Financial Crime World

DOMINICA: Financial Crime Investigation Procedures Under Scrutiny

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The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued an advisory urging financial institutions in the US to exercise enhanced scrutiny over transactions involving Dominica, a Caribbean island nation with a rapidly expanding offshore financial sector.

Lack of Adequate Measures

According to FinCEN, Dominica’s legal and regulatory framework lacks adequate measures to prevent money laundering and terrorist financing. The country’s laws do not criminalize money laundering unless it is linked to narcotics-related offenses, and offshore banks are subject to little or no effective supervision.

Offshore Banking Concerns

  • Anonymous accounts can be issued by offshore banks in Dominica.
  • There is no requirement for offshore banks to report suspicious transactions.
  • International Business Companies (IBCs) in the country can issue bearer shares, making it difficult to trace ownership.

International Cooperation Deficiencies

Dominica’s lack of cooperation with international efforts to combat money laundering has led to its identification as a non-cooperative jurisdiction by the Financial Action Task Force (FATF). However, FinCEN notes that some positive steps have been taken, including:

Positive Efforts

  • Supervision of the domestic banking sector by the Eastern Caribbean Central Bank.
  • Cooperation in sharing information on narcotics-trafficking cases.

US Financial Institutions’ Responsibilities

Financial institutions operating in the US are advised to carefully examine transactions involving Dominica to determine if they require reporting under the suspicious transaction reporting rules contained in 31 C.F.R. 103.18.

Enhanced Scrutiny

  • The FinCEN advisory emphasizes that the need for enhanced scrutiny does not mean that US financial institutions should curtail legitimate business with Dominica.
  • Technical assistance will be provided by the Treasury Department to Dominican officials as they work to remedy the deficiencies in their counter-money laundering systems.

Reporting Requirements

Financial institutions subject to the suspicious transaction reporting rules are urged to carefully examine transactions involving Dominica and consider reporting them if necessary.