Virgin Islands Faces Increased Money Laundering Threats
A Critical Assessment of the Territory’s Efforts to Combat Money Laundering
The Virgin Islands (VI) has been identified as facing significant vulnerabilities in its efforts to combat money laundering (ML). A recent assessment highlights several areas of concern, including:
- Sub-optimal levels of resourcing
- Lack of proper policies and procedures
- Inefficient data maintenance
- Insufficient training for authorities
National Operational Framework Lacking Resources
The VI’s national operational framework is also lacking in resources, making it challenging for authorities to effectively mitigate ML risks. This lack of resources is a significant obstacle in the territory’s efforts to combat money laundering.
Complex Financial System Presents Vulnerabilities
The Virgin Islands’ complex financial system, which includes legal persons and arrangements, makes it vulnerable to criminal misuse. The use of emerging products and technologies such as:
- Gaming and betting
- Cannabis production
- Decentralized finance (DeFi) instruments
- Hawala-style systems
poses a significant ML risk. These systems can facilitate anonymous transactions and make it difficult for authorities to track financial flows.
Banking Industry Vulnerable
The banking industry in the Virgin Islands is particularly vulnerable due to its small size and reliance on face-to-face transactions. While most customers are resident in the territory, some banks provide services to non-resident individuals and entities, which increases the risk of ML.
Alternative Methods for Anonymous Transactions
The introduction of a 7% transaction levy on money service businesses (MSBs) has led to a decline in transactions processed by MSBs. However, intelligence suggests that individuals may be using alternative methods such as:
- Mobile phone apps linked to debit/credit cards and bank accounts
- Unregulated digital currencies
to transfer funds anonymously.
Immediate Action Required
To combat these threats, the VI must take immediate action to address its vulnerabilities. This includes:
- Increasing resources for ML enforcement
- Implementing effective policies and procedures
- Improving data maintenance and analysis
- Providing sufficient training for authorities
The territory must also work to regulate emerging products and technologies and strengthen its financial sector.
Elevated ML Risk
The ML risk is elevated in the VI due to its small size, complex financial system, and lack of resources. It is essential that the territory takes a proactive approach to mitigate these risks and prevent the misuse of its financial system for criminal activities.
By taking immediate action to address these vulnerabilities, the Virgin Islands can reduce the risk of money laundering and maintain a strong and secure financial system.