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Is the Central Bank condoning illegal US$ trade?
Anyone walking through T&T’s capital, Port-of -Spain, or any of the country’s other towns, would be struck by the number of shops that have notices on their front windows advertising the sale of US currency.
The practice of retail shops advertising the sale of US currency has become so pervasive that it has extended beyond urban areas to small shops in suburban and rural districts.
What these shopowners may not know is that this widespread practice is illegal and the sale or purchase of foreign currency by any person or entity who has not been authorised by the Central Bank is a crime that can result in a fine, imprisonment and the confiscation of the foreign currency.
In May last year, the Central Bank published a notice in which it advised the public that “transactions involving the buying, selling, borrowing or lending of foreign currency should only be conducted through authorised dealers.”
The Central Bank notice listed the 12 authorised foreign exchange dealers:
RBC Royal Bank;
First Citizens Bank;
FirstCaribbean Int’l Bank;
Bank of Baroda;
NCB Global Finance;
ANSA Merchant Bank;
Development Finance and
Massy Finance GFC.
Additionally, according to the Central Bank notice, there are five bureaux de change that are authorised to buy or sell foreign currency notes, coins and travellers cheques only.
The five authorised bureaux de change are:
Eastern Credit Union;
Global Exchange T&T;
Millennium Finance and
Leasing Company and
T&T Unit Trust Corporation.
It is noteworthy that the Central Bank notice did not speak to the issue of whether hotels and guest houses have the authority to trade in foreign currency.
But the notice did make clear that it is illegal for any person or entity that has not been authorised by the Central Bank to be buying or selling foreign currency.
According to the notice: “The Exchange Control Act Chap. 79:50 (ECA) states:
“Except with the permission of the (Central) Bank, no person (other than an authorised dealer) shall in T&T, buy or borrow any gold or foreign currency from, or sell or lend any gold or foreign currency to, any person other than an authorised dealer” (Section 6(1)).
“Any person…who contravenes any restriction or requirement (of the ECA)...and any...person who conspires or attempts, or aids, abets, counsels or procures any other person, to contravene any such restriction or requirement...is guilty of an offence...(and) is liable:
(a) on summary conviction to a fine and to imprisonment for two years (or)
(b) on conviction on indictment to a fine and to imprisonment for five years, and where the offence is concerned with any currency, any security, any gold, any goods or any other property, the Court may if it thinks fit, order the currency, security, gold, goods or property to be forfeited.’ (Fourth Schedule).”
So it is clear that, as far as the Central Bank is concerned, the hundreds of retail stores that are buying and selling US currency on a daily basis are engaging in an activity that is a contravention of the Exchange Control Act and is an illegal practice.
Several questions arise as a result of the fact that the buying and selling of US currency—by entities that are not authorised by the Central Bank—seems to be flourishing in T&T.
1. If the Central Bank is aware that there is a flourishing, illegal trade in US currency in T&T, what has it done to criminalise this illegal activity, apart from issuing its May 2016 statement?
2. Do the law enforcement authorities have any evidence that casinos operating in T&T—which have spread like a wildfire on a scorching, dry-season afternoon—are engaging in the illegal buying and selling of US currency?
3. Do the law enforcement authorities have any evidence, actionable or otherwise, that some of the US currency that is being bought and sold in this flourishing black market represents the proceeds of criminal activities?
In other words, are criminals using the black market in US currency to launder the proceeds of their crimes?
4. Do the law enforcement authorities have any evidence that, having laundered their US currency in the local foreign exchange black market, criminals are using the inflated TT dollar proceeds to purchase properties throughout the length and breadth of Trinidad AND Tobago?
5. Can it therefore be argued that by ignoring this illegal trade in US currency that the Central Bank and the law enforcement authorities are condoning the breach of the Exchange Control Act, which is contributing to money laundering, illegal profiteering and inflating the price of real estate in T&T?
6. If the Central Bank and the law enforcement authorities are condoning a practice that contributes to money laundering and illegal profiteering, how are they going to convince the Caribbean Financial Action Task Force—whose address is 21st floor Nicholas Tower on Independence Square—that T&T is doing all it can to address the problem of money laundering in this country?
What can the authorities do?
a. The Central Bank, along with the law enforcement authorities, can criminalise the illegal trade in US currency by notifying retailers that they are commiting an offence by trading in US currency and requesting that they cease and desist?
b. The Exchange Control Act should be clarified to determine if the seller or buyer of US currency is guilty of a crime or both;
c. The law enforcement authorities can raid some of the retail enterprises that are trading in US currency and initiate prosecution against them. This would at least indicate that the authorities believe the illegal trade in US currency is a problem that must be addressed;
d. One fairly obvious solution would be for the Central Bank to increase the number of bureaux de change in T&T, by licensing some of the retailers who are currently trading in US currency illegally. The licence would be a source of funds for the Central Bank and would also ensure that a new and important group is subjected to anti-money laundering regulations and reporting requirements;
e. In a sense, the Central Bank has aggravated the black market in US currency by not providing the authorised dealers with enough foreign exchange to satisfy the demand of their customers. The Central Bank’s response to that statement would be that if it were to satisfy all the demand, T&T’s foreign reserves would be depleted in less than two years.
The Central Bank is rationing US dollars by selling on average US$150 million a month, but it is also keeping a tight rein on the selling price of US dollars.
Is part of the dysfunctionality of the local foreign exchange market that the Central Bank wants to control the price of US dollars, while also controlling the marginal supply?
Disclosure: The author may have purchased US dollars on the illegal black market BEFORE May 2016