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Puerto Rico financial institutions no longer on list of money laundering risks

The U.S. Department of the Treasury has removed Puerto Rico’s International Banking Entities (IBEs), International Financial Entities (IFEs) and credit unions from its list of most significant “vulnerabilities and risks” in its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) policy, the Puerto Rico Office of the Commissioner of Financial Institutions (OCIF, in Spanish) announced.

The update is reflected in the Treasury’s National Money Laundering Risk Assessment 2024 report issued this month. The report no longer includes those Puerto Rican financial entities in the section dedicated to Entities not Subject to Comprehensive AML/CFT Requirements, the OCIF confirmed.

“It’s impossible to overstate the importance of this positive change in U.S. Treasury’s assessment of these Puerto Rican financial entities and, by extension, the island’s entire banking and financial system,” Puerto Rico Financial Institutions Commissioner Natalia Zequeira said.

“To have been included in Treasury’s list of most significant ‘vulnerabilities and risks’ related to the fight against money-laundering and the financing of terrorism-related crimes was a scar that affected all of us, even law-abiding banks and financial institutions, because of the bad reputation it generated,” she said.

The change in Treasury’s position on the matter, she added, “reflects a recognition of the improved oversight we have been conducting over the last three years to demand from all financial entities operating in Puerto Rico the strictest compliance with applicable laws and regulations.”

In its February 2022 report, Treasury had highlighted the risks represented of IBEs, IFEs and cooperatives from Puerto Rico in a section titled “Special Focus: Non-federally Chartered Puerto Rican Financial Entities,” noting they were not subject to federal regulation that requires federally chartered financial institutions to establish and maintain an anti-money laundering program.

However, a rule by Treasury’s Financial Crimes Enforcement Network made the requirement equally applicable to such Puerto Rican financial entities, effective March 15, 2021.

“[Those] Puerto Rican financial entities are now required to implement AML compliance programs and are subject to criminal and civil penalties if they fail to do so,” it stated.

Pierluisi signs banking laws
Furthermore, Gov. Pedro Pierluisi recently signed House bills 1699 and 1700 into law to strengthen the regulation and oversight of IBEs and IFEs in Puerto Rico.

The laws amend the International Banking Center Act (Act 52 of 1989) and the International Financial Center Act (Act 273 of 2012) “to modernize and strengthen both, make them stronger, more efficient, more resilient and better prepared to face changes in the markets and ensure that the international banking and financial entities in them are solvent and solid, operate competitively and responsibly and contribute to the island’s economic growth for the benefit of everyone in Puerto Rico,” Zequeira added.

Zequeira said that the new laws seek to demand “an even higher level of compliance” with applicable anti-money laundering laws and grant the OCIF greater discretion in permit or license issuance based on the financial responsibility, experience, character and aptitude of applicants.

Among other things, the laws introduce increased capitalization requirements, application fees, broadens the scope of the requisite investigation to include the economic capacity of shareholders and owners, and increases bail requirements, the minimum number of employees required and license fees. They include insolvency as a cause to deny the renovation of a license and broaden the commissioner’s authority to deny applications if a shareholder, director or proponent has been convicted of a felony, fraud, money-laundering, moral depravity or tax evasion, among other measures.

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This story was written by our staff based on a press release.

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