Financial Crime World

FinCEN Issues Warning to US Banks: Enhanced Scrutiny Required for Transactions Involving Dominica

Date: July 2000 Advisory: Issue 16

The Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Department of the Treasury, has issued a warning to all banks and financial institutions in the country. The advisory urges heightened caution when dealing with financial transactions linked to the Commonwealth of Dominica.

Background

Dominica, a Caribbean island nation, has faced scrutiny due to several deficiencies in its legal, supervisory, and regulatory systems. With approximately 65,000 residents and a predominantly agricultural economy, Dominica has quickly grown its offshore financial services sector. The nation has chartered six offshore banks and approximately 5,800 International Business Companies (IBCs).

Concerns Regarding Dominica

FinCEN highlights several concerns that hinder effective anti-money laundering efforts in Dominica:

  • Limited definition of money laundering: Money laundering is only considered a crime if it involves narcotics-related offenses.
  • Inadequate supervision of offshore banks: Offshore banks receive no effective supervision.
  • Anonymous accounts: Offshore banks can issue anonymous accounts.
  • Lack of reporting of suspicious transactions: Offshore banks are not required to report suspicious transactions.
  • Bearer shares: IBCs can issue bearer shares.
  • Strict secrecy laws: Transactional information maintained by IBCs is protected by secrecy laws.

International Response

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

Despite some positive aspects of Dominican laws and regulations, US financial institutions should be cautious about transactions originating in or connected to Dominica. Any transaction involving entities organized or domiciled, or persons maintaining accounts, in Dominica should receive enhanced scrutiny.

Financial institutions must comply with the suspicious transaction reporting rules in the Bank Secrecy Act to determine if such transactions require reporting.

Offer of Technical Assistance

US officials stand ready to offer technical assistance to Dominican authorities to address the issues highlighted in the advisory.

For more information about FinCEN, contact the Office of Communications at FinCEN or visit their website at www.fincen.gov.