Puerto Rico Financial Institutions Emerge from Treasury’s “High-Risk” List After Compliance Improvements
The United States 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/combating the financing of terrorism (AML/CFT) policy. This change is reflected in the Treasury’s latest National Money Laundering Risk Assessment (NMLRA) 2024 report, released this month.
Background
In February 2022, the Treasury highlighted the risks posed by these Puerto Rican financial entities due to their lack of federal regulation and requirement for anti-money laundering programs. However, a rule issued by Treasury’s Financial Crimes Enforcement Network (FinCEN) made the requirement equally applicable to such entities, effective March 15, 2021.
Compliance Improvements
The change is seen as a recognition of the improved oversight conducted by Puerto Rico’s Office of the Commissioner of Financial Institutions (OCFI) over the past three years. The OCFI has been demanding strict compliance with applicable laws and regulations from all financial entities operating in Puerto Rico.
Improved Oversight
- The OCFI has been conducting regular audits and inspections to ensure compliance with anti-money laundering laws and regulations.
- Financial institutions have been required to implement effective anti-money laundering programs, including customer due diligence, ongoing monitoring, and reporting of suspicious transactions.
New Legislation
Governor Pedro Pierluisi recently signed into law administration legislation aimed at strengthening the regulation and oversight of IBEs and IFEs on the island. The new laws amend the International Banking Center Law (52-1989) and the International Financial Center Law (273-2012), making them more efficient, resilient, and better prepared to face changes in the markets.
Key Provisions
- Increased capitalization requirements for international banking and financial entities.
- Higher application fees for permits or licenses.
- Broader investigations and stricter penalties for non-compliance.
- Improved customer due diligence and ongoing monitoring of transactions.
Reaction
Puerto Rico Commissioner of Financial Institutions Natalia Zequeira welcomed the change in US Treasury’s assessment and the signing into law of the new legislation. “This positive change reflects a recognition of our improved oversight and our commitment to ensuring that all financial entities operating in Puerto Rico are subject to strict compliance with applicable laws and regulations,” she said.
Goals of New Legislation
- To modernize and strengthen the regulation of international banking and financial entities, making them more efficient, resilient, and competitive.
- To contribute to the Island’s economic growth and benefit all citizens of Puerto Rico.