among them, Guam, Virgin Islands, Puerto Rico and American Samoa.

Immediately after its publication, the list was also rejected by the U.S. Department of the Treasury (UST) due to the lack of rigor in the methodology used by the European Commission in the preparation of the list.

Since its publication at the beginning of February, Puerto Rico government officials have rejected the island’s inclusion, arguing that the island currently has a robust legal and regulatory framework to prevent, detect and combat money laundering and other illegal financial practices. For their part, Aafaf and OCIF expressed they have been communicating and collaborating with the Office of Terrorist Financing & Financial Crimes (TFFC) at the UST.

According to Sobrino Vega, the Government of Puerto Rico has continued to work with the UST in relation to this matter. The executive director of Aafaf and Financial Institutions Commissioner Joyner thanked UST Secretary Steven Mnuchin and his team for supporting the Government of Puerto Rico. Additionally, Gordon Sondland, the U.S. ambassador to the European Union, said it was encouraging to see that common sense of the member states prevailed over the dogmatic posturing of the commission on the issue.

Timeline

The consultation held Feb. 28 resulted in the required majority of EU delegations having declared their intention to object to the list, “in particular on the basis that the act was not established in a sufficiently transparent way,” according to the General Secretariat of the EU Council.

On March 1, following a Financial Attachés Working Party meeting, unanimity on the intention to object was reached and agreed that the Committee of Permanent Representatives invite the council to object, inform the EC and the European Parliament.

In a statement Thursday, the council said it needs “to introduce the list in an orderly process. Therefore, in order to establish a strong and effective instrument, the Council cannot support the current proposal that was not established in a transparent and resilient process that actively incentivises affected countries to take decisive action while also respecting their right to be heard.”

As previously reported by Caribbean Business, early this month, the former director of the Economic Development & Commerce Department (DDEC by its Spanish acronym), Alberto Bacó Bagué, rejected the recent decision to include Puerto Rico on the list of countries with deficiencies in their strategies against money laundering and to combat the financing of terrorist cells, and denounced the fact as an act of bad faith against a jurisdiction such as Puerto Rico, which is going through its most precarious economic period in the past 50 years.

“It’s unjustifiable. For me, that was a political move of very bad faith and we must fight to make them look ridiculous,” Bacó Bagué underlined during an interview with Caribbean Business, insisting that Puerto Rico “has an excellent commissioner of financial institutions, in addition to having a banking system that operates with the highest quality standards.”

Puerto Rico gov’t: European countries reject new inclusions in dirty money list




Puerto Rico gov’t: European countries reject new inclusions in dirty money list

The executive director of the Fiscal Agency and Financial Advisory Authority of Puerto Rico, Christian Sobrino Vega (Courtesy)

SAN JUAN – The executive director of the Fiscal Agency and Financial Advisory Authority of Puerto Rico (Aafaf by its Spanish acronym), Christian Sobrino Vega, and the island’s Financial Institutions (OCIF by its Spanish acronym) commissioner, George Joyner, said Monday that 27 of the 28 member countries of the European Union objected to finalize the list of high-risk jurisdictions for money laundering recently published by the European Commission (EC).

The list included several U.S. territories, among them, Guam, Virgin Islands, Puerto Rico and American Samoa. It was also rejected by the U.S. Treasury Department, which said the EC’s methodology lacked rigor.

“Currently, Puerto Rico has a robust legal and regulatory framework to prevent, detect and combat money laundering and other illegal financial practices,” the Puerto Rico government’s release reads. AAFAF and OCIF stress that their collaboration with the Office of Terrorist Financing and Financial Crimes (TFFC) of the U.S. Treasury is ongoing.

Sobrino and Joyner thanked the U.S. Treasury for supporting the Government of Puerto Rico for voicing its rejection to the EC list.

“It is expected that at its next meeting on March 7, 2019, the European Council of the European Union will ratify the rejection of the list published a few weeks ago by the European Commission,” the commonwealth government said.

The U.S. Treasury had said in a statement that it considers the Financial Action Task Force (FATF) as the entity in charge of developing global standards to combat Anti-Money Laundering and Countering the Financing of Terror (AML/CFT).

It then said the commission’s process contrasts with the FATF’s in that it “did not include a sufficiently in-depth review,” provided the “affected jurisdictions with only a cursory basis for its determination,” notified these they would be included on the list “only days before issuance” and “failed to provide” them ” with any meaningful opportunity to challenge their inclusion or otherwise address issues identified by the Commission.”

Treasury rejected the inclusion of the territories on the list, saying “the commitments and actions of the United States in implementing the FATF standards extend to all U.S. territories, and that the same Anti-Money Laundering and Countering the Financing of Terror (AML/CFT) legal framework that applies to the continental United States also generally applies to U.S. territories.”

The agency concluded its statement saying it “does not expect U.S. financial institutions to take the European Commission’s list into account in their AML/CFT policies and procedures.”

Besides the four U.S. territories, Panama and Saudi Arabia, whose king personally wrote to European Unions in protest, would have been alongside 16 jurisdictions that include Iran, Iraq, Pakistan, Ethiopia and North Korea.

The list warns European banks to closely monitor its transactions with the listed countries.

Local Banking Industry Denounces P.R.’s Inclusion in Laundering Blacklist




Local Banking Industry Denounces P.R.’s Inclusion in Laundering Blacklist

Editor’s note: The following originally appeared in the Feb. 21 -27, 2019, issue of Caribbean Business.

For Alberto Bacó Bagué, the former director of the Economic Development & Commerce Department (DDEC by its Spanish acronym), the European Commission’s (EC) recent decision to include Puerto Rico on the list of countries with deficiencies in their strategies against money laundering and to combat the financing of terrorist cells is an ill-informed action against a jurisdiction such as Puerto Rico, which is going through its most precarious economic period of the past 50 years.

Bacó Bagué, who works in the private sector as founder of the think tank Partnership for Modern Puerto Rico, which promotes change and the modernization of the island through various economic strategies, strongly condemned the decision to include Puerto Rico on the list along with such countries as Panama and Iraq, and said it was unacceptable.

“It’s unjustifiable. For me, that was a political move of very bad faith and we must fight to make them look ridiculous because what they are doing is just that, being ridiculous. Puerto Rico is part of the United States and, like I tell it, we don’t have the IRS [Internal Revenue Service] here but we do have the FBI [Federal Bureau of Investigation]. We also have an excellent commissioner of financial institutions, in addition to having a banking system that operates at the highest quality standards,” Bacó Bagué said in an aside with the press after delivering a speech at the sixth Puerto Rico Investment Summit.

“All states and territories are part of the U.S. banking system. Why do they go after and abuse the smallest?” the former government official questioned, adding he trusted that the governor of Puerto Rico, Ricardo Rosselló, the resident commissioner in Washington, Jenniffer González, and Financial Institutions Commissioner George Joyner will sound the alert in the appropriate forums “because this is an outrage and it does us a lot of damage to compare us with Panama, the Cayman Islands or with Iraq. These are things that I have fought against, to let it be known that we don’t want scoundrels here. What we want here are people who create jobs, who create economic activity and do things well. That is the north and we must defend that until the end.”

Bacó Bagué explained that the inclusion of Puerto Rico on that list constitutes an international warning that indicates that making financial and banking transactions with those countries, including Puerto Rico, could expose the European financial system to money laundering and terrorist financing risks.

In addition to Puerto Rico, Panama and Iraq, the list includes Afghanistan, American Samoa, Bahamas, Botswana, North Korea, Ethiopia, Ghana, Guam, Iran, Libya, Nigeria, Pakistan, Saudi Arabia, Sri Lanka, Syria, Trinidad & Tobago, Tunisia, Yemen and the U.S. Virgin Islands.

However, Bacó Bagué assured that the risk being addressed by the EC is not necessarily linked to the fact that Puerto Rico is one of the U.S. jurisdictions with the lowest tax rates and categorically held that there is no correlation between the rates and money laundering.

“There is no relationship. Money laundering is done by people who are operating illegally in any jurisdiction. If you do not attack them properly, it happens, but that has nothing to do with the tax rates because they earn so much money that the last thing they care about is these low rates,” he said.

“The reason really is how flexible that jurisdiction is in complying with the laws. That kind of practice happened in, for example, Panama, because they were not doing their job legislating and regulating well there. It has nothing to do with how much Panama charged in taxes. So there is no correlation. There are also many jurisdictions with high taxes that do nothing to avoid these criminals,” he added.

Last week, the U.S. Department of the Treasury rejected the EC’s justification to include Puerto Rico on the list and said it “does not expect U.S. financial institutions to take the European Commission’s list into account in their AML/CFT [Anti-Money Laundering & Countering the Financing of Terror] policies and procedures.”

Treasury said the EC’s process “did not include a sufficiently in-depth review,” provided the “affected jurisdictions with only a cursory basis for its determination,” notified them that they would be included on the list “only days before issuance,” and “failed to provide” them “with any meaningful opportunity to challenge their inclusion or otherwise address issues identified by the commission.”

The agency explained that the Financial Action Task Force (FATF) is the entity in charge of developing global standards to combat money laundering and terrorism and proliferation financing, and that the “commitments and actions of the United States in implementing the FATF standards extend to all U.S. territories.” It further stressed that the same AML/CFT “legal framework that applies to the continental United States also generally applies to U.S. territories.”

The executive director of the P.R. Fiscal Agency & Financial Advisory Authority (Aafaf by its Spanish acronym), Christian Sobrino Vega, and Financial Institutions Commissioner George Joyner this week joined the U.S. Department of the Treasury to reject the European Commission’s determination to include several U.S. territories on the list of high-risk jurisdictions for money laundering. According to the officials, the Government of Puerto Rico has a robust legal and regulatory framework to prevent, detect and combat such practices.

The officials said they collaborate with Treasury’s Office of Terrorist Financing & Financial Crimes (TFFC) and that the government of Puerto Rico has a “robust legal and regulatory framework to prevent, detect and combat said practices.”

“The FATF, which includes the United States, the European Commission, 15 EU member states and 20 other jurisdictions, already develops a list of high-risk jurisdictions with AML/CFT deficiencies as part of a careful and comprehensive process,” which the EC lacked, Treasury said in its statement.

For its part, Aafaf and OCIF expressed that they have been communicating and collaborating with the Office of Terrorist Financing & Financial Crimes (TFFC) of the U.S. Department of the Treasury. Both the Aafaf executive director and the OCIF commissioner thanked Treasury for its commitment and support of the Government of Puerto Rico in the implementation of national and global standards to prevent, detect and combat the aforementioned practices.




Puerto Rico, U.S. Treasury reject European Commission list of money laundering risk jurisdictions

Gov. Ricardo Rosselló and U.S. Treasury Secretary Steven Mnuchin (Courtesy)

SAN JUAN – The executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym), Christian Sobrino Vega, and Puerto Rico Financial Institutions (OCIF by its Spanish acronym) Commissioner George Joyner, joined the U.S. Department of the Treasury Wednesday to reject the European Commission’s determination to include several U.S. territories in the list of high-risk jurisdictions for money laundering.

The list published by the European Commission included American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands.

The Aafaf and OCIF officials said they collaborate with Treasury’s Office of Terrorist Financing and Financial Crimes (TFFC) and that the government of Puerto Rico has a “robust legal and regulatory framework to prevent, detect and combat said practice.”

For its part, the U.S. Treasury said in a statement that it “has significant concerns about the substance of the list and the flawed process by which it was developed.”

The agency explained that the Financial Action Task Force (FATF) is the entity in charge of developing global standards to combat money laundering, and terrorism and proliferation financing.

“The FATF, which includes the United States, the European Commission, 15 EU member states, and 20 other jurisdictions, already develops a list of high-risk jurisdictions with AML/CFT deficiencies as part of a careful and comprehensive process,” Treasury wrote.

It then said the commission’s process contrasts with the FATF’s in that it “did not include a sufficiently in-depth review,” provided the “affected jurisdictions with only a cursory basis for its determination,” notified these they would be included on the list “only days before issuance” and “failed to provide” them ” with any meaningful opportunity to challenge their inclusion or otherwise address issues identified by the Commission.”

Treasury rejected the inclusion of the territories on the list, saying “the commitments and actions of the United States in implementing the FATF standards extend to all U.S. territories, and that the same Anti-Money Laundering and Countering the Financing of Terror (AML/CFT) legal framework that applies to the continental United States also generally applies to U.S. territories.”

The agency concluded its statement saying it “does not expect U.S. financial institutions to take the European Commission’s list into account in their AML/CFT policies and procedures.”