Financial Crime Examples in Dominica Raise Concerns for Global Banking Community
The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a warning to banks and financial institutions operating in the US to exercise enhanced scrutiny when dealing with transactions involving Dominica, an island nation in the Caribbean. The advisory highlights significant deficiencies in Dominica’s legal, supervisory, and regulatory systems that create opportunities for money laundering and other financial crimes.
Lack of Effective Supervision and Regulation
FinCEN notes that Dominica’s lack of effective supervision and regulation of offshore banks has led to concerns about the island nation’s ability to combat money laundering. Additionally, the country’s failure to report suspicious transactions creates an environment conducive to illegal activities.
Inadequate Laws and Regulations
Dominica’s laws do not require offshore banks to maintain records of account openings or transactions, making it difficult for authorities to track and trace illegal activities. The country’s commitment to secrecy in regulating banks and International Business Companies also raises concerns about the potential for illegal activities.
FATF Assessment
The Financial Action Task Force on Money Laundering (FATF), a 29-member international group dedicated to combating money laundering, has identified Dominica as non-cooperative in the fight against money laundering.
Positive Aspects
Despite some positive aspects of Dominica’s laws and regulations, such as its cooperation with US authorities in narcotics-trafficking cases and its requirement for financial institutions to retain account opening information and transaction records for a period of 7 years, the country’s overall system is deemed to be inadequate in preventing and detecting money laundering.
Advisory Recommendations
As a result, banks and financial institutions operating in the US are advised to:
- Give enhanced scrutiny to any transactions originating in or routed through Dominica, or involving entities organized or domiciled in the island nation.
- Carefully examine available facts relating to such transactions to determine if they require reporting under the Bank Secrecy Act.
Reporting Suspicious Transactions
The FinCEN advisory emphasizes that the issuance of this warning does not mean that US financial institutions should curtail legitimate business with Dominica. The Treasury Department will consider any report relating to a transaction described in the advisory to constitute a report of a suspicious transaction relevant to a possible violation of law or regulation.
In summary, the FinCEN advisory highlights the need for enhanced scrutiny and reporting requirements for transactions involving Dominica due to its inadequate legal, supervisory, and regulatory systems.