Warning Issued to US Banks: St. Kitts and Nevis’ Weak Laws Facilitate Money Laundering
Financial Crimes in St. Kitts and Nevis: A Growing Concern
A recent advisory issued by the Financial Crimes Enforcement Network (FinCEN) has alerted United States banks and financial institutions operating in St. Kitts and Nevis to exercise heightened scrutiny on all transactions originating from or routed through the country. The warning is a response to the federation’s weak laws and lack of effective supervision, which create significant opportunities for money laundering and other financial crimes.
Deficiencies in St. Kitts and Nevis’ Counter-Money Laundering Regime
The FinCEN advisory highlights several key deficiencies in St. Kitts and Nevis’ counter-money laundering regime, including:
- Limited scope of criminalization: Money laundering is only criminalized if it involves proceeds from narcotics trafficking.
- Inadequate supervision: Individuals with criminal records can hold management positions in offshore banks registered in Nevis.
- Lack of effective supervision mechanisms: Offshore companies registered in Nevis are not effectively supervised, and customers do not have to be verified or recorded.
Consequences: Non-Cooperative Status
As a result of these deficiencies, St. Kitts and Nevis has been identified by the Financial Action Task Force on Money Laundering (FATF) as non-cooperative in the fight against money laundering.
Corrective Measures: A Promise from the Prime Minister
Despite acknowledging these issues, the federation’s Prime Minister has indicated his government’s intention to take corrective action and address the problems noted by the FATF. However, the advisory notes that St. Kitts and Nevis’ commitment to bank secrecy and lack of effective supervision mechanisms increase the possibility that transactions involving offshore entities and accounts will be used for illegal purposes.
Enhanced Scrutiny Required
FinCEN advises U.S. banks and financial institutions operating in the country to give enhanced scrutiny to any transaction originating from or routed through St. Kitts and Nevis, or involving entities organized or domiciled, or persons maintaining accounts, in the federation. They should carefully examine the available facts relating to such transactions to determine if they require reporting under suspicious transaction rules.
No Impact on Legitimate Business
The advisory emphasizes that the issuance of this warning does not mean that U.S. financial institutions should curtail legitimate business with St. Kitts and Nevis. In fact, the Treasury Department will consider any report relating to a transaction described in this advisory to constitute a report of a suspicious transaction relevant to a possible violation of law or regulation.
Technical Assistance Available
The United States officials stand ready to provide technical assistance to St. Kitts and Nevis officials as they work to remedy the deficiencies in their counter-money laundering systems.