Financial Crime World

Dominica’s Banking Industry Faces Compliance Challenges

Introduction

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning financial institutions operating in the United States about potential compliance issues with transactions involving the Commonwealth of Dominica.

Concerns Over Money Laundering Regulations

  • Limited Scope: Money laundering is only considered a crime if linked to narcotics-related offenses.
  • Ineffective Supervision: Offshore banks are subject to little or no effective supervision.
  • Anonymity in Transactions: IBCs can issue bearer shares, allowing for anonymity in transactions.
  • Strict Secrecy Laws: Transactional information maintained by IBCs is protected by strict secrecy laws.

FATF Identification as Non-Cooperative Jurisdiction

The Financial Action Task Force on Money Laundering (FATF) has identified Dominica as a non-cooperative jurisdiction in the fight against money laundering.

Positive Developments

  • The Eastern Caribbean Central Bank (ECCB) already supervises the domestic banking sector.
  • Responsibility for overseeing the offshore sector is expected to be vested with the ECCB.

Recommendations for Financial Institutions

To mitigate potential risks, financial institutions operating in the United States are advised to give enhanced scrutiny to all transactions originating from or routed through Dominica, or involving entities organized or domiciled in Dominica. This includes:

  • Carefully examining available facts relating to any such transaction to determine if it requires reporting under suspicious transaction rules or other applicable law.

Issuance of Warning

The advisory emphasizes that the issuance of this warning does not mean that U.S. financial institutions should curtail legitimate business with Dominica. The Treasury Department will consider any report related to a transaction described in this advisory as 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.

Technical Assistance

U.S. officials stand ready to provide technical assistance to Dominican officials as they work to address the deficiencies in Dominica’s counter-money laundering systems highlighted in this advisory.