Financial Crime World

Financial Crime Prosecution Strategies in St. Kitts and Nevis: A Call for Enhanced Scrutiny by US Banks and Institutions

A recent advisory issued by the Financial Crimes Enforcement Network (FinCEN) has raised concerns about the financial activities of St. Kitts and Nevis, a Caribbean federation with a reputation for offshore banking. The advisory warns that the lack of effective anti-money laundering (AML) regulations and supervisory mechanisms in St. Kitts and Nevis creates significant opportunities for money laundering and other financial crimes.

The Issue at Hand

St. Kitts and Nevis has a population of approximately 40,000 people, with most of its financial activity concentrated on the island of Nevis. The country’s economy is heavily reliant on fees generated by the registration of offshore banks, with over 9,000 such companies registered in Nevis alone.

Systemic Problems Undermining AML Regime

FinCEN notes that St. Kitts and Nevis has a number of systemic problems that undermine its AML regime, including:

  • Lack of criminalization of money laundering beyond drug-related activities
  • Fines as the only punishment for drug money laundering
  • Individuals with criminal records are not prohibited from holding management positions in offshore banks
  • Offshore companies are not effectively supervised
  • Companies are not required to verify customer identities or maintain records relating to customer transactions
  • Financial institutions operating in St. Kitts and Nevis are not required to report suspicious transactions
  • Bank secrecy laws prohibit government authorities from obtaining financial information about customers’ identities and transactions

Consequences of AML Deficiencies

These deficiencies have led the Financial Action Task Force on Money Laundering (FATF) to identify St. Kitts and Nevis as a non-cooperative country in the fight against money laundering.

St. Kitts and Nevis’ Commitment to Corrective Action

Despite these issues, FinCEN notes that St. Kitts and Nevis has indicated an awareness of its AML shortcomings and has committed to taking corrective action. The country has also signed a mutual legal assistance treaty with the United States.

Advisory for US Banks and Financial Institutions

In light of these concerns, FinCEN is advising US banks and financial institutions to give enhanced scrutiny to all transactions involving St. Kitts and Nevis offshore entities and accounts. This includes:

  • Examining available facts relating to any such transaction to determine if it requires reporting under the Bank Secrecy Act or other applicable laws
  • Taking a closer look at transactions involving St. Kitts and Nevis to ensure that they are not being used for illegal purposes

Technical Assistance from US Officials

US officials have pledged to provide technical assistance to St. Kitts and Nevis as it works to address its AML deficiencies.

Conclusion

The advisory issued by FinCEN is a call for heightened vigilance in order to prevent and detect potential money laundering activities involving St. Kitts and Nevis offshore entities and accounts. US financial institutions are urged to take a closer look at transactions involving St. Kitts and Nevis to ensure that they are not being used for illegal purposes.