Puerto Rico’s Financial Institutions Removed from US Treasury’s List of High-Risk Entities
A Positive Development for Puerto Rico’s Financial Sector
The United States Department of the Treasury has made a significant change in its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) policy, removing Puerto Rico’s International Banking Entities (IBEs), International Financial Entities (IFEs) and credit unions from its list of most significant “vulnerabilities and risks”. This development is reflected in the Treasury’s National Money Laundering Risk Assessment 2024 report, released this month.
Improved Oversight by the Puerto Rico Office of the Commissioner of Financial Institutions
According to the Puerto Rico Office of the Commissioner of Financial Institutions (OCIF), the removal from the list is a positive change that recognizes the improved oversight conducted by the agency over the past three years. OCIF Commissioner Natalia Zequeira praised the development, stating:
“This recognition reflects our commitment to demanding strict compliance with applicable laws and regulations from all financial entities operating in Puerto Rico.”
Anti-Money Laundering Compliance Programs Now Equally Applicable
The update comes after a rule issued by Treasury’s Financial Crimes Enforcement Network made anti-money laundering (AML) compliance programs equally applicable to Puerto Rican financial entities, effective March 15, 2021. This means that these entities must implement AML programs and are subject to criminal and civil penalties if they fail to do so.
Strengthening Regulations with New Laws
Governor Pedro Pierluisi recently signed two bills into law aimed at strengthening the regulation and oversight of IBEs and IFEs in Puerto Rico. The laws amend the International Banking Center Act and the International Financial Center Act, aiming to:
- Modernize and strengthen regulations
- Ensure solvency and solidity
- Promote competitive and responsible operations
Key Features of the New Laws
The new laws introduce:
- Increased capitalization requirements
- Application fees
- A broader scope of investigations into economic capacity of shareholders and owners
- Greater discretion for the OCIF in permit or license issuance based on financial responsibility, experience, character, and aptitude
A Major Step Forward for Puerto Rico’s Financial Institutions
The removal from the list is seen as a major step forward for Puerto Rico’s financial institutions, which had previously been included in Treasury’s report on most significant “vulnerabilities and risks” related to money laundering and terrorism financing. This development demonstrates the progress made by Puerto Rico in improving its AML/CFT framework and recognizing the importance of strict compliance with applicable laws and regulations.