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FinCEN Warns on Dominica's Money Laundering Risks

· 2 min read
Emily Brown
Forensic Auditor

Background​

  • The Financial Crimes Enforcement Network (FinCEN) issued a new advisory (Advisory Issue 16) in July 2023, cautioning financial institutions in the US to increase vigilance.
  • The advisory highlights the money laundering risks and deficiencies in Dominica's legislative, supervisory, and regulatory framework.

Dominica: An Overview​

  • Island nation located between the Caribbean Sea and the North Atlantic Ocean.
  • Population: approximately 65,000.
  • Economic backbone: agricultural exportation.
  • Rapidly growing offshore financial services sector.
  • Six offshore banks and approximately 5,800 International Business Companies (IBCs).

Problems with Dominica's Counter-Money Laundering Regime​

  1. Limited scope of money laundering offenses.
  2. Inadequate supervision of offshore banks.
  3. Anonymous accounts and lack of suspicious transaction reporting.
  4. Bearer shares and strict secrecy laws.

Reputation as a Non-Cooperative Jurisdiction​

  • Failed to meet the anti-money laundering standards set by the Financial Action Task Force on Money Laundering (FATF).
  • Increased risk for transactions with possibilities of being used for illegal purposes.

Positive Developments​

  • Supervision of domestic banking sector by Eastern Caribbean Central Bank (ECCB).
  • Information sharing in narcotics-trafficking cases.
  • Retaining account opening information and transaction records.

Advisory for US Financial Institutions​

  • Exercise increased vigilance when processing transactions from or passing through Dominica.
  • Assess suspicious transactions based on reporting rules under 31 C.F.R. 103.18.
  • Compliance with regulations for institutions not subject to specific reporting rules.

Contact Information for FinCEN​

Purpose of the Advisory​

  • Not intended to halt all business activities with Dominica.
  • Reporting suspicious transactions based on the advisory protects against reporting liability under 31 U.S.C. 5318(g)(2) and (g)(3).

US Technical Assistance for Dominican Authorities​

  • Prepared to help Dominica address deficiencies in their counter-money laundering systems.