Puerto Rico Financial Institutions Cleared of Money Laundering and Terrorism Risks
The U.S. Treasury Department has removed Puerto Rico’s International Banking Entities (IBEs), International Financial Entities (IFEs) and Cooperatives from its list of most significant vulnerabilities and risks related to anti-money laundering and combating the financing of terrorism (AML/CFT) policy.
Background
In February 2022, the Treasury Department’s previous report had identified these Puerto Rican financial entities as a risk due to their lack of federal regulation and oversight. However, a rule issued by the Financial Crimes Enforcement Network (FinCEN) in March 2021 made it clear that such entities are now required to implement AML compliance programs and face criminal and civil penalties if they fail to do so.
Positive Development
Puerto Rico Commissioner of Financial Institutions Natalia Zequeira hailed the change as a “positive development” that reflects recognition of the island’s improved oversight and regulation of financial institutions. She noted that the removal from the Treasury Department’s list is a major boost for the island’s banking and financial system, which had been tarnished by the inclusion on the list.
Strengthening Regulation and Oversight
Governor Pedro Pierluisi signed into law legislation aimed at strengthening the regulation and oversight of IBEs and IFEs. The new laws amend existing regulations to demand even higher levels of compliance with anti-money laundering laws and increase the discretion of the Office of the Commissioner of Financial Institutions in granting or denying permits and licenses.
Here are some key changes:
- Increased minimum capitalization requirements
- Higher application fees
- Broader investigations into the economic capacity of shareholders and owners
- Increased authority for the Commissioner to deny applications when certain individuals have been convicted of crimes
The Commissioner said that the new laws are designed to ensure that international banking and financial entities in Puerto Rico operate competitively and responsibly, contributing to the island’s economic growth.
Boosting Confidence and Growth
The removal of Puerto Rico’s financial institutions from the Treasury Department’s list is seen as a major victory for the island’s financial sector, which has been working to improve its AML/CFT compliance and regulation. The change is expected to boost confidence in the sector and pave the way for greater investment and growth in the island’s economy.