Puerto Rico’s Financial Entities Removed from US Treasury’s List of Money Laundering Risks
The United States Department of the Treasury has removed Puerto Rico’s International Banking Entities (IBEs), International Financial Entities (IFEs) and Cooperatives from its list of entities considered vulnerable to money laundering and terrorism financing. This change is reflected in the department’s latest National Money Laundering Risk Assessment report, released this month.
Background
According to the report, these financial entities were previously included in a section dedicated to entities not subject to comprehensive anti-money laundering (AML) and combating the financing of terrorism (CFT) requirements. However, a rule issued by the Financial Crimes Enforcement Network (FinCEN) in 2021 made AML compliance programs mandatory for these entities, effective March 15 of that year.
Positive Development
The removal of Puerto Rico’s financial entities from the list is seen as a positive development by local officials. “It’s impossible to overstate the importance of this change,” said Natalia Zequeira, Commissioner of Financial Institutions in Puerto Rico. “To have been included in Treasury’s list was a scar that affected all of us, even law-abiding banks and financial institutions, because of the bad reputation it generated.”
Recognition of Improved Oversight
The change is also seen as recognition of the improved oversight being conducted by the Office of the Commissioner of Financial Institutions (OCFI) to ensure compliance with applicable laws and regulations. The OCFI has been conducting regular inspections and investigations to ensure that all financial entities operating in Puerto Rico are adhering to strict AML and CFT requirements.
Legislative Developments
In a related development, Governor Pedro Pierluisi signed into law legislation aimed at strengthening the regulation and oversight of IBEs and IFEs on the island. The new laws:
- Amend the International Banking Center Law and the International Financial Center Law to modernize and strengthen them
- Make them more efficient, resilient, and better prepared to face changes in the markets
- Increase the level of compliance with applicable AML laws
- Raise the minimum capitalization requirements for IBEs and IFEs
- Broaden the scope of investigations into the economic capacity of shareholders and owners
- Increase bail requirements
- Provide for increased penalties for non-compliance
Conclusion
Local officials welcome the changes as a step forward in strengthening Puerto Rico’s financial system and enhancing its reputation globally. The removal of the island’s financial entities from the US Treasury’s list is seen as a significant achievement in the fight against money laundering and terrorism financing.