Financial Crimes Investigations in Dominica Raise Concerns

The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory warning banks and financial institutions operating in the US to exercise enhanced scrutiny over transactions involving Dominica, a small island nation in the Caribbean.

The Problem with Dominica’s Offshore Financial Sector

Dominica has rapidly expanded its offshore financial services sector in recent years, with six chartered offshore banks and approximately 5,800 International Business Companies (IBCs). However, FinCEN has identified significant systemic problems in Dominica’s counter-money laundering regime that create opportunities for criminal activity.

Lack of Effective Supervision

• Offshore banks are subject to no effective supervision and can issue anonymous accounts without reporting suspicious transactions.
• IBCs can also issue bearer shares, and transactional information is protected by strict secrecy laws.

FATF’s Concerns

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

FinCEN’s Recommendations

As a result, banks and other 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 Dominica. This includes:

• Examining available facts to determine if such transactions require reporting under suspicious transaction reporting rules.
• Exercising caution when dealing with Dominica-based entities and accounts.

Technical Assistance Offered

The Treasury Department is also willing to provide technical assistance to Dominican officials as they work to remedy the deficiencies in their counter-money laundering systems.

Full Text of FinCEN Advisory 16

The full text of FinCEN Advisory 16 can be found on the FinCEN website at http://www.fincen.gov.