Title: FinCEN Warns US Banks: Exercise Caution with Financial Transactions Linked to Dominica

Date: July 2000

The Financial Crimes Enforcement Network (FinCEN), a branch of the United States Department of the Treasury, has issued a stern advisory for all banks and financial institutions in the US, urging them to exercise heightened caution when dealing with financial transactions linked to the Commonwealth of Dominica.

Background

With approximately 65,000 residents and a predominantly agricultural economy, Dominica is a picturesque Caribbean island nation that has been under scrutiny due to several deficiencies in its legal, supervisory, and regulatory systems. These concerns have arisen as the island nation has rapidly expanded its offshore financial services sector. It now boasts six offshore banks and approximately 5,800 International Business Companies (IBCs).

Limitations and Concerns

FinCEN has identified numerous concerns that hinder effective anti-money laundering efforts in Dominica. These issues include:

1. Limited definition of money laundering: Money laundering is only defined in relation to narcotics-related offenses.
2. Inadequate supervision of offshore banks: These banks receive no effective supervision.
3. Anonymous accounts: Offshore banks are able to issue anonymous accounts.
4. Lack of reporting of suspicious transactions.
5. Bearer shares: IBCs can issue bearer shares, making transactional information difficult to verify.
6. Strict secrecy laws: Transactional information maintained by IBCs is protected by strict secrecy laws.

International Action

The Financial Action Task Force on Money Laundering (FATF) has labeled Dominica a non-cooperative jurisdiction due to these and other deficiencies.

Recommendations for US Financial Institutions

US financial institutions should take a cautious approach when dealing with transactions originating in or connected to Dominica. These transactions may pose increased money laundering and financing terrorism risks. Entities organized or domiciled in, and individuals maintaining accounts, in Dominica warrant enhanced scrutiny.

Compliance with Regulations

Financial institutions must adhere to the suspicious transaction reporting rules set forth in the Bank Secrecy Act to determine whether such transactions require reporting.

Offer of Technical Assistance

US officials have announced their readiness to offer technical assistance to Dominican authorities to address the issues highlighted in the advisory and improve the country’s financial regulatory framework.

For more information, please contact FinCEN’s Office of Communications or visit their website at www.fincen.gov.