Article about Money Laundering published in the
local press end of March 2000

As a new entrant into the International Financial Services Industry St. Lucia has taken a proactive stance to preventing money laundering. In fact in Dr. Kenny Anthony’s welcome to the industry the government’s position is clearly laid out:

"The launch of St. Lucia into the International Financial Services industry has come after years of deliberation and planning. At all times the Government has been concerned with the need to make an effective entry into the industry while at the same time ensuring that there is a legislative and regulatory framework that will facilitate international business and preserve our precious reputation."

The Legislative Framework and the FATF Forty Recommendations.

There are three significant regulatory acts that apply to the operation of all entities formed under our financial services legislation:

i) the Money Laundering (Prevention) Act,

ii) the International Business Companies Act. &

iii) the Registered Agent and Trustee Licensing Act.



The Money Laundering (Prevention) Act

Our Money Laundering Act has the following crucial sections that meet the accepted international standards outlined in the FATF’s forty (40) recommendations and strongly emphasise the know your customer principle:

1. Broadly defines financial institutions to include local banking institutions, insurance companies and any entity that performs international financial services under the international financial services legislation. In addition, trust companies, finance companies or deposit taking companies declared to be financial institutions.

2. The Act requires financial institutions to determine the identity of the persons seeking to do business with the it, and if that person is acting on behalf of another, to determine the identity of the beneficial owner. Identity records are to be kept for 7 years.

3. All transactions above $10,000 must generate a transaction record that must be kept for seven years. The transaction record must include: the identity records of a person who is a party to a transaction, a description of the transaction, details of any account used for the transaction including the name of the financial institution address and sort code and the name and address of the employee who prepared the record.

4. There is a dedicated agency: the Money Laundering Prevention Authority, which is appointed to enforce the Act.

5. The Act makes it mandatory for financial institutions to develop internal reporting procedures for the confidential and safe passage of information to the appointed institutional and Money Laundering Prevention Authority personnel.

6. Financial institutions are required to develop internal control procedures to combat and detect money laundering.

7. All financial institutions must train their staff in the relevant laws and in the recognition of money laundering transactions.

8. Both the employee and the body corporate may be guilty of an offence under this Act.

9. There is a separation of powers between the Minister of Finance, the Minister of International Financial Services and the Minister of Legal Affairs, the latter who is responsible for the prevention of Money Laundering.

10. The MLPA has broad powers including the power to enter premises of any financial institution, inspect records, issue guidelines, and give instructions.

11. There are broad powers to obtain warrants for search of premises of financial institutions and also of employees thereof.

12. Property that belongs to, or is in the possession of, a person who is charged or is about to be charged with an offence under the Act may be frozen.

13. Forfeiture orders may be sought against the property of a person, or in that person’s possession, if that person is convicted of an offence under the Act. Importantly the burden of proof lies on the person convicted, though the standard of proof is the balance of probabilities.

14. The penalties are severe: fines between half and two million dollars, and/or prison terms of five to fifteen years.

15. Anti-tipping off provisions are in the Act.

16. Mutual Assistance provisions are included.

17. Very broad list of offences including, abduction, blackmail, stealing, extortion, drug trafficking are covered by the Act.

18. There is a very broad secrecy override provision limited only by the Constitution.



The International Business Companies Act

This Act is similar in some ways to other international financial service models though it has the following distinguishing characteristics:

1. A register of shareholders is to be kept at the registered office.

2. The registered office must be in St. Lucia and is to be provided by the registered agent who must be licensed by the Minister for International Financial Services.

3. A register of directors is to be kept at the registered office.

4. Bearer shares are not permitted.

5. All company records including minutes of all meetings are required to be kept at the registered office.

6. There is a prescribed due diligence questionnaire which is to be completed and submitted with each application for incorporation.

7. All banks, insurance companies and mutual funds to be established under the international financial services legislation must do so as IBC’s and must receive preliminary consent to their incorporation from the Minister.

8. An IBC may be struck off the register if it is deemed to be acting in a manner detrimental to the public interest.



The Registered Agent and Trustee Licensing Act

This Act regulates the service providers in the international financial services industry. It is broad reaching and confers wide powers on the Regulator, the Director of Financial Services to ensure compliance with its provisions. The main sections are:

1. All persons seeking to provide international financial services representation must be licensed under the RATLA.

2. The Director has power to inspect records, demand explanations, and recommend the suspension and revocation of licenses.

3. Warrants can be obtained to search premises where there is reasonable cause to suspect that an offence under this Act or under any international financial services legislation has been committed.

4. All licenses are to reapply annually and must submit audited accounts and a certificate of compliance stating that the information submitted on application has not changed. Any material changes are to be communicated to the Minister who may object.

The other international financial services Acts passed, particularly the banking and insurance acts, give the director wide powers to require records of the operation and explanations of an entity’s operations and records. Further, the Minister must approve all directors and has the power to require the removal of any director.



Conclusion:

The legislative framework that has been developed for the regulation of the international financial services industry has been designed to ensure that the critical requirements for the prevention and deterrence of money laundering are met. The “Know Your Customer” theme is echoed repeatedly to ensure completeness of records. The synergistic effect of these Acts is a very tightly interconnected web through which legitimate sustainable international business will flow easily, while trapping and impeding those who seek to facilitate money laundering and other illegal activity.

It would be remiss to prepare only those entities that deal internationally for the threat of money laundering, while ignoring the local financial institutions. The Money Laundering (Prevention) Act serves to ensure that both the local institutions and those engaged international financial services are aware, trained and prepared to detect and prevent this harmful activity.

Our laws are in keeping with the FATF Forty recommendations. In fact, a review of the key sections that I have outlined indicates that most, if not all of these forty useful guidelines have been incorporated in our laws and the Government’s policies. The Government remains committed to addressing any areas through which St. Lucia can improve its efforts at prevention of money laundering and thereby ensuring our sustained economic development and maintaining our unblemished reputation.

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