Press Releases

2007 International Narcotics Control Strategy Report (INCSR).

March 1, 2007

Drug Trafficking - Bahamas

I.  Summary

The Bahamas is a major transit country for cocaine and marijuana bound for the U.S. from South America and the Caribbean. The Government of the Commonwealth of The Bahamas (GCOB) cooperates closely with the USG to stop the flow of illegal drugs through its territory, to target Bahamian drug trafficking organizations, and to reduce the domestic demand for drugs within the Bahamian population. The GCOB extradited drug trafficker, Samuel “Ninety” Knowles, who had been fighting his extradition to the U.S in the courts since 2001.   The GCOB seized or froze nearly $2 million in assets derived from drug trafficking and money laundering.   A joint GCOB/USG investigation into narcotics smuggling at the airport resulted in the arrest of nine baggage handlers in the U.S. and The Bahamas.  The Bahamas is a party to the 1988 UN Drug Convention.

II. Status of Country

The Bahamas, a country of 700 islands and cays distributed over an area the size of California astride maritime and aerial routes between South American drug producing countries and the U.S., is an attractive location for drug transshipments of cocaine, marijuana and other illegal drugs.  Cultivation of marijuana on remote islands and cays appears to have increased in 2006.    The Bahamas is not a producer or transit point for drug precursor chemicals. In 2006, The Bahamas continued to participate as an active partner in "Operation Bahamas and Turks and Caicos" (OPBAT)--a multi-agency international drug interdiction effort established in 1982.

III. Country Actions Against Drugs in 2006

Policy Initiatives. In furtherance of its efforts to implement the 2004 National Anti-Drug Plan, in June 2006 the GCOB dedicated office space for the National Drug Secretariat but has yet to appoint its head.  The Cabinet approved draft precursor chemical control legislation and sent it to the Law Commission for reconciliation with existing laws.  The measure should be introduced into Parliament in early 2007.  The GCOB and the Government of Haiti began negotiations concerning the placement of Haitian National Police officers on Great Inagua Island to improve the collection of intelligence  from Haitian vessels passing through Bahamian waters.  

Accomplishments. In 2006, the Drug Enforcement Unit (DEU) of the Royal Bahamas Police Force (RBPF) cooperated closely with the U.S. and foreign law enforcement agencies on drug investigations.    In August 2006, the GCOB extradited accused drug kingpin, Samuel, “Ninety” Knowles to the U.S.  Knowles was named a drug kingpin by President Bush in 2001 and his extradition was a top USG priority.  During 2006, including OPBAT seizures, Bahamian authorities seized 1.6 metric tons of cocaine (double that seized in 2005) and over 140 metric tons of marijuana (a ten-fold increase over 2005).  The DEU arrested 1,399 persons on drug-related offenses and seized drug-related assets valued at nearly $2.5 million.

Law Enforcement Efforts.   During the year, the RBPF participated actively in OPBAT whose mission is to stop the flow of cocaine and marijuana through The Bahamas to the U.S.  U.S. Army and Coast Guard helicopters intercept maritime drug smugglers detected by Department of Homeland Security surveillance aircraft and on occasion, the Cuban Border Guard. Officers of the DEU and the Royal Turks and Caicos Islands Police fly on all missions and are responsible for making arrests and seizures.   Aerial reconnaissance identified marijuana fields under cultivation on remote islands and cays leading to record seizures of marijuana by the GCOB in 2006.  GCOB law enforcement officers have noted that Haitian traffickers are concealing their drugs in hidden compartments in sailing vessels and drug trafficking networks are commingled with illegal migrant smuggling organizations. Following an eight-month long RBPF/DEA investigation into narcotics smuggling at the airport, five baggage handlers were arrested in the U.S. and four others were arrested in The Bahamas.

To enhance the results of drug interdiction missions, The Royal Bahamas Defense Force (RBDF) provided vetted officers to the DEU in 2006.  The RBDF also agreed to position a DOD funded fast-boat in Great Inagua to provide OPBAT endgame capabilities.  The DEA in conjunction with the DEU and Bahamian Customs initiated a program in Great Inagua to enforce GCOB requirements that vessels entering Bahamian waters check-in with Bahamian Customs.  In September, the GCOB and the Government of Haiti reached an agreement in principle to provide Haitian National Police officers to work with Bahamian counterparts to interview Creole speaking crew members of vessels that are interdicted or that register with Bahamian Customs in Great Inagua.  During 2006, the RBDF assigned three ship-riders each month to Coast Guard Cutters. The ship-riders extend the capability of the U.S. Coast Guard into the territorial seas of The Bahamas.

Corruption. As a matter of  policy, The Bahamas does not encourage or facilitate illicit production or distribution of narcotic or psychotropic drugs or other controlled substances, nor the laundering of proceeds from illegal drug transactions.  No senior official in the GCOB was convicted of drug-related offenses in 2006. The RBPF anticorruption unit reported that during 2006 there were eight allegations of corruption brought against officers, three pending prosecutions and five ongoing investigations. The RBPF uses an internal committee to investigate allegations of corruption involving police officers instead of an independent entity.

Agreements and Treaties. The Bahamas is a party to the 1961 UN Single Convention as amended by the 1972 Protocol, and is party to the 1971 Convention on Psychotropic Substances, 1988 UN Drug Convention, and the 1990 U.S.-Bahamas-Turks and Caicos Island Memorandum of Understanding concerning Cooperation in the Fight Against Illicit Trafficking of Narcotic Drugs. The GCOB is also a party to the Inter-American Convention Against Corruption.

The U.S. and the Bahamas cooperate in law enforcement matters under an extradition treaty and a mutual legal assistance treaty (MLAT).  The MLAT facilitates the bilateral exchange of information and evidence for use in criminal proceedings. There are currently 30 U.S. extraditions pending in the Bahamas.  GCOB prosecutors pursue USG extradition requests vigorously and, at times, at considerable expense.  However, in the Bahamian justice system, defendants can appeal a magistrate’s decision, first domestically, and ultimately, to the Privy Council in London. This process often adds years to an extradition procedure.  In the case of Samuel Knowles the process took five years. The USG also has a Comprehensive Maritime Agreement (CMA) with The Bahamas, which entered into force in 2004 replacing a patchwork of disparate safety, security and law enforcement agreements.  Among its provisions, the CMA permits seamless cooperation in counterdrug and migrant interdiction operations in and around Bahamian territorial seas, including the use of shipriders and expedited boarding approval and procedures.

Cultivation and Production. 
The majority of marijuana seized in 2006 was in plant form grown by Jamaican nationals on remote islands and cays of the Bahamas.  OPBAT and the RBPF cooperate in identifying, seizing and destroying the marijuana.  Although there are no official estimates of marijuana hectarage in the islands, cultivation of marijuana by Jamaicans is a significant new trend. 

Drug Flow/Transit. The cocaine flow originates in South America and arrives in The Bahamas via go-fast boats, small commercial freighters, or small aircraft from Jamaica, Hispaniola and Venezuela.  According to USG law enforcement, sport fishing vessels and pleasure crafts then transport cocaine from The Bahamas to Florida, blending into the legitimate vessel traffic that moves daily between these locations. Larger go-fast and sport fishing vessels regularly transport between 1,000 to 3,000 pounds of marijuana shipments from Jamaica to The Bahamas. These shipments are moved to Florida in the same manner as cocaine. During 2006, law enforcement officials identified 35 suspicious go-fast type boats on Bahamian waters. In addition, there were 11 drug smuggling aircraft detected over Bahamian territory. Small amounts of drugs were found on individuals transiting through the international airports in Nassau and Grand Bahamas Island and the cruise ship ports.

In 2006 Bahamian law enforcement officials also identified shipments of drugs in Haitian sloops and coastal freighters.  According to the U.S. Joint Interagency Task Force – South, multi-ton cocaine shipments to the Turks and Caicos Islands and The Bahamas from Venezuela and Colombia took place during the year.  None of these shipments were successfully interdicted.   Illegal drugs have also been found in transiting cargo containers stationed at the Port Container facility in Freeport. DEA/OPBAT estimates that there are a twelve to fifteen major Bahamian drug trafficking organizations.

Domestic Programs. The quasi-governmental National Drug Council coordinates the demand reduction programs of the various governmental entities such as Sandilands Rehabilitation Center, and of NGO’s such as the Drug Action Service and The Bahamas Association for Social Health. Schools and youth organizations are the primary target of prevention/education program.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. The goals of USG assistance to The Bahamas are to dismantle drug trafficking organizations, stem the flow of illegal drugs through The Bahamas to the United States, and strengthen Bahamian law enforcement and judicial institutions to make them more effective and self-sufficient in combating drug trafficking and money laundering.

Bilateral Cooperation. During 2006, INL in coordination with the U.S. Embassy’s Narcotics Affairs Section (NAS), funded training, equipment, travel and technical assistance for a number of law enforcement and drug demand reduction officials. In 2006, the U.S. and the CGOB concluded negotiations to include the Freeport Container Port as part of the Department of Homeland Security’s Container Security Initiative (CSI).  NAS procured computer and other equipment to improve Bahamian law enforcement capacity to target trafficking organizations through better intelligence collection and more efficient interdiction operations.  NAS also provided funding to the National Drug Council and the Drug Action Service to extend their demand reduction education campaign throughout Bahamian public schools and to the Family Islands.

Road Ahead. The Bahamas will likely continue to be a preferred route for drug transshipment and other criminal activity because if its location and the expanse of its territorial area. We encourage the Bahamian Government to continue its strong commitment to joint counternarcotics efforts and its cooperative efforts to extradite drug traffickers to the U.S. The GCOB can further enhance its drug control efforts by  integrating Creole speakers into the DEU and work with HNP officers stationed in Great Inagua to develop information on Haitian drug traffickers transiting the Bahamas; as well as introducing precursor chemical control legislation to the Parliament.  The USG will continue to support RBPF efforts to convert seized boats for use in interdiction operations, and plans to assist the Bahamians in identifying innovative technologies to obtain important intelligence to thwart the flow of drugs.
 

 

Money Laundering - Bahamas

The Commonwealth of The Bahamas (GOB) is an important regional and offshore financial center. The financial services sector provides vital economic contribution to The Bahamas, accounting for approximately 15 percent of the country's gross domestic product. The U.S. dollar circulates freely in The Bahamas, and is accepted everywhere on par with the Bahamian dollar. Money laundering in The Bahamas is related to financial fraud and the proceeds of drug trafficking. Illicit proceeds from drug trafficking usually take the form of cash or are quickly converted into cash. The strengthening of anti-money laundering laws has made it increasingly difficult for most drug traffickers to deposit large sums of cash. As a result, drug traffickers store extremely large quantities of cash in security vaults at properties deemed to be safe houses. Other money laundering trends include the purchase of real estate, large vehicles and jewelry, and the processing of money through a complex national or international web of legitimate businesses and shell companies.

The Bahamas has two 24-hour casinos in Nassau, one in Freeport/Lucaya, and one in Great Exuma. Cruise ships that overnight in Nassau may operate casinos. Reportedly, there are over ten Internet gaming sites based in The Bahamas, although internet gambling is illegal in The Bahamas. Under Bahamian law, Bahamian residents are prohibited from gambling. Freeport is home to The Bahamas’ only free trade zone.  There are no indications that it is used to launder money.

The Central Bank of The Bahamas is responsible for the licensing, regulation, and supervision of banks and trust companies operating in The Bahamas. The Central Bank Act 2000 (CBA) and The Banks and Trust Companies Regulatory Act 2000 (BTCRA) enhanced the supervisory powers of the Central Bank and provides the Central Bank with extensive information gathering powers, including on-site inspection of banks and enhanced cooperation between overseas regulatory authorities and the Central Bank. The BTCRA expands the licensing criteria for banks and trust companies, enhances the supervisory powers of the Inspector of Banks and Trust Companies and enhances the role of the Central Bank’s Governor. These expanded rights including the right to deny licenses to banks or trust companies deemed unfit to transact business in The Bahamas. In 2001, the Central Bank enacted a physical presence requirement that means "managed banks" (those without a physical presence but which are represented by a registered agent such as a lawyer or another bank) must either establish a physical presence in The Bahamas (an office, separate communications links, and a resident director) or cease operations. The transition to full physical presence is complete. Some industry sources have suggested that this requirement has contributed to a decline in banks and trusts from 301 in 2003 to 250 at the end of 2005.

The International Business Companies Act 2000 and 2001 (Amendments) enacted provisions that abolish bearer shares, require international business companies (IBCs) to maintain a registered office in The Bahamas, and require a copy of the register of the names and addresses of the directors and officers and a copy of the shareholders register to be kept at the registered office. A copy of the register of directors and officers must also be filed with the Registrar General’s office. Only banks and trust companies licensed under the BTCRA and financial and corporate service providers licensed under the Financial Corporate Service Providers Act (FCSPA) may provide registration, management, administration, registered agent, registered office, nominee shareholders, and officers and directors for IBCs.

The Financial Transaction Reporting Act 2000 (FTRA) establishes "know your customer" (KYC) requirements. By December 31, 2001, financial institutions were obliged to verify the identities of all their existing account holders and of customers without an account who conduct transactions over $10,000. All new accounts established in 2001 or later have to be in compliance with KYC rules before they are opened. As of October 2006, the Central Bank reported full compliance with KYC requirements. All non-verified accounts have been frozen.

The FTRA requires financial and non-financial institutions to report suspicious transactions to the financial intelligence unit (FIU) when the institution suspects or has reason to believe that any transaction involves the proceeds of crime. Financial institutions are required by law to maintain records related to financial transactions for no less than five years. Established by the FIU Act 2000, The Bahamas FIU operates as an independent administrative body under the Office of the Attorney General, and is responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs). The FIU is also responsible for publishing guidelines to advise entities of their reporting obligations.  Presently, the FIU is in the process of revising its guidelines to incorporate terrorist financing reporting requirements, and is expected to publish the guidelines in early 2007.    
The FIU has the administrative power to issue an injunction to stop anyone from completing a transaction for a period of up to three days upon receipt of an STR. In 2005 there were nine cases of asset restraint as a result of suspicious transactions. From January to September 2006, the FIU received 124 STRs, of which 60 were being analyzed and 15 were forwarded to the police for investigation. If money laundering is suspected, the FIU will disseminate STRs to the Tracing and Forfeiture/Money Laundering Investigation Section (T&F/MLIS) of the Drug Enforcement Unit (DEU) of the Royal Bahamas Police Force for investigation and prosecution in collaboration with the Office of the Attorney General.

Between January 2000 and September 2006, 17 individuals were charged with money laundering by the T&F/MLIS, leading to seven convictions. Seven defendants await trail, while two defendants fled the jurisdiction prior to trial. As a matter of law, the Government of the Commonwealth of the Bahamas (GOB) seizes assets derived from international drug trade and money laundering. The banking community has cooperated with these efforts. During 2006, nearly two million dollars in cash and assets were seized or frozen. The seized items are in the custody of the GOB. Some are in the process of confiscation while some remain uncontested. Seized assets may be shared with other jurisdictions on a case-by-case basis.

In 2004, the Anti-Terrorism Act (ATA) was enacted to implement the provisions of the UN International Convention for the Suppression of the Financing of Terrorism. In addition to formally criminalizing terrorism and making it a predicate crime for money laundering, the law provides for the seizure and confiscation of terrorist assets, reporting of suspicious transactions related to terrorist financing, and strengthening of existing mechanisms for international cooperation. To date, there have been no suspicious transactions or prosecutions for violation of the ATA.

The Bahamas is a party to the UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism. The Bahamas has signed, but has not yet ratified, the UN Convention against Transnational Organized Crime and the Inter-American Convention against Terrorism. The GOB has neither signed nor ratified the UN Convention against Corruption. The Bahamas is a member of the Caribbean Financial Action Task Force (CFATF) and recently underwent a Mutual Evaluation in June 2006. The FIU has been an active participant within the Egmont Group since becoming a member in 2001, and is currently one of the two regional representatives for the Americas. The Bahamas has a Mutual Legal Assistance Treaty with the United States, which entered into force in 1990, and agreements with the United Kingdom and Canada. The Attorney General’s Office for International Affairs manages multilateral information exchange requests. In December 2004, the Bahamas signed an agreement for future information exchange with the U.S. Securities and Exchange Commission to ensure that requests can be completed in an efficient and timely manner. The Bahamas FIU has the ability to sign memoranda of understanding with other FIUs for the exchange of information.

The GOB has enacted substantial reforms to reduce its vulnerability to money laundering and terrorist financing. The GOB should continue to enhance its supervision of financial institutions, especially investment funds. The Bahamas should also provide adequate resources to its law enforcement and prosecutorial/judicial personnel to ensure that investigations and prosecutions are satisfactorily completed, and requests for international cooperation are efficiently processed.