Financial Crime World

Dominica’s Financial System Faces Money Laundering and Terrorist Financing Risks

=====================================================

Dominica’s financial system has been identified as vulnerable to money laundering (ML) and terrorist financing (TF) risks. As a nation heavily reliant on its Citizenship by Investment Programme (CBI), it is crucial that the government takes immediate action to address these threats.

National Strategy Needed

A recent assessment commended Dominica’s strong commitment to national strategy and policy setting, but emphasized the need for a comprehensive ML/TF assessment of Non-Profit Organizations (NPOs), legal persons, Virtual Asset Service Providers (VASPs), cross-border wire transfers, and the CBI programme. The country must also update its Financial Institutions (FI) and Designated Non-Financial Businesses and Professions (DNFBP) sectoral risk assessments to enhance its understanding of these risks.

Key Recommendations

  • Conduct comprehensive ML/TF assessments for NPOs, legal persons, VASPs, cross-border wire transfers, and the CBI programme
  • Update FI and DNFBP sectoral risk assessments
  • Enhance national strategy and policy setting

CBI Programme Concerns

The CBI programme, which accounts for 30% of Dominica’s GDP, was found to have ML/TF and corruption risks that were not fully assessed. The government must address these concerns to ensure the integrity of this vital programme.

Key Challenges

  • ML/TF and corruption risks in the CBI programme
  • Lack of comprehensive assessments and monitoring

Terrorist Financing Risks Underscored

Dominica’s TF risks were deemed “low” by authorities, but a more thorough analysis revealed several vulnerabilities, including cross-border wire transfers, NPOs, and VASPs. The country has not prosecuted any TF cases, and its lack of national CFT policy hinders effective counter-terrorism efforts.

Key Findings

  • Vulnerabilities in cross-border wire transfers
  • ML/TF risks in NPOs and VASPs
  • Lack of national CFT policy and prosecution of TF cases

Central Authority Procedures Criticized

The Central Authority procedures for implementing the United Nations Security Council Resolution (UNSCR) 1267 and 1373 were found to be deficient. The Financial Services Union (FSU), as primary supervisory authority, must provide guidance on TF requirements to regulated entities and DNFBPs.

Key Recommendations

  • Update Central Authority procedures for implementing UNSCR 1267 and 1373
  • Provide guidance on TF requirements to regulated entities and DNFBPs

Supervisor’s Oversight Needed

The FSU was criticized for not providing specific training on TF risks and vulnerabilities in NPOs, a sector review of which is urgently needed. Substantial work remains to be done by the supervisor to implement a targeted approach, outreach, or oversight of this sector.

Key Challenges

  • Lack of training on TF risks and vulnerabilities
  • Urgent need for sector review of NPOs

Immediate Action Required

Dominica must take immediate action to address these ML/TF risks, including updating its legal framework, conducting comprehensive assessments, and implementing effective counter-terrorism measures. The country’s financial system depends on it.

Key Recommendations

  • Update legal framework to address ML/TF risks
  • Conduct comprehensive assessments of NPOs, legal persons, VASPs, cross-border wire transfers, and the CBI programme
  • Implement effective counter-terrorism measures