Banks Warned to be Vigilant on Transactions Involving Saint Kitts and Nevis

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning banks and other financial institutions operating in the United States to give enhanced scrutiny to all financial transactions originating from or routed through the Federation of Saint Kitts and Nevis.

Deficiencies in Saint Kitts and Nevis’ Legal, Supervisory, and Regulatory Systems

According to FinCEN, the island nation’s legal, supervisory, and regulatory systems suffer from serious systemic problems that create opportunities for money laundering. The advisory cites a number of deficiencies, including:

• Inadequate Money Laundering Laws: Money laundering is only criminalized when it involves narcotics trafficking, and even then, it is punishable by fines only.
• Lax Oversight of Offshore Banks: Individuals with criminal records are not prohibited from holding management positions in offshore banks registered in Nevis.
• Poor Supervision of Offshore Companies: Offshore companies, including those that operate as financial institutions, are not effectively supervised or required to verify the identity of their customers or maintain records relating to customer identities.

Enhanced Scrutiny Required for Transactions Involving Saint Kitts and Nevis

Despite Saint Kitts and Nevis indicating an awareness of these deficiencies and signing a mutual legal assistance treaty with the United States, FinCEN believes that the island nation’s commitment to bank secrecy and lack of sufficient supervisory and enforcement mechanisms aimed at preventing and detecting money laundering increase the possibility that transactions involving offshore entities and accounts will be used for illegal purposes.

As a result, banks and other financial institutions operating in the United States should give enhanced scrutiny to any transaction originating from or routed through Saint Kitts and Nevis, or involving entities organized or domiciled, or persons maintaining accounts, in Saint Kitts and Nevis. A financial institution subject to suspicious transaction reporting rules should carefully examine the available facts relating to any such transaction to determine if it requires reporting.

Issuance of Advisory Does Not Mean Curtailment of Legitimate Business

The advisory emphasizes that the issuance of this warning does not mean that US financial institutions should curtail legitimate business with Saint Kitts and Nevis. The Treasury Department will consider any report relating to a transaction described in this Advisory to constitute a report of a suspicious transaction relevant to a possible violation of law or regulation, for purposes of the prohibitions against disclosure and protection from liability for reporting of suspicious transactions contained in 31 U.S.C. 5318(g)(2) and (g)(3).