The Government of St. Kitts and Nevis wishes to register its utter disappointment with the U.S. Department of State’s 2018 International Narcotics Control Strategy Report, Volume II: Money Laundering (2018 INCSR) and takes exception to the grossly misleading, erroneous and offensive statements about the Federation of St. Kitts and Nevis. The Report makes false claims which are void of any substantive evidence. The Government wishes to reiterate that it continues to operate in a transparent manner and has in all its interactions with the United States Department cooperated in providing all relevant information.
Vulnerabilities and Expected Typologies
In response to the 2018 INCSR’s misleading charges of anonymous accounts, unusually strong bank secrecy laws and overall lack of transparency of beneficial ownership of legal entities in the Federation, the Government of St. Kitts and Nevis notes the following:
Section 69 of the Financial Services Implementation of Industry Standards Regulations 2011 (FSIISR) prohibits anonymously operated accounts and requires regulated businesses to conduct due diligence, as well as record their findings in writing and keep such findings available. Additionally, the Federation’s Anti-Money Laundering Regulations, 2011, its Anti-Terrorism (Prevention of Terrorist Financing) Regulations, 2011 and its FSIISR with appending Guidance Notes require all regulated entities, including international banks to carry out careful and comprehensive customer due diligence.
The Confidential Relationships Act, Cap 21.02 supports the confidentiality provisions in both the Nevis International Banking Ordinance 2014 and the Banking Act 2015, whilst importantly offering the same level of protection given in all other jurisdictions that allow financial institutions to operate. Confidential information from banks can, however, be disclosed in connection with a request for information under a Tax Information Exchange Agreement (TIEA) or Double Taxation Convention (DTC), or in pursuance of a regulatory or criminal investigation.
It is also important to note that since the passage of the international banking legislation in Nevis in 1996, only one international bank has ever been granted a licence to conduct international banking business from or within Nevis. Said licence was granted in 1998 to a wholly owned subsidiary of a domestic bank which was duly licensed by the Eastern Caribbean Central Bank. There are no offshore banks on the island of St. Kitts. It is therefore disingenuous to imply that there has been “growth in the offshore banking sector”.
The Financial Services Regulatory Commission (FSRC) is responsible for the monitoring of the sole international bank for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) purposes and has conducted comprehensive on-site examinations to ensure compliance with the AML/CFT legislation, the Nevis International Banking Ordinance, Nevis International Banking Regulations, FATF Recommendations and the Basel Core Principles.
The jurisdiction has a robust regulatory framework for AML/CFT including a strong focus on customer due diligence. The FSRC – the ultimate regulatory body for financial services and AML/CFT for St. Kitts and Nevis – adopted a Risk-Based Supervision (RBS) Framework in May 2015. The IMF, through the Caribbean Regional Technical Assistance Centre (CARTAC), was instrumental in providing the necessary training and expertise to develop the RBS Framework.
Furthermore, subject to Section 40 of the FSRC Act and Section 4(3) of the FSIISR, the FSRC undertakes enforcement actions in St. Kitts and Nevis. Statistics showing the number of on-site examinations/inspections conducted and enforcement actions undertaken by the FSRC’s St. Kitts and Nevis Branches are publicly available online in the December editions of the respective monthly newsletters.
The Government refutes the claim that “The CPU does not maintain adequate autonomy from politicians to prevent political interference in its decisions.” This is a grave and damaging statement which bears no semblance of truth. The application process is handled by technicians, and contrary to what the Report claims, without any involvement by any politician in any stage of the process. Instead, reliance is placed on the multi-tiered due diligence process and the decisions of the technical persons.
The Government would have welcomed any consultation with the writers of the Report who, prior to publication, should have sought verification or clarification on any matter of concern.
AML Deficiencies
Bearer shares have been immobilised in accordance with FATF Recommendation 24 and the FATF Methodology Criterion 24.11. The St. Kitts and Nevis authorities therefore contend that the Federation is compliant with the international standards in this regard. The fact that this issue is cited as a deficiency is disputed.
It is also unclear why the 2018 INCSR makes references to internet gaming entities and a requirement for them to apply for a licence as an IBC. Internet gaming business is prohibited in Nevis and the FSRC – Nevis Branch has never issued a licence to an IBC to carry on such an activity. Additionally, the words, ‘gaming’, ‘gambling’, ‘casino’ and ‘betting’ including any derivative or cognate term of the said words are considered prohibited words.
Enforcement/Implementation Issues and Comments
The 2018 INCSR ignores the fact that the Federation’s Law Enforcement is guided by legislation that provides for international cooperation, among which are the Proceeds of Crime Act, Cap 4.28 and the Mutual Assistance in Criminal Matters Act, Cap 4.19. St. Kitts and Nevis also signed a treaty with the U.S. Government on Mutual Legal Assistance in Criminal Matters in 1997.
Additionally, the Federation’s Financial Intelligence Unit (FIU) continues to assist several jurisdictions, including the United States of America, with international requests to aid AML/CFT investigations. The FIU also spontaneously shares with U.S. agencies all relevant information emanating from Suspicious Transaction Reports.
Noteworthy, too, is that St. Kitts and Nevis’ commendable progress in implementing the recommendations of the Financial Action Task Force (FATF) precipitated the country’s removal from any listing related to AML/CFT regimes. Additionally, the Organisation for Economic Co-operation and Development (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes completed a Phase 2 Peer Review Assessment of St. Kitts and Nevis, rating it as “Largely Compliant” along with approximately 80 other countries, including the United States of America.
The Government of St. Kitts and Nevis continues to work assiduously to demonstrate that it is committed to abiding by the same exacting standards that the United States of America and its other longstanding allies adhere to, as responsible members of the international community.
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