Financial Crime World

St. Kitts and Nevis Cracks Down on Financial Compliance: FSRC Conducts Thorough Examinations of Regulated Businesses

St. Kitts and Nevis, the tropical paradise in the Caribbean, takes its anti-money laundering and countering financing of terrorism (AML/CFT) laws seriously. The Financial Services Regulatory Commission (FSRC) is responsible for regulating all regulated businesses in Nevis and ensuring their adherence to these crucial laws.

Adoption of Risk-based Supervision Framework (RBS)

In a proactive move, the St. Kitts and Nevis branches of the FSRC adopted a Risk-based Supervision Framework (RBS) in May 2015, later revised in June 2017. This framework applies to both on-site and off-site examinations, aimed at maintaining the highest standards of compliance for regulated entities in Nevis.

Importance of Comprehensive Examinations

According to section 4(2)(g) of the Financial Services Regulatory Commission Act, Cap 21.10 (FSRC Act), all regulated entities undergo regular on-site examinations to ensure adherence to the FSRC Act, AML/CFT legislation, and related enactments outlined in Schedule 1. These examinations are crucial for assessing a regulated entity’s financial health and prudent business management.

During these on-site examinations, FSRC-Nevis Branch examiners scrutinize various aspects of the regulated entities’ operations, including:

  1. Adherence to AML/CFT legislation
  2. Risk management practices

Customer Identification and Verification

Regulated entities in St. Kitts and Nevis are required to identify, verify, obtain, maintain, and monitor their customers and the beneficial owners (BOs) of legal persons (companies) and legal arrangements (trusts). To increase transparency, entities and trustees must make this information available to competent authorities and those conducting AML/CFT due diligence.

Know Your Customer (KYC) and Customer Due Diligence (CDD) Documents

During the examination process, FSRC examiners review specific customer files and citizenship by investment applications to ensure adequate KYC and CDD documents are obtained and updated as necessary. The required documents include:

  • A customer’s/BO’s passport or identity card
  • Two letters of reference – one from a banking institution, and the other from a recognized professional body such as a lawyer or accountant
  • Proof of address via a utility bill
  • Additional documents like customer risk assessments, source of funds and wealth declarations, and account opening files

Compliance with AML/CFT Legislation

Examiners also assess a regulated entity’s policies, practices, procedures, and internal controls for compliance with AML/CFT legislation, including:

  • Ongoing monitoring programs
  • Training schedules
  • Suspicious transaction reporting
  • Record-keeping systems
  • Retention period
  • Condition of records

Frequency of Future Monitoring

Based on the results of an on-site examination, the intensity and frequency of future monitoring are determined. Entities that operate satisfactorily require less frequent monitoring than those with weaknesses and deficiencies.

Conclusion

The FSRC’s meticulous on-site examinations play a pivotal role in maintaining the integrity and transparency of St. Kitts and Nevis’ financial sector. By adhering to these regulations, the nation continues to uphold an excellent reputation for financial compliance.