Volume II: Money Laundering and Financial Crimes
Introduction
Introduction
This year’s Volume II of the INCSR on Money Laundering highlights continuing threats and vulnerabilities posed by money laundering and terrorist financing to U.S. national security and to the stability of the global financial system. The 2008 Volume II also reflects the current and latest trends used by criminals and terrorists to launder, move, and store the fruits of their illicit activities. Some of these methodologies include: the continuing use of banks and money service businesses as gateways to the global financial system; bulk cash smuggling; trade-based money laundering and value transfer; legal entities such off-shore financial centers and international business centers; casinos and “virtual” casinos; and new payment methods sometimes also identified as “e-money.”
In 2007, we continue to see that increasingly sophisticated criminal organizations, terrorists, kleptocrats and other illicit actors seek out the weak links in global anti-money laundering and counter-terrorist finance countermeasures. This report also gives numerous examples of the determination of law enforcement to dismantle these illicit activities. As of year-end 2007, nine more jurisdictions have criminalized money laundering beyond drugs, bringing the total to 180 jurisdictions that have done so. Similarly, 19 more jurisdictions have criminalized terrorist financing, bringing the total to 137.
In assessing progress in both domestic and global anti-money laundering/counter-terrorist finance efforts, historical perspective is sometimes useful. We can measure incremental steps of progress, highlight continuing areas of concern, and learn how to better focus scarce training and assistance resources. A review also reinforces the importance of these efforts. For example, the International Monetary Fund (IMF) estimates the magnitude of money laundering is about 3-5 percent of the world’s Gross Domestic Product (GDP). Using 2007 World Bank data, global GDP is approximately $72.3 trillion. In other words, international money laundering can be estimated at between approximately $2.17 and $3.61 trillion a year, which is larger than the current U.S. budget. Ten years ago, the generally accepted estimate of international money laundering was in the range of $300-$500 billion. Although international economic growth accounts for a large percentage of the increase in international money laundering, there is also a greater understanding of new threats, methodologies, and diverse laundering systems. Throughout the 25 successive editions of this report, we have continued to see how, outside of crimes of passion, criminals are still primarily motivated by greed.
Volume II of the INCSR is a valuable tool to assist in our “look back.” For example, a number of worrisome laundering “trends and typologies” were included in the 1997 and 1998 editions of the Money Laundering and Financial Crimes Section. The entries make familiar reading today, particularly if compared to threats articulated in the U.S. interagency 2007 National Money Laundering Strategy.
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Antigua and Barbuda has comprehensive legislation in place to regulate its financial sector, but remains susceptible to money laundering because of its offshore financial sectors and Internet gaming industry. As with other countries in the region, illicit proceeds from the transshipment of narcotics are laundered in Antigua and Barbuda. Its offshore financial sector exacerbates Antigua and Barbuda’s vulnerability to money laundering.
In 2007, Antigua and Barbuda had 17 offshore banks, three offshore trusts, two offshore insurance companies, 3,255 international business corporations (IBCs), and 23 licensed Internet gaming companies. The International Business Corporations Act of 1982 (IBCA), as amended, is the governing legal framework for offshore businesses in Antigua and Barbuda. Bearer shares are permitted for international companies. However, the license application requires disclosure of the names and addresses of directors (who must be natural persons), the activities the corporation intends to conduct, the names of shareholders, and number of shares they will hold. Registered agents or service providers are required by law to know the names of beneficial owners. Failure to provide information or giving false information is punishable by a fine of U.S. $50,000. Offshore financial institutions are exempt from corporate income tax. All licensed institutions are required to have a physical presence, which means presence of at least a full-time senior officer and availability of all files and records. Shell companies are not permitted.
Antigua and Barbuda has five domestic casinos, which are required to incorporate as domestic corporations. Internet gaming companies are required to incorporate as IBCs, and as such are required to have a physical presence. Internet gaming sites are considered to have a physical presence when the primary servers and the key person are resident in Antigua and Barbuda. The Government of Antigua and Barbuda (GOAB) receives approximately U.S. $2.8 million per year from license fees and other charges related to the Internet gaming industry. A nominal free trade zone in the country seeks to attract investment in priority areas of the government. Casinos and sports book-wagering operations in Antigua and Barbuda’s free trade zone are supervised by the Office of National Drug Control and Money Laundering Policy (ONDCP), which serves as the GOAB’s financial intelligence unit (FIU), and the Directorate of Offshore Gaming (DOG), housed in the Financial Services Regulatory Commission (FSRC). The GOAB has adopted regulations for the licensing of interactive gaming and wagering, to address possible money laundering through client accounts of Internet gambling operations. The FSRC and DOG have also issued Internet gaming technical standards and guidelines. Internet gaming companies are required to submit quarterly and annual audited financial statements, enforce know-your-customer verification procedures, and maintain records relating to all gaming and financial transactions of each customer for six years. Suspicious activity reports from domestic and offshore gaming entities are sent to the ONDCP and FSRC.
The GOAB has not initiated a unified regulatory structure or uniform supervisory practices for its domestic and offshore banking sectors. Currently, the Eastern Caribbean Central Bank (ECCB) supervises Antigua and Barbuda’s domestic banking sector. The Registrar of Insurance supervises and examines domestic insurance agencies. The director of the ONDCP—who was designated in 2003 as the Supervisory Authority created under the Money Laundering Prevention Act of 1996 (MLPA)—supervises all financial institutions for compliance with suspicious transaction reporting requirements. The FSRC is responsible for the regulation and supervision of all institutions licensed under the IBCA, including offshore banking and all aspects of offshore gaming. This includes issuing licenses for IBCs, maintaining the register of all corporations, and conducting examinations and reviews of offshore financial institutions as well as some domestic financial entities, such as insurance companies and trusts.
In the offshore sector, the IBCA requires that a corporate entity submit all books, minutes, cash, securities, vouchers, customer identification, and customer account records. Financial institutions are required to maintain records for six years after an account is closed. The IBCA provides for disclosure of confidential information pursuant to a request by the director of the ONDCP, and pursuant to an order of a court of competent jurisdiction in Antigua and Barbuda. In addition, section 25 of the MLPA states that the provisions of this Act shall have effect notwithstanding any obligation as to secrecy or other restriction upon the disclosure of information imposed by any law or otherwise. The MLPA contains provisions for obtaining client and ownership information.
The MLPA, as amended, is the cornerstone of Antigua and Barbuda’s anti-money laundering legislation. The MLPA makes it an offense for any person to obtain, conceal, retain, manage, or invest illicit proceeds or bring such proceeds into Antigua and Barbuda if that person knows or has reason to suspect that they are derived directly or indirectly from any unlawful activity. The MLPA covers institutions defined under the Banking Act, IBCA, and the Financial Institutions (NonBanking) Act, which include offshore banks, IBCs, money service businesses, credit unions, building societies, trust businesses, casinos, Internet gaming companies, and sports betting companies. Intermediaries such as lawyers and accountants are not included in the MLPA. The MLPA requires reporting entities to report suspicious activity suspected to be related to money laundering, whether a transaction was completed or not. There is no reporting threshold imposed on banks and financial institutions. Internet gaming companies, however, are required by the Interactive Gaming and Interactive Wagering Regulations to report to the ONDCP all payouts over U.S. $25,000.
The Office of National Drug Control and Money Laundering Policy Act, 2003 establishes the ONDCP as the GOAB’s FIU. The ONDCP is an independent organization under the Ministry of National Security and is primarily responsible for the enforcement of the MLPA and for directing the GOAB’s anti-money laundering efforts in coordination with the FSRC. The ONDCP assumes the role and fulfills the responsibilities of the Supervisory Authority as described in the MLPA, which includes the supervision of all financial institutions with respect to filing suspicious transaction reports (STRs). Additionally, the ONDCP Act authorizes the director to appoint officers to investigate narcotics trafficking, fraud, money laundering, and terrorist financing offenses. Auditors of financial institutions review their compliance program and submit a report to the ONDCP for analysis and recommendations. The ONDCP has no direct access to databases of financial institutions. Domestically, the ONDCP has a memorandum of understanding with the FSRC and is expected to sign another with the ECCB. Other memoranda of understanding have been drafted to cover all aspects of the ONDCP’s relationship with the Royal Antigua and Barbuda Police Force, Customs, Immigration, and the Antigua and Barbuda Defense Force.
As of October 2007, the ONDCP had received 43 STRs (down from 52 in 2006), 11 of which were investigated. No arrests, prosecutions or convictions were reported by the GOAB in 2006 or 2007, although there were two arrests in 2005. Antigua and Barbuda has yet to prosecute a money laundering case.
Under the MLPA, a person entering or leaving the country is required to report to the ONDCP whether he or she is carrying U.S. $10,000 or more in cash or currency. In addition, all travelers are required to fill out a customs declaration form indicating if they are carrying in excess of U.S. $10,000 in cash or currency. If so, they may be subject to further questioning and possible search of their belongings by Customs officers. The GOAB Customs Department maintains statistics on cross-border cash reports and seizures for failure to report. This information is shared with the ONDCP and the police.
The Misuse of Drugs Act empowers the court to forfeit assets related to drug offenses. The ONDCP is responsible for tracing, seizing and freezing assets related to money laundering. The ONDCP has the ability to direct a financial institution to freeze property up to seven days, while it makes an application for a freeze order. If a charge is not filed or an application for civil forfeiture is not made within 30 days, the freeze order lapses. Convictions for a money laundering offense make it likely that an application for forfeiture will succeed unless the defendant can show that the property was acquired by legal means or the defendant’s business was legitimate. Forfeited assets are placed into the Forfeiture Fund and can be used by the ONDCP for any other purpose. Approximately 20 percent of forfeited assets go to the Consolidated Fund at the Treasury.
The GOAB is currently working on asset forfeiture agreements with other jurisdictions. The director of ONDCP, with Cabinet approval, may enter into agreements and arrangements with authorities of a foreign State, which covers matters relating to asset sharing. There are asset sharing agreements with certain countries, while others are negotiated on an ad hoc basis. The ONDCP is presently overseeing the drafting of MOUs with a number of countries in Central America to enhance asset tracing, freezing and seizure. An MOU has recently been concluded with Canada. Regardless of its own civil forfeiture laws, currently the GOAB can only provide forfeiture assistance in criminal forfeiture cases.
In the past few years, the GOAB has frozen approximately U.S. $6 million in Antigua and Barbuda financial institutions as a result of U.S. requests and has repatriated approximately U.S. $4 million. The GOAB has frozen, on its own initiative, over U.S. $90 million believed to be connected to money laundering cases still pending in the United States and other countries. The GOAB reported seizing U.S. $420,236 in 2006 and U.S. $14,753 in 2007.
The GOAB enacted the Prevention of Terrorism Act 2001, amended in 2005, to implement the UN conventions on terrorism. The Act empowers the ONDCP to nominate any entity as a “terrorist entity” and to seize and forfeit terrorist funds. The law covers any finances in any way related to terrorism. The Act also provides the authority for the seizure of property used in the commission of a terrorist act; seizure and restraint of property that has been, is being or may be used to commit a terrorism offence; forfeiture of property on conviction of a terrorism offence; and forfeiture of property owned or controlled by terrorists. The Act requires financial institutions to report every three months on whether or not they are in possession of any property owned or controlled by or on behalf of a terrorist group. In addition, financial institutions must report every transaction that is suspected to be related to the financing of terrorism to the ONDCP. The Attorney General may revoke or deny the registration of a charity or nonprofit organization if it is believed funds from the organization are being used for financing terrorism. The GOAB circulates lists of terrorists and terrorist entities to all financial institutions in Antigua and Barbuda. No known evidence of terrorist financing has been discovered in Antigua and Barbuda to date. The GOAB does not believe indigenous alternative remittance systems exist in country, and has not undertaken any specific initiatives focused on the misuse of charities and nonprofit entities
The GOAB continues its bilateral and multilateral cooperation in various criminal and civil investigations and prosecutions. As a result of such cooperation, both the United States and Canada have shared forfeited assets with the GOAB on several occasions. The amended Banking Act 2004 enables the ECCB to share information directly with foreign regulators if a memorandum of understanding is established. In 1999, a Mutual Legal Assistance Treaty (MLAT) and an extradition treaty with the United States entered into force. An extradition request related to a fraud and money laundering investigation remains pending under the treaty. The GOAB signed a Tax Information Exchange Agreement with the United States in December 2001 that allows the exchange of tax information between the two nations.
Antigua and Barbuda is a member of the Caribbean Financial Action Task Force (CFATF) and will undergo a mutual evaluation in early 2008. Antigua and Barbuda is also a member of the Organization of American States Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering (OAS/CICAD). The GOAB is a party to the 1988 UN Drug Convention, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption, the International Convention for the Suppression of the Financing of Terrorism, and the Inter-American Convention against Terrorism. The ONDCP is a member of the Egmont Group.
The Government of Antigua and Barbuda has taken steps to combat money laundering and terrorist financing by passing relevant legislation that applies to both domestic and offshore financial institutions, and establishing a thorough regulatory regime. However, the GOAB should implement and enforce all provisions of its anti-money laundering and counter-terrorist financing legislation, including the supervision of its offshore sector and gaming industry. Despite the comprehensive nature of the law, Antigua and Barbuda has yet to prosecute a money laundering case and there are few arrests or prosecutions. The GOAB should conduct more thorough investigations that could lead to higher numbers of arrests, prosecutions, and convictions. Law enforcement and customs authorities should be trained to recognize money laundering typologies that fall outside the formal financial sector. The GOAB should continue its international cooperation, particularly with regard to the timely sharing of statistics, information related to offshore institutions, and seized assets.
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Barbados
A transit country for illicit narcotics, Barbados remains vulnerable to money laundering, which primarily occurs in the formal banking system. Domestically, money laundering is largely drug-related and is appears to be derived from the trafficking of cocaine and marijuana. There is also evidence of Barbados being exploited in the layering stage of money laundering with funds originating abroad. The major source of these funds appears to be connected to fraud.
As of December 2007, there are six commercial banks in Barbados. The offshore sector includes 4,635 international business companies (IBCs), 164 exempt insurance companies and 55 qualified exempt insurance companies, seven mutual funds companies and one exempt mutual fund company, seven trust companies, seven finance companies, and 55 offshore banks. There are no free trade zones and no offshore casinos.
The International Business Companies Act (1992) provides for the general administration of IBCs. The Ministry of Industry and International Business vets and grants licenses to IBCs after applicants register with the Registrar of Corporate Affairs. The International Business (Miscellaneous Provisions) Act 2001 enhanced due diligence requirements for IBC license applications and renewals. Bearer shares are not permitted, and financial statements of IBCs are audited if total assets exceed $500,000.
The Central Bank regulates and supervises domestic and offshore banks, trust companies, and finance companies. The Ministry of Finance issues banking licenses after the Central Bank receives and reviews applications, and recommends applicants for licensing. The International Financial Services Act (IFSA) requires offshore applicants to disclose directors and shareholders names and addresses. Offshore banks must submit quarterly statements of assets and liabilities and annual balance sheets to the Central Bank. The Central Bank has the mandate to conduct on-site examinations of offshore banks. This allows the Central Bank to augment its off-site surveillance system of reviewing anti-money laundering policy documents and analyzing prudential returns. Additionally, permission must be obtained from the Central Bank to move currency abroad.
In 2007, the Central Bank revised the anti-money laundering guidelines for licensed financial institutions to reflect changes in international standards, and to include guidance on how licensees can fulfill their obligations in relation to combating the financing of terrorism. The guideline applies to all entities that are incorporated in Barbados and are licensed under the Financial Institutions Act (FIA) 1996 and the IFSA. The Central Bank conducts off-site surveillance and undertakes regular on-site examinations of licensees to assess compliance with anti-money laundering legislation and regulations. Licenses can be revoked by the Minister of Finance for noncompliance.
The Government of Barbados (GOB) criminalized drug money laundering through the Proceeds of Crime Act and the Drug Abuse (Prevention and Control) Act, 1990-14. The Money Laundering (Prevention and Control) Act 1998 (MLPCA) and subsequent amendments extends the offense of money laundering beyond drug-related crimes by criminalizing the laundering of proceeds from unlawful activities. Under the MLPCA, money laundering is punishable by a maximum of 25 years in prison and a maximum fine of $1 million. The MLPCA applies to a wide range of financial institutions, including domestic and offshore banks, IBCs, insurance companies, money remitters, investment services, and any other services of a financial nature. These institutions are required to identify their customers, cooperate with domestic law enforcement investigations, report and maintain records of all transactions exceeding $5,000 for a period of five years, and establish internal audit and compliance procedures. Financial institutions must also report suspicious transactions to the Anti-Money Laundering Authority (AMLA).
Established by the MLPCA, the AMLA supervises financial institutions’ compliance with the MLPCA, and issues training requirements and regulations for financial institutions. The AMLA is comprised of nine members including a chairperson, selected from the private sector; a deputy chairperson, from the University of the West Indies; the Solicitor General; the Commissioner of Police; the Commissioner of Inland Revenue; Comptroller of Customs; the Supervisor of Insurance; the Registrar of Corporate Affairs; and a representative of the Central Bank. The Barbados Financial Intelligence Unit (FIU) is the operational arm of the AMLA and carries out the AMLA’s supervisory function over financial institutions.
Established in 2000, the FIU is an independent agency housed in the office of the Attorney General. The FIU is responsible for receiving and analyzing suspicious transactions reports from financial institutions; instructing financial institutions to take steps that would facilitate an investigation; and conduct awareness training in regards to record and reporting obligations. There are no laws that prevent disclosure of information to relevant authorities and persons who report to the FIU are protected under the law.
Financial institutions are required to report transactions when the entity has reasonable grounds to suspect the transaction involves the proceeds of crime; involves the financing of terrorism; or is suspicious in nature. In cases where the FIU suspects a transaction involves the proceeds of crime, the FIU will forward the report for further investigation to the Commissioner of Police. As of June 30, 2007, the FIU had received 56 SARs; none were referred to the Commissioner of Police. Government entities and financial institutions are required to provide the FIU with information requested by the Director of FIU. The Royal Barbados Police force pursues all potential prosecutions.
The MLPCA provides only for criminal asset seizure and forfeiture. In 2001, the GOB amended legislation to shift the burden of proof to the accused to demonstrate that property in his or her possession or control is derived from a legitimate source. Absent such proof, the presumption is that such property was derived from the proceeds of crime. The law also enhances the GOB’s ability to freeze bank accounts and to prohibit transactions from suspect accounts. Legitimate businesses and other financial institutions are subject to criminal sanction, which can result in the termination of operating licenses. Tracing, seizing and freezing assets may be done by the FIU and the police. Freezing orders are usually granted for six months at a time after which they need to be reviewed. Frozen assets may be confiscated on application by the Director of Public Prosecutions and are paid into the National Consolidated Fund. No asset sharing law has been enacted, but bilateral treaties as well as the Mutual Assistance in Criminal Matters Act have provisions for asset tracing, freezing and seizure between countries.
The Anti-Terrorism Act of 2002 as well as provisions of the Money Laundering Financing of Terrorism (Prevention and Control) Act (MLFTA) criminalizes the financing of terrorism. The MLFTA is also designed to control bulk cash smuggling and the use of cash couriers. The GOB circulates the names of suspected terrorists and terrorist organizations listed on the United Nations 1267 Sanctions Committee’s Consolidated List and the list of Specially Designated Global Terrorists designated by the United States. In 2007, the GOB found no evidence of terrorist financing. The GOB has not taken any specific initiatives focused on alternative remittance systems or the misuse of charitable and nonprofit entities.
Barbados has bilateral tax treaties that eliminate or reduce double taxation with the United Kingdom, Canada, Finland, Norway, Sweden, Switzerland, and the United States. The United States and the GOB ratified amendments to its bilateral tax treaty in 2004. The treaty with Canada currently allows IBCs and offshore banking profits to be repatriated to Canada tax-free after paying a much lower tax in Barbados. A Mutual Legal Assistance Treaty (MLAT) and an extradition treaty between the United States and the GOB each entered into force in 2000.
Barbados is a member of the Caribbean Financial Action Task Force (CFATF) and underwent a mutual evaluation in December 2006. The report is anticipated to be finalized in the summer of 2008 and published electronically via CFATF’s website. Barbados is a member of the Offshore Group of Banking Supervisors, the Caribbean Regional Compliance Association, and the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. The FIU is a member of the Egmont Group. Barbados is a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism. The GOB has signed, but not yet ratified, the UN Convention against Transnational Organized Crime, the UN Convention against Corruption and the Inter-American Convention against Terrorism.
The Government of Barbados has taken a number of steps in recent years to strengthen its anti-money laundering and counter-terrorist financing legislation, and should continue to implement these reforms. The GOB should be more aggressive in conducting examinations of the financial sector and maintaining strict control over vetting and licensing of offshore entities. The GOB should consider adopting civil forfeiture and asset sharing legislation. The GOB should ensure adequate supervision of nonprofit organizations and charities. It should also work to improve information sharing between regulatory and enforcement agencies. Additionally, Barbados should continue to provide adequate resources to its law enforcement and prosecutorial personnel, to ensure mutual legal assistance treaty requests are efficiently processed. The GOB should also ratify the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.
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Dominica
The Commonwealth of Dominica initially sought to attract offshore dollars by offering a wide range of confidential financial services, low fees, and minimal government oversight. A rapid expansion of Dominica’s offshore sector without proper supervision made it attractive to international criminals and vulnerable to official corruption. In response to international criticism, Dominica enacted legislation to address many of the deficiencies in its anti-money laundering and counter-terrorist financing regime.
Dominica’s financial sector includes one offshore bank, approximately 12,787 international business companies (IBCs) (an increase from 11,452 in 2006), 20 insurance agencies, six money remitters, one building and loan society, and three operational Internet gaming companies. However, reports indicate more Internet gaming sites may exist. There are no free trade zones in Dominica.
Under Dominica’s Economic Citizenship Program, individuals can purchase citizenship and obtain passports for approximately U.S. $75,000 for an individual and U.S. $100,000 for a family of up to four persons. There is no residency requirement and passport holders may travel to Commonwealth countries without a visa. An application for economic citizenship must be made through a government approved local agent and requires a fee for due diligence or background check purposes. An in-person interview is also required. Dominica’s Economic Citizenship Program does not appear to be adequately regulated. In the past, subjects of United States criminal investigations have been identified as exploiting this program. In 2007, 15 individuals acquired economic citizenship.
Under common banking legislation enacted by its eight member jurisdictions, the Eastern Caribbean Central Bank (ECCB) acts as the primary supervisor and regulator of onshore banks in Dominica. The ECCB, in conjunction with the Financial Services Unit (FSU), supervises Dominica’s offshore bank. The ECCB assesses applications for offshore banking licenses, conducts due diligence checks on applicants, and provides a recommendation to the Minister of Finance. Offshore banks are required to have a physical presence and are forbidden from opening client accounts before verifying the beneficial owner of the bearer shares and/or companies. The Minister of Finance is required to seek advice from the ECCB before exercising his powers with respect to licensing and enforcement.
The ECCB also conducts on-site inspections for anti-money laundering compliance of onshore and offshore banks in Dominica. Inspections of offshore banks are conducted by the ECCB in collaboration with the FSU. The Offshore Banking (Amendment) Act No. 16 of 2000 prohibits the opening of anonymous accounts, prohibits IBCs from direct or indirect ownership of an offshore bank, and requires disclosure of beneficial owners and prior authorization to changes in beneficial ownership of banks. All offshore banks are required to have available for review on-site books and records of transactions. Per the Banking Act, which went into effect in Dominica in 2006, the ECCB is able to share information directly with foreign regulators through a memorandum of understanding (MOU).
The International Business Companies Act (IBCA) enacted in 1996 and amended in 2000, requires that bearer shares be kept with an approved fiduciary, who is required to maintain a register with the names and addresses of beneficial owners. Additional amendments to the Act in September 2001 require previously issued bearer shares to be registered. Dominica permits “shelf companies” or ready made offshore companies. Shelf companies have already been incorporated with a nominee director and nominee shareholder, and are for sale for immediate use. IBCs are not required to have a physical presence and are restricted from conducting local business activities. Internet gaming entities must register as IBCs.
The IBCA empowers the FSU to perform regulatory, investigatory, and enforcement functions over IBCs. The FSU also supervises, regulates, and inspects Dominica’s registered agents and conducts on-site visits to ensure that the companies are operating in compliance with requirements imposed by law. The FSU staff consists of a manager, two professional staff (supervisors/examiners), and one administrative assistant.
Amendments to the Money Laundering Prevention Act (MLPA) No. 20 of December 2000 adopted in 2001 criminalize the laundering of proceeds from any indictable offense. The law applies to narcotics-related money laundering and all hybrid or indictable offenses as predicate offenses for money laundering, whether committed in Dominica or elsewhere. The MLPA overrides secrecy provisions in other legislation and requires financial institutions to keep records of transactions for at least seven years. The MLPA also requires persons to report cross-border movements of currency that exceed U.S. $10,000 to the financial intelligence unit (FIU). The MLPA requires a wide range of financial institutions and businesses, including any offshore institutions, to report suspicious transactions simultaneously to the MLSA and the FIU. Additionally, financial institutions are required to report any transaction over U.S. $5,000.
The MLPA establishes the Money Laundering Supervisory Authority (MLSA) and authorizes it to inspect and supervise nonbank financial institutions and regulated businesses for compliance with anti-money laundering legislation. The MLSA is also responsible for developing anti-money laundering policies, issuing guidance notes, and conducting training. The MLSA consists of five members: a former bank manager, the FSU manager, the Deputy Commissioner of Police, a senior State Attorney, and the Deputy Comptroller of Customs.
The 2001 Money Laundering Prevention Regulations apply to all onshore and offshore financial institutions including banks, trusts, insurance companies, money transmitters, regulated businesses, and securities companies. The regulations specify know-your-customer requirements, record keeping, and suspicious transaction reporting procedures, and require compliance officers and training programs for financial institutions. The regulations require that the true identity of the beneficial interests in accounts be established, and mandate the verification of the nature of the business and the source of the funds of the account holders and beneficiaries. Reporting entities are protected by law with respect to their cooperation with law enforcement entities. Anti-Money Laundering Guidance Notes, also issued in 2001, provide further instructions for complying with the MLPA and provide examples of suspicious transactions to be reported to the MLSA and the FIU.
The FIU, established under the MLPA, became operational in August 2001. The FIU’s staff consists of a certified financial investigator and a director. The FIU analyzes suspicious transaction reports (STRs) and cross-border currency transactions reports, forwards appropriate information to the Director of Public Prosecutions, and works with foreign counterparts on financial crimes cases. The FIU has access to records of financial institutions and other government agencies with the exception of the Inland Revenue Division. In 2007, the FIU received 17 STRs. The FIU is closely examining the relationship between narcotics proceeds and money laundering in Dominican financial institutions. However, Dominica believes most of the money laundering cases under investigation involves external proceeds from fraudulent investment schemes.
The MLPA provides for the freezing of assets for seven days by the FIU, after which time a suspect must be charged with money laundering or the assets released. All assets that can be linked to any individual or legitimate business under investigation can be seized or forfeited, providing that the amount seized or forfeited does not exceed the total benefit gained by the subject from the crime committed. The court can order the confiscation of frozen assets. Pursuant to the MLPA, tangible confiscated assets such as vehicles or boats are forfeited to the state. Intangible assets such as cash or bank accounts are split between the forfeiture fund and the government-consolidated fund by 80 and 20 percent, respectively. In 2006, $55,481 was frozen but subsequently the matter was discontinued by the Director of Public Prosecutions and the funds returned. No statistics are currently available on the amount of assets frozen or seized in 2007.
There are no known convictions on money laundering charges in Dominica and there were no arrests or prosecutions for money laundering or terrorist financing in 2007. In 2006, a French national was arrested for attempting to obtain a line of credit through fraudulent wire transfers; he had been under investigation since 2004 for misappropriation of funds from Guadeloupe nationals. Since 2003, Dominica has collaborated closely with U.S. and foreign law enforcement agencies in a widespread money laundering case involving a European fraudulent investment scheme proceeds in one of the now closed offshore banks in Dominica.
In 2003, Dominica enacted the Suppression of Financing of Terrorism Act (No. 3 of 2003), which provides authority to identify, freeze, and seize terrorist assets, and to revoke the registration of charities providing resources to terrorists. The MLSA and the Office of the Attorney General supervise and examine financial institutions for compliance with anti-money laundering and counter-terrorist financing laws and regulations. The Government of the Commonwealth of Dominica (GOCD) circulates pertinent terrorist lists to financial institutions. To date, no accounts associated with terrorists or terrorist entities have been found in Dominica. There were no terrorist-related assets frozen, forfeited, or seized in 2007. The GOCD has not taken any specific initiatives focused on alternative remittance systems.
In 2000, a Mutual Legal Assistance Treaty between Dominica and the United States entered into force. However, in 2007, Dominica has not been cooperative in meeting mutual legal assistance requests. The GOCD also has a Tax Information Exchange Agreement with the United States but Dominica has not responded to more than two dozen requests from the USG for information regarding a potential money laundering case involving both countries. The MLPA authorizes the FIU to exchange information with foreign counterparts. Cash smuggling reports are not shared with foreign governments.
Dominica is a member of the Caribbean Financial Action Task Force (CFATF). The GOCD is also a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Dominica’s FIU became a member of the Egmont Group in June 2003. Dominica is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, and to the Inter-American Convention against Terrorism. The GOCD has neither signed nor ratified the UN Convention against Corruption or the UN Convention against Transnational Organized Crime.
The Government of the Commonwealth of Dominica should fully implement and enforce the provisions of its legislation and provide additional resources for regulating offshore entities, including immobilizing the bearer shares of current “shell companies”. It should stringently regulate Internet gaming entities. Dominica should take measures to update its anti-money laundering regulations and guidance notes to reflect current international standards. In addition, Dominica should conduct awareness training for financial institutions, specifically banks, to ensure their understanding and compliance of STR reporting requirements. The GOCD should either commit to engage in scrupulous due diligence on Economic Citizenship applicants, or eliminate the program. Per its agreements with the United States Government (USG), Dominica should make efforts to share information with the USG in an effective and timely manner as stipulated under the terms of its MLAT and Tax information Exchange Agreement. The GOCD should also become a party to the UN Convention against Corruption and the UN Convention against Transnational Organized Crime.
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Grenada
Grenada is not a regional financial center. As a transit location, money laundering in Grenada is primarily related to smuggling and drug trafficking. Illicit proceeds are typically laundered through a wide variety of businesses, as well as through the purchase of real estate, boats, jewelry, and cars.
As of December 2007, Grenada’s domestic financial sector is comprised of six commercial banks, 26 registered domestic insurance companies, two credit unions, and five money remitters. Grenada has one trust company and 1,580 international business companies (IBCs), a significant, if unexplained, decrease from the reported 6,000 IBCs in 2006. There are no casinos or Internet gaming sites operating in Grenada. There are no free trade zones in Grenada, although the Government of Grenada (GOG) has indicated that it may create one in the future. The GOG has repealed its economic citizenship legislation.
Bearer shares are not permitted for offshore banks. Registered agents are required by law to verify the identity of the beneficial owners of all shares. In addition, the International Companies Act requires registered agents to maintain records of the names and addresses of directors and beneficial owners of all shares. There is an U.S. $11,500 penalty and possible revocation of the registered agent’s license for failure to maintain records. Grenada has not enacted laws preventing disclosure of client and ownership information by domestic and offshore services companies to bank supervisors and law enforcement authorities.
The Grenada Authority for the Regulation of Financial Institutions (GARFIN) became operational in early 2007. The GARFIN was created to consolidate supervision of all nonbank financial institutions, and effectively replace the Grenada International Financial Services Authority (GIFSA). Institutions supervised by GARFIN include insurance companies, credit unions, offshore financial services, the building and loan society, money service businesses, and other such services. The Eastern Caribbean Central Bank (ECCB) retains supervision responsibility for Grenada’s commercial banks.
The Money Laundering Prevention Act (MLPA), enacted in 1999, and the Proceeds of Crime Act (POCA) No. 3 of 2003 criminalize money laundering in Grenada. Under the MLPA, the laundering of the proceeds of narcotics trafficking and all serious crimes is an offense. Under the POCA, the predicate offenses for money laundering extend to all criminal conduct, which includes illicit drug trafficking, trafficking of firearms, kidnapping, extortion, corruption, terrorism and its financing, and fraud. According to the POCA, a conviction on a predicate offense is not required to prove that certain goods are the proceeds of crime, and subsequently convict a person for laundering those proceeds. The POCA establishes a penalty three to ten years in prison and fines of $18,500 or more. This legislation applies to banks and nonbank financial institutions, as well as the offshore sector.
Established under the MLPA, the Supervisory Authority supervises the compliance of banks and nonbank financial institutions (including money remitters, stock exchange, insurance, casinos, precious gem dealers, real estate, lawyers, notaries, and accountants) with money laundering and terrorist financing laws and regulations. These institutions are required to know, record, and report the identity of customers engaging in significant transactions. This applies to large currency transactions over the threshold of $3,700. Records must be maintained for seven years. In addition, a reporting entity must monitor all complex, unusual or large business transactions, or unusual patterns of transactions, whether completed or not. Once a transaction is determined to be suspicious or potentially indicative of money laundering, the reporting entity must forward a suspicious transaction report (STR) to the Supervisory Authority within 14 days. Reporting individuals are protected by law with respect to their cooperation with law enforcement entities.
The Supervisory Authority issued its Anti-Money Laundering Guidelines in 2001. The guidelines direct financial institutions to maintain records, train staff, identify suspicious transactions, and designate reporting officers. The guidelines also provide examples to help institutions recognize and report suspicious transactions. The Supervisory Authority is authorized to conduct anti-money laundering inspections and investigations. The Supervisory Authority can also conduct investigations and inquiries on behalf of foreign counterparts and provide corresponding information. Financial institutions may be fined for not granting access to Supervisory Authority personnel.
In June 2001, the GOG established a police-style financial intelligence unit (FIU). The FIU is charged with receiving and analyzing suspicious transaction reports (STRs) from the Supervisory Authority, and with investigating alleged money laundering offenses. The FIU has access to the records and databases of all government entities and financial institutions and is empowered to request any documents it considers necessary to its investigations. From January to November 2007, the FIU received 25 STRs and investigations commenced for all STRs received. The FIU has the authority to exchange information with its foreign counterparts without a memorandum of understanding (MOU).
Two foreign nationals were arrested by GOG authorities for money laundering in October 2007. These individuals came to Grenada with a large number of fraudulent credit cards and over a short period of time, withdrew in excess of $40,000 from automatic teller machines (ATMs) from several local banks. Half of the amount stolen was sent out to a number of different destinations via a legitimate money remittance company, which agreed to freeze the transaction. Local authorities are working with the company to repatriate those funds. The two perpetrators were arrested and charged with money laundering and fraud by false pretense. The case is currently ongoing.
The FIU and the Director of Public Prosecution’s Office are responsible for tracing, seizing and freezing assets. Under current law, all assets can be seized, including legitimate businesses if they are used in the commission of a crime. The banking community cooperates with law enforcement efforts to trace funds and seize or freeze bank accounts. The time period for restraint of property is determined by the High Court. Presently, only criminal forfeiture is allowed by law. Proceeds from asset seizures and forfeitures can either be placed in the consolidated fund or the confiscated asset fund, which is supervised by the Supervisory Authority or the Cabinet for use in the development of law enforcement. The approximate dollar amount seized in the past year was U.S. $62,000, with approximately U.S. $22,000 forfeited. The Civil Forfeiture Bill, Cash Forfeiture Act, and Confiscation of the Proceeds of Crime Bill were introduced in 2006 and remain under discussion.
Grenada is not engaged in bilateral or multilateral negotiations with other governments to enhance asset tracing, freezing, and seizure. However, the GOG works actively with other governments to ensure tracing, freezing, and seizures take place, if and when necessary, regardless of the status of existing agreements.
The GOG regulates the cross-border movement of currency. However, there is no threshold requirement for currency reporting. Law enforcement and Customs officers have the powers to seize and detain cash that is imported or exported from Grenada. Cash seizure reports are shared between government agencies, particularly between Customs and the FIU.
The GOG criminalized terrorist financing through the Terrorism Act No. 5 2003. Grenada has the authority to identify, freeze, seize, and/or forfeit terrorist finance-related assets under the POCA and the Terrorism Act. The GOG circulates to the appropriate institutions the lists of individuals and entities that have been included on the UN 1267 Sanctions Committee’s consolidated list. There has been no known identified evidence of terrorist financing in Grenada. It is suspected that alternative remittance systems are used in Grenada, though none have been positively identified.
In 2003, the GOG passed the Exchange of Information Act No. 2, which strengthens Grenada’s ability to share information with foreign regulators. Grenada has a Mutual Legal Assistance Treaty (MLAT), Tax Information Exchange Agreement (TIEA) and an Extradition Treaty with the United States. The GOG cooperates fully with MLAT requests and responds rapidly to U.S. Government requests for information involving money laundering cases.
Grenada is a member of the Caribbean Financial Action Task Force (CFATF), and is expected to undergo a mutual evaluation in 2008. The GOG is also a member of the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. Grenada’s FIU is a member of the Egmont Group. Grenada is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, and the Inter-American Convention against Terrorism. The GOG has not yet signed the UN Convention against Corruption.
Although the Government of Grenada has strengthened the regulation and oversight of its financial sector, it must remain alert to potential abuses and must steadfastly implement the laws and regulations it has adopted. The GOG should also move forward in adopting civil forfeiture legislation, and establish mechanisms to identify and regulate alternative remittance systems. Law enforcement and customs authorities should initiate money laundering investigations based on regional smuggling. Grenada should also become a party to the UN Convention against Corruption.
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St. Kitts and Nevis
St. Kitts and Nevis is a federation composed of two islands in the Eastern Caribbean. The federation is at major risk for corruption and money laundering due to the high volume of narcotics trafficking activity through and around the island, and the presence of known traffickers on the islands. The growth of its offshore sector and an inadequately regulated economic citizenship program further contribute to the federation’s money laundering vulnerabilities.
The Ministry of Finance oversees St. Kitts and Nevis’ Citizenship by Investment Program. An individual may qualify for citizenship with a U.S. $350,000 minimum investment in real estate. In addition, the Government of St. Kitts and Nevis (GOSKN) created the Sugar Industry Diversification Foundation (SIDF) after the closure of the federation’s sugar industry as a special approved project for the purposes of citizenship by investment. To be eligible, an applicant must make a contribution between U.S. $200,000 to $400,000 (based on the number of the applicant’s dependents). The GOSKN requires applicants to make a source of funds declaration and provide evidence supporting the declaration. According to the GOSKN, the Ministry of Finance oversees the Citizenship Investment Program and has established a Citizenship Processing Unit to manage the screening and application process.
As a federation, there is anti-money laundering, counter-terrorist financing, and offshore legislation governing both St. Kitts and Nevis. However, each island has the authority to organize its own financial structure. With most of the offshore financial activity concentrated in Nevis, it has developed its own offshore legislation independently. As of October 2007, Nevis has one offshore bank, 90 licensed insurance companies, 33,165 international business companies (IBCs), 9,840 limited liability companies (LLCs), 3,684 international trusts, 47 multiform foundations (utilized for estate planning, charity financing, and special investment holding arrangements), and 3,684 trusts. Figures from 2007 indicate that the St. Kitts has 1,201 exempt companies, 257 exempt foundations, nine exempt partnerships, 23 exempt trusts, 51 captive insurance companies, one insurance manager, five trust service providers, 25 corporate service providers, two investment companies, and three licensed Internet gaming sites. Internet gaming entities must apply for a license as an IBC.
Bearer shares are permitted provided that bearer share certificates are retained in the safe custody of authorized persons or financial institutions authorized by the Minister of Finance as approved custodians. Legislation requires certain identifying information to be maintained about bearer certificates, including the name and address of the bearer of the certificate, as well as its beneficial owner. All authorized custodians are required by law to obtain proper documents on shareholders or beneficial owners before incorporating exempt or other offshore companies. This information is not publicly available and only available to the regulator and other authorized persons who have access to the information.
The GOSKN licenses offshore banks and businesses. The GOSKN states that extensive background checks on all proposed licensees are conducted by a third party on behalf of the GOSKN before a license is granted. By law, all offshore bank licensees are required to have a physical presence in the federation; shell banks are not permitted. The Eastern Caribbean Central Bank (ECCB) has direct responsibility for regulating and supervising the offshore bank in Nevis, as it does for the entire domestic sector of St. Kitts and Nevis, and for making recommendations regarding approval of offshore bank licenses. Under Section 10(8) of the Nevis Offshore Banking Ordinance, 1996 as amended in 2002, the ECCB is required to review all applications for licenses and report its findings to the Minister of Finance prior to consideration of the application.
The St. Kitts and Nevis Gaming Board is responsible for ensuring compliance of casinos. The Financial Services Commission (FSC) is the primary regulatory body for financial services in the federation and has the authority to cooperate with foreign counterparts on supervisory issues. Separate regulators for St. Kitts and Nevis carry out the actual supervision of institutions on behalf of the FSC including anti-money laundering examinations. Nevis seeks to consolidate its regulatory regime to a single unit as of January 2009, which would regulate all financial services businesses in Nevis. This would expand supervision to credit unions, local insurance companies, and money transfer agencies. Nevis also seeks to establish a risk-based supervision program and will conduct risk assessments on all licensees, as well as establish a risk based supervision schedule for onsite and offsite monitoring.
The Proceeds of Crime Act (POCA) No. 16 of 2000 criminalizes money laundering for serious offenses (defined to include more than drug offenses), and imposes penalties ranging from imprisonment to monetary fines. The POCA also overrides secrecy provisions that may have constituted obstacles to administrative and judicial authorities’ ability to access information with respect to account holders or beneficial owners. The POCA limits and monitors the international transportation of currency and monetary instruments. Any person importing into or exporting from St. Kitts and Nevis a value exceeding $10,000 or its equivalent in Eastern Caribbean Currency needs to declare it through Customs. In addition, the Customs Control and Management Act criminalizes bulk cash smuggling. Customs and police share cash smuggling reports.
The FSC has issued guidance notes on the prevention of money laundering, pursuant to the Anti-Money Laundering Regulations. Regulations require financial institutions to identify their customers, maintain a record of transactions for up to five years, report suspicious transactions, and establish anti-money laundering training programs. The Anti-Money Laundering (Amendment) Regulations No. 36, 2001 and relevant Guidance Notes are presently under revision to include institutions’ reporting obligations related to combating terrorist financing.
The Financial Intelligence Unit Act (FIUA) No. 15 of 2000 authorized the creation of a financial intelligence unit (FIU). The FIU began operations in 2001 and receives, collects, and investigates suspicious activity reports (SARs). All financial institutions, including nonbank financial institutions, are required by law to report suspicious transactions. Anti-money laundering regulations and the FIUA provide protection to reporting entities and employees, officers, owners, or representatives who forward suspicious reports to the FIU. The FIU has direct and indirect access to the records of other government entities via memorandums of understanding with domestic agencies. There is also indirect access to the records at financial institutions. The FIUA contains provisions for sharing information both domestically and with other foreign law enforcement agencies.
In 2007, the FIU received 96 SARs, almost double the number received in 2006. The FIU attributes this increase to efforts to increase awareness and educate entities of their reporting obligations. Of the 96 SARs, 40 were referred to law enforcement for appropriate action. The GOSKN did not report any action taken on these referrals. The Royal St. Kitts and Nevis Police Force is responsible for investigating financial crimes, but does not have adequate staff or training to effectively execute its mandate.
The Anti-Terrorism Act (ATA) No. 21 of 2002 provides the FIU and Director of Public Prosecutions with the authority to identify, freeze, and/or forfeit terrorist finance-related assets. However, the law only allows for criminal forfeiture. Civil forfeiture is considered unconstitutional. Under the POCA, legitimate businesses can be seized by the FIU if proven to be connected to money laundering activities. The FIU and the Director of Public Prosecutions are responsible for tracing, seizing, and freezing assets. The FIU can freeze an individual’s bank account for a period not exceeding five days in the absence of a court order. The freeze orders obtained via the court at times ascribe an expiration of six months or more. Also under the POCA, there is a forfeiture fund under the administration and control of the Financial Secretary in St. Kitts and the Permanent Secretary in the Ministry of Finance in Nevis. All monies and proceeds from the sale of property forfeited or confiscated are placed in the fund to be used for the purpose of anti-money laundering activities in both St. Kitts and Nevis. Between 2001 and 2006, the GOSKN froze approximately $2 million in assets, of which $1 million was forfeited. No assets were seized in 2007.
The ATA criminalizes terrorist financing. The ATA also implements various UN conventions against terrorism. The GOSKN circulates to its financial institutions the list of individuals and entities that have been included on the UN 1267 sanctions committee’s lists. The GOSKN has some existing controls that apply to alternative remittance systems, but has undertaken no initiatives that apply directly to the potential terrorist misuse of charitable and nonprofit entities. To date, no terrorist related funds have been identified.
St. Kitts and Nevis is a member of the Caribbean Financial Action Task Force (CFATF) and is expected to undergo a mutual evaluation in 2008. St. Kitts and Nevis’ Anti-Money Laundering/Combating Terrorist Financing Task Force will review the federation’s legal and administrative structures and seek to address weaknesses in the regime in preparation for the upcoming mutual evaluation. St. Kitts and Nevis is also a member of the Organization of American States Inter-American Drug Abuse Control Commission Experts Group to Control Money Laundering (OAS/CICAD). The FIU is a member of the Egmont Group. The GOSKN is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, and the UN Convention against Transnational Organized Crime. St. Kitts and Nevis is not a party to the UN Convention against Corruption, and has signed, but not ratified, the Inter-American Convention against Terrorism. A Mutual Legal Assistance Treaty (MLAT) between the GOSKN and the United States entered into force in 2000.
St. Kitts and Nevis should devote sufficient resources to effectively implement its anti-money laundering regime, giving particular attention to its offshore financial sector. St. Kitts and Nevis should determine the exact number of Internet gaming companies present on the islands and provide the necessary oversight of these entities. St. Kitts and Nevis should provide adequate resources and training to law enforcement agencies to effectively investigate money laundering cases. The GOSKN should also become a party to the UN Convention against Corruption.
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St. Lucia
St. Lucia has developed an offshore financial service center that is vulnerable to money laundering. Transshipment of narcotics (cocaine and marijuana), unregulated money remittance businesses, cash smuggling, and bank fraud, such as counterfeit U.S. checks and identity theft, are among the other primary vulnerabilities for money laundering in St. Lucia.
Currently, St. Lucia has six offshore banks, 2,851 international business companies (a 49 percent increase from 2006), six private mutual funds, two public mutual funds, 24 international insurance companies, 66 trust companies, three mutual fund administrators, 25 registered agents and five registered trustees (service providers),and 30 domestic financial institutions. Shell companies are not permitted. The Government of St. Lucia (GOSL) also has one free trade zone where investors may establish businesses and conduct trade and commerce within the free trade zone or between the free trade zone and foreign countries. There are no casinos or Internet gaming sites in St. Lucia and the GOSL does not plan to consider the establishment of gaming enterprises.
Money laundering in St. Lucia is a crime under the 1993 Proceeds of Crime Act and the Money Laundering (Prevention) Act (MLPA) of 2003, which superseded the Money Laundering (Prevention) Act of 1999 and the Financial Intelligence Authority Act of 2002. The MLPA criminalizes the laundering of proceeds with respect to numerous predicate offenses, including narcotics, abduction, blackmail, counterfeiting, extortion, firearms and narcotics trafficking, forgery, corruption, fraud, prostitution, trafficking in persons, tax evasion, terrorism, gambling and robbery. The MLPA mandates suspicious transaction reporting requirements and imposes record keeping requirements. In addition, the MLPA imposes a duty on financial institutions (which include banks, credit unions, building societies, trust companies, and financial services providers) to take reasonable measures to establish the identity of customers, and requires accounts to be maintained in the true name of the holder. It also requires an institution to take reasonable measures to identify the underlying beneficial owner when an agent, trustee or nominee operates an account. These obligations apply to domestic and offshore financial institutions, including credit unions, trust companies, and insurance companies. The Financial Services Supervision Unit has issued detailed guidance notes to implement the MLPA. Currently, steps are also being taken to implement legislation to regulate money remitters.
In 1999, the GOSL enacted a comprehensive inventory of offshore legislation, consisting of the International Business Companies (IBC) Act, the Registered Agent and Trustee Licensing Act, the International Trusts Act, the International Insurance Act, the Mutual Funds Act, and the International Banks Act. An IBC may be incorporated under the IBC Act. Only a person licensed under the Registered Agent and Trustee Licensing Act as a licensee may apply to the Registrar of IBCs to incorporate and register a company as an IBC. IBCs intending to engage in banking, insurance or mutual funds business may not be registered without the approval of the Minister responsible for international financial services. An IBC may be struck off the register on the grounds of carrying on business against the public interest.
The Committee on Financial Services, established in 2001, is designed to safeguard St. Lucia’s financial services sector. The Committee is composed of the Minister of Finance, the Attorney General, the Solicitor General, the Director of Public Prosecutions, the Director of Financial Services, the Registrar of Business Companies, the Commissioner of Police, the Deputy Permanent Secretary of the Ministry of Commerce, the police officer in charge of the Special Branch, the Comptroller of Inland Revenue, and others. The GOSL has implemented administrative procedures for an integrated regulatory unit to supervise the onshore and offshore financial institutions the GOSL currently regulates; however, the unit is not yet fully functional. The Eastern Caribbean Central Bank regulates St. Lucia’s domestic banking sector.
The MLPA authorizes the establishment of St. Lucia’s financial intelligence unit (FIU), which became operational in October 2003. The FIU is responsible for receiving, analyzing and disseminating suspicious transaction reports (STRs) from obligated financial institutions, and has regulatory authority to monitor compliance with anti-money laundering requirements. The FIU is also able to compel the production of information necessary to investigate possible offenses under the 1993 Proceeds of Crime Act and the MLPA. Failure to provide information to the FIU is a crime punishable by a fine or up to ten years imprisonment. The FIU has access to relevant records and databases of all St. Lucian government entities and financial institutions, and is permitted by law to share information with foreign FIUs. However, no formal agreement exists for sharing information domestically and with other FIUs. In 2007, the FIU received 39 suspicious transaction reports, two of which were referred to law enforcement agencies for further investigation. There are no recorded cases of money laundering within St. Lucia’s banking sector for 2007.
Customs laws criminalize cash smuggling, and customs officials are aware of cash courier problems. Cash smuggling reports are shared with the FIU, Police, Director of Public Prosecutions and the Attorney General.
Under current legislation, instruments of crime, such as conveyances, farms, and bank accounts, can be seized by the FIU. Substitute assets can also be seized. The legislation also applies to legitimate businesses if used to launder drug money, support terrorist activity, or are otherwise used in a crime. There is no legislation for civil forfeiture or shared narcotics assets. If the individual or business is not charged, then assets must be released within seven days. No assets were frozen in 2007.
The GOSL has not criminalized the financing of terrorism. However, St. Lucia circulates lists to financial institutions of terrorists and terrorist organizations on the UN 1267 Sanctions Committee’s consolidated list and the list of Specially Designated Global Terrorists designated by the United States pursuant to E.O 13224. The GOSL has the legislative power to freeze, seize and forfeit terrorist finance related assets. To date, no accounts associated with terrorists or terrorist entities have been found in St. Lucia. The GOSL has not taken any specific initiatives focused on the misuse of charitable and nonprofit entities.
The GOSL has been cooperative with the USG in financial crimes investigations. In February 2000, St. Lucia and the United States brought into force a Mutual Legal Assistance Treaty.
The GOSL is a party to the 1988 UN Drug Convention and has signed, but not yet ratified, the UN Convention against Transnational Organized Crime or the Inter-American Convention against Terrorism. The GOSL has not signed the UN International Convention for the Suppression of the Financing of Terrorism or the UN Convention against Corruption. St. Lucia is a member of the Caribbean Financial Action Task Force (CFATF) and the OAS Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. St. Lucia’s FIU is not a member of the Egmont Group.
In accordance with international standards, the Government of St. Lucia should become a party to the UN International Convention for the Suppression of the Financing of Terrorism the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption.
The GOSL should criminalize the financing of terrorism. It should also enhance and implement its anti-money laundering legislation and programs, including adopting civil forfeiture legislation and ensuring that its FIU meets the Egmont Group standards. The rapid expansion of the island’s offshore financial services sector should be counterbalanced by efforts that increase transparency. The GOSL also needs to improve its record of investigating, prosecuting, and sentencing money launderers and those involved in other financial crimes, as well as improving and implementing its asset seizure and forfeiture regime.
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St. Vincent and the Grenadines
St. Vincent and the Grenadines (SVG) remains vulnerable to money laundering and other financial crimes as a result of the rapid expansion and limited regulation of its offshore sector. Money laundering is principally affiliated with the production and trafficking of marijuana in SVG, as well as the trafficking of other narcotics from South America. Money laundering occurs in various financial institutions such as banks (domestic and offshore) and money remitters. There has been a slight increase in fraud and the use of counterfeit instruments over the last year, such as tendering counterfeit checks or cash.
The domestic financial sector includes two commercial banks, a development bank, two savings and loan banks, a building society, 16 insurance companies, 10 credit unions, and two money remitters. The offshore sector includes six offshore banks, 8,573 international business corporations (an increase of 918 from the previous year), 13 offshore insurance companies, 55 mutual funds, 27 registered agents, and 154 international trusts. There are no offshore casinos and no Internet gaming licenses have been issued. There are no free trade zones in SVG. The Government of St. Vincent and the Grenadines (GOSVG) eliminated its economic citizenship program in 2001.
No physical presence is required for offshore sector entities and businesses, with the exception of offshore banks. Nominee directors are not mandatory except when an international business corporation (IBC) is formed to carry on banking business. Bearer shares are permitted for IBCs but not for banks. The International Business Companies (Amendment) Act No.26 and 44 of 2002 was enacted to immobilize bearer shares and requires registration and custody of bearer share certificates by a registered agent who must also keep a record of each bearer certificate issued or deposited in its custody. The record must contain pertinent information relating to the company issuing the shares, the number of the share certificate, and identity of the beneficial owner. The Offshore Finance Inspector has the ability to access the name or title of a customer account and confidential information about the customer that is in the possession of a license.
The Eastern Caribbean Central Bank (ECCB) supervises SVG’s domestic banks. The International Banks (Amendment) Act No. 30 of 2002 provided the ECCB with enhanced authority to review and make recommendations regarding approval of offshore bank license applications, and to directly supervise the offshore banks in conjunction with the International Financial Services Authority (IFSA). The agreement includes provisions for joint on-site inspections to evaluate the financial soundness and anti-money laundering programs of offshore banks. The IFSA continues independently to supervise and regulate other offshore sector entities; however, its staff exercises only rudimentary controls over these institutions. The GOSVG has strengthened the structure and staffing of the IFSA to regulate offshore insurance and mutual funds. The Exchange of Information Act No. 29 of 2002 authorizes and facilitates the exchange of information among regulatory bodies.
The Proceeds of Crime and Money Laundering (Prevention) Act (PCMLPA) 2001 criminalizes money laundering, and requires financial institutions and other regulated businesses to report suspicious transactions. Reporting is required for all suspicious activities regardless of the transaction amount. In 2005, the PCMLPA was amended to expand the definition to include an all offences approach and extended the scope of sections relating to the seizure, detention, and forfeiture of cash. The Proceeds of Crime (Money Laundering) Regulations establish mandatory record-keeping rules and customer identification requirements. Financial institutions are required to maintain all records relating to transactions for a minimum of seven years.
Customers are required to complete a source of funds declaration for any cash transaction over 10,000 East Caribbean dollars (XCD) (approximately U.S. $3,800). It is not mandatory to report other noncash transactions exceeding 10,000 XCD. In 2003, the GOSVG reintroduced a customs declaration form to be completed by incoming travelers. Incoming travelers are required to declare currency over 10,000 XCD.
The Financial Intelligence Unit Act No. 38 of 2001 (FIU Act) establishes the GOSVG’s financial intelligence unit (FIU). Operational as of 2002, the FIU has the mandate to receive, analyze, and investigate financial intelligence, and prosecute money laundering cases. Suspicious activity related to drug trafficking is forwarded to the Narcotics Unit for further investigation, and activity related to fraud is forwarded to the Criminal Investigation Division. The FIU also has the ability to obtain production orders and stop/freeze orders. The FIU staff includes the Director, financial investigators, legal officers, and administrative officers. As of November 2007, the FIU received 159 suspicious activity reports for the year, and more than 750 since its inception. There was one conviction for money laundering in 2007.
The FIU is the main entity responsible for supervising and examining financial institutions for compliance with anti-money laundering and counter-terrorist financing laws and regulations. The function is also performed by the International Financial Services Authority (IFSA) and the ECCB. Money laundering controls also apply to nonbanking financial institutions and intermediaries, which the FIU monitors for compliance. Reporting entities are protected by law if fully cooperative with the FIU. An amendment to the FIU Act permits the sharing of information even at the investigative or intelligence stage. The FIU does not have direct access to the records or databases of other government entities. Generally, records are still kept in physical form and must be retrieved manually.
Existing anti-money laundering legislation allows for the criminal forfeiture of intangible as well as tangible property. Drug trafficking offenses may also be liable to forfeiture pursuant to the Drug (Prevention and Misuse) Act and the Criminal Code. There is no period of time during which the assets must be released. Frozen assets are confiscated by the FIU upon conviction of the defendant. Proceeds from asset seizures and forfeitures are placed by the FIU into the Confiscated Assets Fund established by the PCMLPA. Legitimate businesses can also be seized if used to launder drug money, support terrorist activity, or are otherwise used in a crime. A civil forfeiture bill has been drafted and is currently before the National Anti-Money Laundering Committee (NAMLC) for its approval. In 2007, approximately $304,380 was frozen or seized. Of this amount, approximately U.S. $69,889 was forfeited.
In 2006, the GOSVG enacted the United Nations (Anti-Terrorism Measures) (Amendment) (UNATMA) Act 2006, Act. No.13. The UNATMA criminalizes terrorist financing and imposes a legal obligation on financial institutions and relevant business to report suspicious transactions relating to terrorism and terrorist financing to the FIU. The GOSVG circulates lists of terrorists and terrorist entities to all financial institutions in SVG. To date, no accounts associated with terrorists have been found. The GOSVG has not undertaken any specific initiatives focused on the misuse of charitable and nonprofit entities.
An updated extradition treaty and a Mutual Legal Assistance Treaty between the United States and the GOSVG entered into force in 1999. The FIU executes the Mutual Legal Assistance Treaty requests. A member of the Caribbean Financial Action Task Force (CFATF), the GOSVG is scheduled to undergo its second mutual evaluation in early 2008. The GOSVG is also a member of the Organization of American States Inter-American Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering, and the FIU is a member of the Egmont Group. The GOSVG is a party to the 1988 UN Drug Convention and the UN International Convention for the Suppression of the Financing of Terrorism. The GOSVG has signed, but not yet ratified, the UN Convention against Transnational Organized Crime and the Inter-American Convention against Terrorism. The GOSVG has not signed the UN Convention against Corruption.
The Government of St. Vincent and the Grenadines has strengthened its anti-money laundering and counter-terrorist financing regime through legislation and the establishment of an effective FIU. The GOSVG should continue to ensure that this legislation is fully implemented, and that the FIU has access to all necessary information. The GOSVG should insist that the beneficial owners of IBCs are known and listed in a registry available to law enforcement, immobilize all bearer shares, and properly supervise and regulate all aspects of its offshore sector. The GOSVG should continue to provide training and devote resources to increase the cooperation among its regulatory, law enforcement, and FIU personnel in anti-money laundering and counter-terrorist financing operations and investigations. In addition, the GOSVG should consider computerizing its record keeping systems to ensure timely and effective information sharing. The GOSVG should pass civil forfeiture legislation and consider the utility of special investigative techniques. The GOSVG should also become a party to the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.
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2007 Human Rights Reports
International Religious Freedom Report 2007
