Part 1

Every now and again we find out that Dominica, along with other Caribbean countries, has been either “blacklisted” or “greylisted” by some international body, whether it is the OECD (Organisation for Economic Cooperation and Development) or FATF (Financial Action Task Force), the global money laundering and terrorist financing watchdog, or the EU (European Union).


The OECD’s broad mandate is to assist its members with issues of economic growth, and among the issues it deals with are tax evasion and avoidance, and money laundering. The EU is a politico-economic union of 28 member states that are located primarily in Europe which also has, among its responsibilities, those identified immediately above regarding the OECD. Both these organisations issue AML/CFT (anti-money laundering / counter-financing of terrorism) directives, regarding legislation that their member states must enact to prevent their domestic financial systems being used for money laundering and terrorist financing.

As a recent Jamaica Gleaner Editorial seeks to clarify: “Prior to the EU’s declaration of its own regime, the standards for AML/CTF compliance were established by the OECD via the Financial Action Task Force (FATF) and regional subgroups such as, for this region, the Caribbean Financial Action Task Force. Now, according to the EU, the FATF merely “constitutes a baseline for the EU list”, which it built out with its own methodologies”. For instance, FATF can have a country on a “grey list”, while the EU may have the same country on its blacklist. If this all seems confusing, it is. Unfortunately, as dependent, powerless countries in this business, “ours is not to reason why” ours is but … to strive to comply. More or less.

The FATF is especially concerned with money laundering and terrorism financing. The FATF itself is a global body that encompasses the EU member states, the USA, Canada, the UK, and others. In the Caribbean, FATF operates through the CFATF, (the Caribbean FATF), which is “an organisation of twenty-five states of the Caribbean Basin, Central and South America, which have agreed to implement common countermeasures to address money laundering”. (All Caricom member countries are members of CFATF.)

CFATF’s main objective is “to achieve effective implementation of, and compliance with, the FATF recommendations to prevent and control money laundering and to counter the financing of terrorism and proliferation of weapons”. CFATF also works closely with international organisations including the World Bank, the IMF, and the Eastern Caribbean Central Bank.

The OECD, EU, FATF and CFATF all closely monitor the extent to which the countries adhere to their directives or recommendations, in keeping with the findings deriving from their periodic reviews of these countries. The countries, including Caribbean countries, are often tardy in taking action to reflect these findings, directives, or recommendations. As implementation deadlines approach, or when we find ourselves blacklisted, greylisted or included on a list of “non-cooperative countries”, we then find ourselves having to scamper to put measures in place, legislative and otherwise, to satisfy the requirements and to get off the backlists.

Non-compliance can have undesirable consequences on the economies of those countries affected and can cause serious reputational harm to these small states. As such, we are pressured to comply, or run the risk of potential trade and other sanctions that could negatively impact the various economies.

Truth be told, the EU does not have direct enforcement powers over our Caribbean islands, but its sheer political and economic power forces a “call to action” by the Caribbean islands, based on EU directives that we would not have signed up to, nor were we even in a position to readily comply. Sometimes, we would have satisfied FATF, OECD or EU recommendations, but the red tape involved and the timing of the issuance of the lists, could work against the ability of countries like Dominica to be speedily removed from the “name and shame” lists of these organisations.

The Dominica Experience

Here we have to be careful to distinguish between blacklisting for reasons of money laundering, on the one hand, and supposed tax avoidance and evasion, and “harmful tax practices”, on the other. For example, Dominica was among a list of countries that were added to the EU’s blacklist on March 19, 2019. That blacklist had to do with “harmful tax practices”. Dominica, after taking the required corrective measures, was removed from this blacklist in October of the same year.

However, our focus in this article is on money laundering, which is the main focus of the FATF and CFATF. (and as we have indicated above, the EU is also a very interested party). One outcome of FATF’s 2000 Review was to label five Caribbean jurisdictions as “non-cooperative” – The Bahamas, Cayman Islands, Dominica, St. Kitts and Nevis, and St. Vincent and the Grenadines. Dominica was found to have met fourteen of the twenty-five criteria defining “Non-Cooperative Countries and Territories” (NCCT). Where Dominica was concerned, the country’s AML/CFT legislation was found to be outdated, and its offshore sector largely unregulated. The report particularly cited obstacles to the identification of owners of accounts.

In 2001 Dominica was able to make some strides, but not enough to remove it from the NCCT list, aka the blacklist. Dominica addressed some of the FATF’s recommendations by enacting laws that criminalised money laundering, established a financial intelligence unit, and created some record keeping and suspicious transaction reporting requirements for the financial services sector. Dominica, however, still needed to address issues of customer identification, retention of records for the FATF-mandated five-year period, and the ability of supervisory authorities to access necessary information.

In the FATF Review 2002, Dominica was again deemed to be a non-cooperative nation. Despite that setback, Dominica was praised by the FATF for amendments to the Offshore Banking Act that required offshore banks to establish a physical presence in the jurisdiction, and for amendments to the International Business Companies Act that created a mechanism to register bearer shares. Dominica’s ability to aid foreign regulatory authorities was enhanced as of January 31, 2002, through enactment of the Exchange of Information Act. Dominica also amended its International Exempt Trust Act to grant government access to the financial documents of licensees under the Act.

Although Dominica made significant legislative and regulatory progress, the FATF continued to be concerned about Dominica’s ability to cooperate in a timely manner to requests for international mutual legal assistance and the fact that there was no clear mechanism to secure the cooperation of regulators from foreign banks, with local and regional regulators. Dominica was finally removed from the NCCT list in Oct 2002. (Like other Eastern Caribbean jurisdictions, Dominica has placed its offshore banks under the direct supervision of the Eastern Caribbean Central Bank).

Since then, the NCCT list has been replaced by two public documents: FATF’s Public Statement and Improving Global AML/CFT Compliance: Ongoing Process, which focus on the inadequacies in AML/CFT regimes of the countries. These documents are updated three times a year.

In November 2011, the CFATF identified certain jurisdictions, including Dominica, with major strategic deficiencies in their AML/CFT regimes. In order to inspire an efficient remediation process, Dominica and the CFATF developed an Action Plan with identified target dates, to address the deficiencies that existed in Dominica’s national regime to combat money laundering and the financing of terrorism.

The CFATF issued a public statement in May 2013 recommending that Dominica enact legislation and issue relevant guidelines addressing their AML/CFT deficiencies. Dominica has acted on those guidelines and continues to work with the CFATF to complete its reform process. Thankfully, Dominica has not been the target of any international sanctions, although the US State Department’s “Know your Country” website stated in 2013, that Dominica was “categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes”.

The CARICOM Experience

More recently, with effect from 1st October 2020, the following four Caribbean countries were placed on the EU’s list of 23 countries “with strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks”. The EU calls these countries “high-risk third countries” — Bahamas, Barbados, Jamaica and Trinidad and Tobago, among a number of other developing countries. “The European Commission carries out risk assessments in order to identify and respond to risks affecting the EU internal market. “The aim of this list is to protect the EU’s financial system by better preventing money laundering and terrorist financing risks.” As a result of the listing, banks and other entities covered by EU anti-money laundering rules will be required to apply increased checks (due diligence) on financial operations involving customers and financial institutions from these high-risk countries.”

The EU’s decision was condemned by CARICOM: The Barbados authorities condemned their inclusion in this list: “taking this action while the world is in the midst of an economic crisis due to the COVID-19 pandemic, is both insensitive and inconsiderate, particularly as Barbados was given no prior warning or opportunity for engagement. “As a partner of Barbados, the least that can be expected of the EU before it engages in actions that are likely to result in reputational and economic harm to the country, is the opportunity to have full, fair, free and frank exchanges towards an amicable resolution of the issue.”

“CARICOM’s leaders described the EU’s action as disproportionate and an egregious practice from which it should desist. We agree. Indeed, we remain surprised that the EU, a long-standing partner with the Caribbean on development, not only took such an action against its allies, but brought more community states into the net at a time when CARICOM’s already troubled economies were even more stressed and vulnerable.” (Jamaica Gleaner)

However, the Jamaica Gleaner did not fail to “acknowledge and support, the need for effective systems against money laundering …. “Obviously, too, loopholes through which terrorists can funnel money to finance their activities … must be closed. After all, tax evasion and the financing of terrorism pose as much a threat to the economic well-being and security of Caribbean countries as they do to the rest of the world.”


In concluding this article, we take note of this sobering quote by former US Deputy Attorney General, Paul Mc Nulty: “The cost of non-compliance is great. If you think compliance is expensive, try non-compliance.” The ongoing efforts of the Caribbean region to remain compliant require the support of all citizens. The focus has to be all encompassing to enable us to succeed in the eradication of money laundering and terrorist financing involving our vulnerable economies. To achieve this outcome all citizens must be sensitised to the effects and consequences that non-compliance could have on people, the environment, and the economy. Part II of this article will explore the consequences of Money Laundering on these critical aspects of all countries.

About the author:

Annette Severin-Lestrade, BA MBA AICB, is a former banker, having served for over 30 years in Dominica and other Caribbean countries. She is a certified anti-money laundering specialist (CAMS) and certified financial crimes specialist (CFCS), and through her company 767Compliance and Business Services, provides training and advisory services in AML/ CFT and customer service, and other business services.

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