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Money Laundering Risk Assessment Reveals Vulnerabilities in Virgin Islands’ Financial Sector

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A recent assessment by the Financial Services Commission (FSC) and the Financial Investigation Agency (FIA) has identified significant vulnerabilities in the financial sector of the Virgin Islands, making it susceptible to money laundering (ML) activities. The report highlights that the use of virtual assets, such as cryptocurrencies, and legal persons and arrangements, poses a high risk of ML.

Vulnerabilities Identified

• Inadequate anti-money laundering (AML) programs within financial institutions (FIs)
• Lack of robust customer due diligence (CDD), beneficial ownership (BO), and transaction recordkeeping and reporting requirements
• The use of virtual assets provides anonymity and can be easily transmitted globally, making it a means to pay for contraband or illicit services and to disguise the origin of illicit proceeds

Assessment Findings

• While FIs have taken steps to mitigate the risk of ML, there are still inherent vulnerabilities in the system
• Compliance deficiencies within FIs contribute to the ML risk, with inadequate AML programs allowing suspicious transactions to occur without adequate screening or reporting
• The use of legal persons and arrangements, such as trusts and companies, by high-risk customers, including foreign politically exposed persons (PEPs), increases their vulnerability to be misused for ML purposes

Risk Assessment

• The overall ML risk assessment for the Virgin Islands was determined to be Medium-High, taking into account the impact of ML threats from both domestic and foreign criminality
• The FIA’s ML risk assessment of designated non-financial businesses and professions (DNFBPs) and non-profit organizations (NPOs) was also factored into this rating

Recommendations

• FIs should continue to strengthen their AML programs by:
  • Implementing robust CDD procedures
  • Conducting regular transaction monitoring
  • Reporting suspicious activities to the authorities
• The use of virtual assets should be closely monitored, and measures should be taken to prevent their misuse for ML purposes

Conclusion

The money laundering risk assessment highlights the importance of effective AML measures in preventing ML activities in the Virgin Islands’ financial sector. While there have been improvements in recent years, there are still vulnerabilities that need to be addressed. It is crucial that FIs and other stakeholders continue to work together to mitigate these risks and ensure the Territory’s financial system remains robust and secure.