Financial Crime World

Virgin Islands’ Money Laundering Risk Assessment Reveals Medium-High Threat

A recent assessment by the Financial Services Commission (FSC) and the Financial Investigation Agency (FIA) has identified a medium-high risk of money laundering in the Virgin Islands. The report highlights several key factors that contribute to this threat.

Virtual Assets: A Growing Concern

The report notes that virtual assets, such as cryptocurrencies, have become a significant concern due to their ability to provide anonymity and facilitate global transactions. This increased use of virtual assets has created new opportunities for money launderers to exploit vulnerabilities in the financial system.

Compliance Deficiencies

Additionally, compliance deficiencies within financial institutions (FIs) increase the risk of money laundering, particularly among those with inadequate anti-money laundering (AML) programs. The report emphasizes the need for FIs to prioritize AML compliance and implement robust measures to prevent money laundering.

Vulnerabilities in Trust and Company Service Providers

The assessment also notes that the territory’s porous borders and high volume of foreign visitors make it vulnerable to criminal activity. Furthermore, the growing presence of high-risk customers, including foreign politically exposed persons (PEPs), increases the likelihood of money laundering.

Recommendations for TCSPs

Measures implemented by Trust and Company Service Providers (TCSPs) to mitigate risk are commendable, but inherent vulnerabilities remain. The report emphasizes the need for strong adherence to customer due diligence (CDD), beneficial ownership (BO), and transaction recordkeeping and reporting requirements.

Methodology and Findings

The assessment took into account data from various sources, including FSC prudential and statistical returns, supervisory and inspection data, enforcement data, and crime statistics. The results indicate that the overall ML risk to the Virgin Islands is medium-high, driven by threats emanating from both domestic and foreign criminality.

Comparison with Previous Assessment

In comparison to a previous assessment in 2016, the methodologies used differed, but the findings show some consistency in identifying medium to high levels of risk within each sector. The report emphasizes the need for continued vigilance and cooperation among stakeholders to combat this growing threat.

Risk Factors and Recommendations

Risk Factors:

  • Virtual assets providing anonymity and facilitating global transactions
  • Compliance deficiencies within financial institutions
  • Porous borders and high volume of foreign visitors
  • Growing presence of high-risk customers, including foreign PEPs
  • Inherent vulnerabilities in trust and company service providers

Recommendations:

  • Financial institutions should prioritize AML compliance and implement robust measures to prevent money laundering
  • Trust and company service providers should strengthen CDD, BO, and transaction recordkeeping and reporting requirements
  • The government should continue to monitor and address the growing presence of high-risk customers
  • Stakeholders should maintain cooperation and vigilance to combat money laundering threats