Financial Crime World

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Compliance Issues Plague Banking Sector in Dominica, US Warns

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The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a stern warning to banks and financial institutions operating in the US to exercise heightened vigilance when dealing with transactions involving Dominica.

Warning Issued Due to Serious Compliance Issues

According to FinCEN, Dominica’s banking sector is plagued by systemic problems that make it vulnerable to money laundering. The island nation has rapidly expanded its offshore financial services, but lacks effective supervision and regulation, allowing criminals to exploit its systems.

Key Issues Identified

  • Money laundering is only a crime in Dominica if linked to narcotics-related offenses.
  • Offshore banks are subject to no effective supervision.
  • These institutions are not prohibited from issuing anonymous accounts.
  • There is no requirement to report suspicious transactions.
  • International Business Companies (IBCs) can issue bearer shares, and transactional information maintained by IBCs is protected by strict secrecy laws.

Consequences of Deficiencies

As a result of these deficiencies, Dominica has been identified as non-cooperative in the fight against money laundering by the Financial Action Task Force (FATF). Despite some positive aspects, including cooperation with the US on sharing information and mutual legal assistance, FinCEN remains concerned about the significant opportunities for money laundering and the protection of criminal proceeds.

Advice to Banks and Financial Institutions

In light of these findings, banks and financial institutions operating in the US are advised to give enhanced scrutiny to all transactions originating in or routed through Dominica, or involving entities organized or domiciled, or persons maintaining accounts, in Dominica. Specifically:

  • Carefully examine the facts relating to any transaction to determine if it requires reporting.
  • Give heightened attention to suspicious transactions.

Technical Assistance Offered

The issuance of this advisory does not mean that US financial institutions should curtail legitimate business with Dominica. In fact, FinCEN emphasizes that technical assistance will be provided to Dominican officials as they work to remedy the deficiencies in their counter-money laundering systems.