Financial Crime World

St. Kitts and Nevis: Financial Crime Concerns and Implications for U.S. Financial Institutions

The Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury issued a warning [FinCEN Advisory, Issue 26, July 2000] to financial institutions regarding dealings with financial transactions linked to St. Kitts and Nevis. This Caribbean Federation of approximately 40,000 residents has drawn global attention, and concerns, for its offshore financial sector.

Regulatory Inadequacies

The jurisdiction’s counter-money laundering regulations have been criticized for inadequacies. St. Kitts and Nevis criminalizes money laundering only when tied to illicit drug proceeds, with punishments limited to fines. Financially institutional transactions are not supervised effectively, and there is no requirement for identity verification or record-keeping from clients. Offshore entities in St. Kitts and Nevis are not obligated to report suspicious transactions, making it difficult for governmental investigative efforts.

FATF’s Label: Non-Cooperative

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

U.S. Financial Institutions’ Response

Despite the Federation’s efforts to address these issues and sign a mutual legal assistance treaty with the United States, U.S. financial institutions should remain cautious. The following actions are advised for financial institutions operating in the U.S.:

  1. Assess and investigate transactions: Thoroughly examine transactions originating from, routed through, or involving entities or individuals based in St. Kitts and Nevis.
  2. Suspicious transaction reports: Assess any transaction of $5,000 or more in accordance with the Bank Secrecy Act and the U.S. Treasury Department’s suspicious transaction reporting rules.
  3. Review obligations under relevant legislation: Financial institutions yet to be subject to specific suspicious transaction reporting rules should consider their obligations under other relevant legislation.

A Reminder of Robust Procedures

Instead of discouraging business with St. Kitts and Nevis, this advisory serves as a reminder of the importance of implementing robust know-your-customer and anti-money laundering procedures. U.S. officials are on standby to offer technical assistance as St. Kitts and Nevis strengthens its regulatory framework.

For more information, please visit the FinCEN website at http://www.fincen.gov.