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Meeting anti-money laundering obligations in the Dominican Republic

Meeting anti-money laundering obligations in the Dominican Republic

Contributed by Jay Ryan, Executive Vice President for Accuity

The new compliance obligations placed on non-financial businesses are stringent, but help is at hand.

Last summer, tens of thousands of people flooded onto the streets of Santo Domingo, dressed mostly in green. The Marcha Verde protests were a clear indication of the strength of public feeling about the Dominican Republic’s history of corruption in both the private and public sector. But the tide is turning. Change is underway.

Despite an economy that is among the largest in the Caribbean, the Dominican Republic (DR) has struggled to assert itself on the international financial stage because of poor regulatory controls. A 2014 assessment by the Bureau of International Narcotics and Law Enforcement Affairs said that ‘corruption, the presence of international illicit trafficking cartels, a large informal economy, and a fragile formal economy make the DR vulnerable to money laundering and terrorism financing threats’.

New regulations introduced in 2017, though, are changing the landscape. The new Anti-money Laundering and Terrorist Financing Act came into effect on 1 June 2017, replacing the existing Anti-money Laundering Act and bringing DR into line with financial crime legislation already in place in many developed nations. The new Act is based on the recommendations of the Financial Action Task Force (FATF – the G7 organization set up to develop an international response to the growing threat of money laundering) and will, it is hoped, help to greatly improve the country’s access to foreign credit and the support of international organizations.

Jay Ryan

Jay Ryan

Implementation of the Act is now well underway, with the full support of President Danilo Medina. In January 2018 President Medina urged government officials to work to achieve a satisfactory evaluation from the International Financial Action Group of Latin America, which is tasked with coordinating anti-money laundering efforts in the region.

The new law introduces more stringent money laundering and terrorist financing regulation by improving the due diligence and data transparency around financial transactions and involving a wider group of professionals in the fight against financial crime. It also establishes a number of government agencies as competent authorities responsible for the detection and prevention of money laundering.

The law considerably broadens the activities that are defined as money laundering, which now include tax evasion, counterfeiting, copyright infringement and market manipulation. Critically, the new law also extends anti-money laundering (AML) compliance requirements that have until now only applied to financial institutions to a far wider group of non-financial professions. This includes:

  • Savings and loan cooperatives
  • Lotteries and sports betting companies
  • Factoring companies
  • Pawn houses
  • Traders in vehicles, metals, precious stones and jewelry
  • Construction companies
  • Real estate brokers
  • Lawyers, notaries and accountants who participate in a wide range of activities on behalf of their clients, including real estate transactions.

These professionals are now expected to meet far higher standards of compliance than has ever been seen in the DR before. All entities that fall under the Act are required to introduce and maintain a compliance program that includes detailed policies and procedures to:

  • Evaluate the money laundering and terrorist financing risks in their business
  • Manage and mitigate that risk effectively
  • Carry out detailed due diligence on their clients
  • Monitor the financial activities of their clients, and
  • Report suspicious activity to the Financial Analysis Unit within five days of the event.

Customer due diligence is one of the biggest challenges introduced by the Act. The new law specifies that due diligence of a customer or client means establishing and verifying their identity – and if someone is acting on behalf of a client, their identity must also be verified, as well as their authorization to act for the client. If the client is a company, the ultimate beneficial owner must also be identified. In all cases, this monitoring of clients and client activity must be continuous and regularly updated. Merely asking the client for this information will not satisfy the Act’s requirements – it makes clear that the data must be verified from ‘reliable and independent sources’.

Few of the professions affected by the new Act were prepared for its sudden implementation last summer. The penalties for failing to comply with the Act are severe – fines of millions of pesos and, in some cases, imprisonment.

Meeting the full requirements of the Act will take extensive planning, the establishment of clear policies and procedures, and on-going training of staff; and the Dominican Republic has already taken some proactive steps to progress in these areas. In recent months, the government has consulted Accuity on how to achieve best practices in financial crime compliance and our subject matter experts have provided a series of practical recommendations. The good news is that there are excellent automated systems available that effectively and efficiently screen customers, accounts and transactions.

Firco Compliance Link is ideal for businesses and professionals who want to keep their business flowing and keep costs down, while being confident that they are meeting their regulatory obligations. It can be installed on site or as part of a SaaS solution, providing a consolidated view of all account, transaction and trade activity. It can be configured to meet individual risk appetite and creates the clear audit trail that regulators expect.

Alternatively, the online screening option, Firco Online Compliance, is a fast and easy-to-use solution that automates Know-Your-Customer checks using the latest verified data. With comprehensive data on more than three million entities in 250 jurisdictions and over 1,300 enforcement agencies, these solutions allow businesses in all regulated fields to quickly and effectively meet their obligations under the new Act.

There is no doubt that the new requirements that financial and non-financial businesses face are stringent and will require work to implement effectively. But the new Act marks a significant step in DR’s history. Having worked a long time in advising governments in the area, we feel confident the government has the right spirit to drive forward the development of a trustworthy and well-regulated financial environment that will bring DR, and its businesses, onto the international stage.

Global Banking & Finance Review


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