Washington DC – The Caribbean has seen an increase in financial crimes, including fraud schemes, in recent years. Financial fraud has a widespread footprint across the region, involving hundreds of millions if not billions of dollars in illicit income each year, affecting the economic security of countries and the region as a whole and generating a certain level of accompanying violence.
The new Global Financial Integrity Report, Financial fraud in the Caribbean, examines the spread and dynamics of this financial crime. It analyzes the actors and facilitators involved, the contact methods used by the perpetrators and the channels used to move the associated revenue. It also evaluates current policies and law enforcement responses. Additionally, the report provides five country case studies, examining country contexts in Antigua and Barbuda, Barbados, Belize, Jamaica, and Trinidad and Tobago.
 | “Fraud, like other crimes, is a constantly evolving phenomenon that reacts to local, regional and international developments,” he explains. GFI President and CEO Tom Cardamone. “The public and private sectors, as well as citizens of the region, must be alert and responsive to the dynamics of long-standing and nascent fraud schemes.” |
The report is based on interviews with subject matter experts from law enforcement, financial intelligence units (FIUs), financial services commissions (FSCs), multilateral organizations, the private sector and the media. Using interviews as well as background research, the report i) considers the effectiveness of the region’s response to fraud, specifically exploring the success of national and/or regional efforts, ii) examines the source of these weaknesses and iii) assesses performance in four main areas: prevention, detection, investigation and prosecution.
Below are some of the key observations made in the report:
- The most common types of fraud in the Caribbean include advance fee scams, especially lottery/prize scams, online shopping scams and romance scams, as well as pyramid and Ponzi schemes.
- Pyramid schemes in the region often take advantage of citizens’ comfort and familiarity with “sou-sous,” a legitimate, informal community savings practice.
- The method of contact between the victim and the fraudster often depends on the type of fraud being perpetrated, the sophistication of the schemes and the type of victims involved. For example, lottery scams are mostly phone-based, while romance scams are carried out online and through social media.
- The main channels used to move the proceeds of fraud are money smuggling, money service businesses, wire transfers, trade-based money laundering and online money transfer platforms, according to interviews with subject matter experts.
- Caribbean countries have laws in place to cover the types of fraud discussed in this report, however many countries face challenges in translating these laws into effective enforcement action.
- Fraud prevention and investigation in the region faces cultural barriers. Some citizens may misperceive governments’ efforts to combat fraud as an attempt to prevent them from making money. Others may be reluctant to report fraud victimization because of cultural stigma.
- In Jamaica alone, experts estimated the annual value of fraud income at up to $800 million.
Selected recommendations for the public and private sector include:
- While awareness campaigns are being used to sensitize citizens to the risks, the public and private sectors should take additional steps to evaluate and improve the effectiveness of these campaigns.
- Given the prevalence of investment fraud schemes, governments should make it easy for potential investors to verify those individuals and companies registered to do business in a jurisdiction.
- Prosecutors working on fraud cases should explore the use of tax legislation when civil asset forfeiture is not available.
- Policymakers should evaluate current consumer protection legislation for possible improvements.
- Countries in the region should establish courts that deal only with financial crime cases.
- Recognizing that all jurisdictions face financial crime threats, the private sector must take steps to assess and mitigate risk in a nuanced, evidence-based manner, avoiding “de-risking”.
This report is part of a larger project by GFI that analyzes financial crimes in Latin America and the Caribbean. The project’s first report, Financial Crime in Latin America and the Caribbean: Understanding Country Challenges and Designing Effective Technical Solutions covered financial crime trends across the hemisphere. It examined the illicit proceeds of corruption, drug trafficking, mineral trafficking, human trafficking and migrant smuggling. Continuing that effort, this report is part of a new four-part initiative to understand financial crime threats in the hemisphere.
Read the full report here.
To read the press release in Spanish, click here.
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ABOUT GFI: Global Financial Integrity is a Washington, DC-based institute that produces high-caliber analysis of illicit financial flows, advises developing country governments on effective policy solutions, and promotes pragmatic measures of transparency in the financial system to promote development and global security.
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