«St. Lucia St. Lucia has developed an offshore financial service center that could potentially make the island more vulnerable to money laundering and ...»
Money Laundering and Financial Crimes
St. Lucia has developed an offshore financial service center that could potentially make the island
more vulnerable to money laundering and other financial crimes. Currently, St. Lucia has four
offshore banks, 1,884 international business companies, 43 international trusts, 17 international
insurance companies, two money remitters, three mutual fund administrators, nine registered agents
and three registered trustees (service providers) and a total of 30 domestic financial institutions. St.
Lucia has a free trade zone. The Government of St. Lucia (GOSL) also is considering the establishment of gaming enterprises.
The 1993 Proceeds of Crime Act criminalizes money laundering with respect to narcotics. The Proceeds of Crime Act also provides for a voluntary system of reporting account information to the police or prosecutor when such information may be relevant to an investigation or prosecution. In addition, the Act requires financial institutions to retain information on new accounts and transactions for seven years. In September 2003, legislation was adopted that extends anti-money laundering compliance requirements to credit unions, money remitters and pawnbrokers, as well as strengthens criminal penalties for money laundering. Many of the 1993 Proceeds of Crime Act provisions are superseded by the 1999 Money Laundering (Prevention) Act (ML Prevention Act), which criminalizes the laundering of proceeds with respect to 15 prescribed offenses, including narcotics trafficking, corruption, fraud, terrorism, gambling and robbery. The ML Prevention Act mandates suspicious transaction reporting requirements and imposes record keeping requirements. In addition, the ML Prevention Act imposes a duty on financial institutions 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. In April 2000, the Financial Services Supervision Unit issued detailed guidance notes, entitled “Minimum Due Diligence Checks, to be conducted by Registered Agents and Trustees.” Pursuant to the ML Prevention Act, the Money Laundering (Prevention) Authority (the Authority) was established in early 2000. The Authority consists of five persons “who have sound knowledge of the law, banking or finance.” The Authority’s functions include receipt of suspicious transaction reports, subsequent investigation of the transactions, dissemination of information within (e.g., to the Director of Public Prosecutions) or outside of St. Lucia, and monitoring of compliance with the law. The ML Prevention Act imposes a duty on the Authority to cooperate with competent foreign authorities.
Assistance includes the provision of documents, testimony, conduct of examinations, execution of search and seizure orders, and the provision of information and evidentiary items. The Authority has a number of regulatory powers, including the right to enter the premises of a financial institution during normal working hours to inspect transaction records or copy relevant documentation, to issue guidelines to financial institutions, and to instruct a financial institution to facilitate an investigation by the Authority.
In 1999, the GOSL also 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. The registration process involves submission of the memorandum and articles of the company by the registered agent, payment of the prescribed fee and the Registrar’s determination of compliance with the requirements of the IBC Act. IBCs can be registered online through the GOSL’s web page. IBCs intending to engage in banking, insurance or mutual funds business may not be registered without the approval of the Minister responsible for
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international financial services. An IBC may be struck off the register on the grounds of carrying on business against the public interest.
The Financial Intelligence Authority Act No. 17 of 2002 authorizes the establishment of a Financial Intelligence Unit (FIU) for St. Lucia, which became operational in October 2003. Some functions of the Authority have been transferred to the new FIU. The FIU is able to compel the production of information necessary to investigate possible offenses under the 1993 Proceeds of Crime Act and the ML Prevention Act. Failure to provide information to the FIU is a crime, punishable by a fine or up to ten years imprisonment. The Financial Intelligence Authority Act permits the sharing of information obtained by the FIU with foreign FIUs. The Caribbean Anti-Money Laundering Program (CALP) has trained St. Lucia’s FIU personnel. In September 2003, legislation was adopted merging the Authority with the FIU. In 2005, the FIU received 85 suspicious transaction reports. There has been no money laundering convictions to date in St. Lucia. However, there is a money laundering case pending.
The GOSL established the Committee on Financial Services in 2001. The Committee, which meets monthly, 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 announced in 2003 its intention to form an integrated regulatory unit to supervise the onshore and offshore financial institutions the GOSL currently regulates. The Eastern Caribbean Central Bank regulates St. Lucia’s domestic banking sector. Counter-terrorism and counterterrorist financing legislation is pending before the St. Lucia Parliament. In 2002, St. Lucia signed the Inter-American Convention Against Terrorism, which includes counterterrorist financing provisions. St. Lucia circulates lists of terrorists and terrorist entities to all financial institutions. 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.
As a member of the Caribbean Financial Action Task Force (CFATF), St. Lucia underwent a First Round Mutual Evaluation immediately prior to the establishment of its offshore sector. St. Lucia underwent its Second Round evaluation in September 2003. St. Lucia is a member of the OAS InterAmerican Drug Abuse Control Commission (OAS/CICAD) Experts Group to Control Money Laundering. In February 2000, St. Lucia and the United States brought into force a Mutual Legal Assistance Treaty. St. Lucia also has a Tax Information Exchange Agreement with the United States.
The GOSL has been cooperative with the USG in financial crime investigations. St. Lucia is a party to the 1988 UN Drug Convention and, on September 26, 2001, signed, but has not yet ratified, the UN Convention against Transnational Organized Crime. The GOSL has not signed the UN International Convention for the Suppression of the Financing of Terrorism.
The Government of St. Lucia should become a party to the UN International Convention for the Suppression of the Financing of Terrorism and adopt counterterrorism financing legislation. St. Lucia should continue to enhance and implement its money laundering legislation and programs, including adopting civil forfeiture legislation.
St. Vincent and the Grenadines St. Vincent and the Grenadines remains vulnerable to money laundering, other financial crimes, and the facilitation of terrorist financing, as a result of the rapid expansion and inadequate regulation of its offshore sector. The offshore sector includes six offshore banks, 6,632 international business corporations, 14 offshore insurance companies, 29 mutual funds, 33 registered agents, and 114 international trusts. No physical presence is required for offshore financial institutions and businesses.
Nominee directors are not mandatory except where an international business corporation is formed to
Money Laundering and Financial Crimes
carry on banking business. Bearer shares are permitted for international business corporations but not for banks. The domestic sector comprises of two commercial banks, a development bank, two savings and loan banks, a building society, 13 insurance companies, 10 credit unions, and two money remitters. There are no free trade zones in St. Vincent and the Grenadines (SVG) nor have any Internet gaming licenses been issued.
The Eastern Caribbean Central Bank (ECCB) supervises SVG’s four domestic banks. Beginning in October 2001 with an administrative agreement, and finalized in the International Banks (Amendment) Act No. 30 of 2002, the Government of St. Vincent and the Grenadines (GOSVG) gave the ECCB increasing authority to review and make recommendations regarding approval of offshore bank license applications, and to directly supervise the offshore banks in cooperation with the GOSVG’s 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 alone continues to supervise and regulate the 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 by appointing five new members to the IFSA board. This brings the total to 12 staffers to regulate offshore insurance and mutual funds.
In June 2003, the Financial Action Task Force (FATF) recognized that the GOSVG, through enactment and implementation of appropriate legal reforms, had sufficiently addressed deficiencies identified by the FATF in 2000, and removed it from the list of Non-Cooperative Countries or Territories (NCCT). With SVG’s removal from the NCCT list, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) lifted its advisory, which had instructed all U.S. financial institutions to “give enhanced scrutiny” to all transactions involving St. Vincent and the Grenadines. The FATF encouraged the GOSVG to consider tightening provisions relating to the granting of exemptions from customer identification requirements.
Since July 2000, the GOSVG has passed substantial legislation, primarily the International Banks (Amendment) Act No. 7 of 2000 that deals with the authorization and regulation requirements for offshore banks as well as with the rules regarding the transfer of shares and beneficial interest. The GOSVG also enacted the International Banks (Amendment) Act of October 2000, which enables the Offshore Finance Inspector to have access to the name or title of a customer account and any other confidential information about the customer that is in the possession of a licensee. The GOSVG prepared a further amendment to the International Banks Act with a view to improving licensing procedures and better regulating the offshore banking sector.
The GOSVG enacted the Proceeds of Crime and Money Laundering (Prevention) Act in December 2001 and the Proceeds of Crime (Money Laundering) Regulations in January 2002. Subsequent amendments further strengthen provisions of the Act and the Regulations. Among other measures, the Act criminalizes money laundering and imposes on financial institutions and regulated businesses a requirement to report suspicious transactions likely to be related to money laundering or the proceeds of crime. The related regulations establish mandatory record keeping rules and limited customer identification/verification requirements. Financial institutions are required to maintain all records relating to transactions for a minimum of seven years. Reporting is required for all suspicious activities despite the transaction amount. Customers are required to complete a source of funds declaration for a cash transaction over $10,000 ECD ($3,703). However, it is not mandatory to report other transactions exceeding $10,000 ECD.
The GOSVG enacted the International Business Companies Amendment Act No. 26 of 2002, which became effective on May 27, 2002, to immobilize and register bearer shares. The GOSVG also revoked the Confidentiality Act and passed the Exchange of Information Act No. 29 of 2002 to authorize and facilitate the exchange of information, particularly among regulatory bodies. In April 2001, the GOSVG revoked its economic citizenship program, which provided the legal basis to sell
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citizenship and passports, although there were no reports of passports having been issued under the program.
The Financial Intelligence Unit Act No. 38 of 2001 (FIU Act) establishes the Financial Intelligence Unit (FIU) that began operation in May 2002. The FIU Act allows for the exchange of information with foreign FIUs. An amendment to the FIU Act permits the sharing of information even at the investigative or intelligence stage. The FIU has a staff of 14 and became a member of the Egmont Group in June 2003. As of November 2005, the FIU had received 104 suspicious activity reports for the year and almost 500 since its inception. In November 2004, the FIU began an anti-money laundering /counterterrorist finance training initiative at the financial institutions.
There have been no money laundering convictions; however, there were five money laundering cases pending in 2005. In 2005 the GOSVG froze approximately 500,254 ECD ($185,279) and seized $396,232 ECD ($146,753). In 2003, the GOSVG reintroduced a customs declaration form to be completed by incoming travelers. Incoming travelers are required to declare currency over approximately $3,703.