Puerto Rico’s Battle Against Financial Crimes: An Overview of AML/CTF Regulations and Reporting Obligations

Overview

As an unincorporated territory of the United States, Puerto Rico is subject to various federal laws aimed at combating money laundering and terrorist financing (ML/TF). This article provides an overview of the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations and reporting obligations for financial institutions operating in Puerto Rico. The Financial Crimes Enforcement Network (FinCEN) plays a significant role in overseeing these regulations.

The Role of the Financial Crimes Enforcement Network (FinCEN)

The Financial Crimes Enforcement Network (FinCEN) is a crucial component of the U.S. government’s financial intelligence network. It is tasked with protecting the financial system against illegal activities and promoting national security by analyzing and disseminating financial intelligence. FinCEN collects and maintains vast amounts of financial data, distributes it to law enforcement agencies, and develops international partnerships to combat ML/TF.

Regulations Governing Financial Institutions in Puerto Rico

Financial institutions in Puerto Rico must adhere to AML/CTF regulations, primarily the Bank Secrecy Act (BSA) and the USA PATRIOT Act.

The Bank Secrecy Act (BSA)

Passed in 1970, the BSA is the first comprehensive U.S. law intended to prevent money laundering and the financing of terrorism. The regulatory bodies enforcing the BSA can impose measures that ensure financial institutions implement rigorous AML/CTF programs with customer due diligence (CDD) and record-keeping requirements. These regulations have proven crucial in various criminal, tax, and regulatory investigations and prosecutions.

The USA PATRIOT Act

The USA PATRIOT Act, enacted in 2001, empowers federal authorities to conduct more extensive surveillance, access corporate records, and share information between agencies to target potential terrorist threats.

Compliance Measures for Financial Institutions

BSA Compliance Measures

Banks operating in Puerto Rico must comply with both the BSA and the USA PATRIOT Act. To do so, they must establish efficient compliance systems, implement monitoring mechanisms for unusual activity, and maintain thorough reporting procedures.

Record-keeping and Reporting

BSA compliance measures include thorough record-keeping, customer identification (CIP), customer due diligence (CDD), and ongoing suspicious activity monitoring. Banks are responsible for submitting regular reports, including currency transaction reports (CTRs) and reports of suspicious activity (SARs), to FinCEN.

Currency Transaction Reports (CTRs)

CTRs, detailing cash transactions exceeding $10,000 per day, must be filed within 15 days of the transaction date and maintained for five years.

Reports of Suspicious Activity (SARs)

SARs, filed for attempts to circumvent BSA reporting requirements, potential money laundering, or other illegal activities, must be filed no later than 30 days following the initial discovery of the relevant information.

MSBs and Currency Exchangers’ Reporting Obligations

MSBs and exchangers of foreign or domestic currency are also subject to specific reporting obligations.

Penalties for Non-compliance

Failure to comply with these obligations can result in significant penalties, including fines and legal repercussions. Therefore, financial institutions in Puerto Rico must prioritize AML/CTF regulations and reporting obligations to effectively combat financial crimes.