Puerto Rico Takes Steps to Close Doors on Illicit Banking Activity
Strengthening Financial Sector and Removing High-Risk Label
In a significant move, Puerto Rico’s central government and legislature have taken steps to strengthen the island’s financial sector and remove it from the high-risk list in the US Department of the Treasury’s 2024 National Money Laundering Risk Assessment. This development comes after efforts by the Puerto Rico Office of the Commissioner of Financial Institutions (OCIF) to improve its regulatory and supervisory framework.
Regulatory Framework Improvements
According to OCIF Commissioner Natalia Zequeira, Puerto Rico is no longer considered a high-risk jurisdiction due to the agency’s focus on strengthening investigative units, supervising financial institutions, and taking action against those that do not comply with applicable laws and regulations. The passage of two new mandates, Acts 44 and 45 of 2024, aims to improve the regulatory framework for International Banking Entities (IBEs) and International Financial Entities (IFEs), combating money laundering in the process.
US Treasury’s Oversight and Support
The US Treasury’s Under Secretary for Terrorism and Financial Intelligence, Brian Nelson, met with Puerto Rico Governor Pedro Pierluisi and OCIF officials to discuss key illicit finance issues, including:
- Countering illicit fentanyl and narcotics trafficking
- Strengthening anti-money laundering and counter-terrorism regulations
- Promoting awareness of beneficial ownership reporting requirements
Nelson emphasized that the US Treasury’s oversight, including the 2024 National Money Laundering Risk Assessment, drives the types of reforms seen in Puerto Rico. He also commended the passage of Act 273 as an important reflection of these efforts.
Governor Pierluisi’s Commitment to Compliance
Governor Pierluisi expressed gratitude for Nelson’s support and commitment to ensuring a compliant banking system on the island. The governor emphasized that they will continue to work together to eliminate potential risks of terrorism and money laundering in Puerto Rico, protecting both their nation and consumers.
Previous Risks and Vulnerabilities
The island was previously identified as a risk by the US Treasury in 2022 due to its “cooperativas” and IBEs/IFE entities. The recent visit highlights the importance of addressing money laundering vulnerabilities in Puerto Rican financial entities, which are chartered and licensed by territorial authorities. These entities may present risks to the US financial system, particularly IBEs and IFEs with offshore banking business models.
FinCEN Exchange and Future Collaboration
The visit comes after Andrea Gacki, the Financial Crimes Enforcement Network’s (FinCEN) director, hosted the first-ever FinCEN Exchange in Puerto Rico in February. This exchange aimed to promote international cooperation and information sharing on anti-money laundering and counter-terrorism efforts. Nelson’s visit demonstrates the importance of continued collaboration between the US Treasury and Puerto Rican authorities to combat illicit banking activities.