In an effort to bring the Dominican legal framework up to date with new international standards, on June 1, 2017, the Executive Power of the Dominican Republic promulgated the new Anti-money Laundering and Terrorist Financing Act 155-17 (“New Law”). The New Law overhauls the Anti-money Laundering Act 72-02 of June 7, 2002, to allow for a more adequate, coherent and contemporary legal framework.
The New Law aims to regulate more efficiently money laundering and terrorist financing activities according to the latest international guidelines and, to comply with international standards for transparency and transmission of available information regarding economic agents, their activities and their beneficial owners. The enactment of the New Law will likely help the Dominican Republic continue on a path of international cooperation, access to foreign credit and assistance by international organizations.
Some of the key provisions of the New Law introduce the following:
- The inclusion of several governmental agencies as competent authorities responsible for money laundering detection and prevention (i.e. the Financial Analysis Unit, the Monetary Board, the Insurance Superintendence, the Securities Superintendence, the Pension Fund Superintendence, the Private Security Superintendence, the General Customs Directorate, the Casinos and Gaming Directorate, the Credit Cooperative and Development Institute, and any other authority that holds regulatory and supervisory oversight).
- Definitions for the terms “shell banks”, “correspondent bank”, “beneficial owner”, “objective circumstances”, “regular due diligence”, “simplified due diligence” and “enhanced due diligence”.
- The new term “preceding or determinant infraction”, which broadens extensively the infractions that constitute money laundering (i.e. child pornography, traffic of influences, crimes committed by public officials while in office, transnational bribes, tax evasion, aggravated fraud, smuggling, counterfeiting, copyrights infringement, crimes against intellectual property, forgery of public documents, medicine, food and beverage falsification and adulteration, illicit traffic of merchandise, arts, jewelry and sculptures, aggravated robbery, financial crimes, technological crimes and felonies, improper use of confidential or privileged information, and market manipulation).
- Definition for the term “political exposed person” and a new anti-money laundering and financial terrorism supervision focused on a risk based approach.
- A broader definition of money laundering and higher standards of compliance by the government, private corporations and their employees.
- Substantive regulation for international cooperation in the prevention of money laundering and terrorist financing.
- New financial and non-financial regulated parties that must comply with the provisions of the New Law (i.e. trust companies, savings and loan cooperatives, reinsurance companies, investment funds, securitization companies, broker/dealers, depository trust corporations, issuers of public offerings that distribute securities directly to the public, lotteries and sports betting companies and concessionaries, factoring companies, pawn houses, and construction companies).
- Lawyers, notaries, and accountants, will also be bound to the provisions of the New Law if intend to or participate in transactions on behalf of their clients by performing one of the following activities: (i) purchase, sale or remodeling of real estate; (ii) asset management; (iii) bank or brokerage account management; (iv) organize contributions for the creation, operation or administration of companies; (vi) incorporation, operation or administration of companies and other legal entities, and purchase and sales of companies; (vii) the incorporation of companies, any capital modifications, merger, acquisitions or stock sales; (viii) act as agent for the incorporation of companies; (ix) act as director, authorized person or shareholder or other similar position in a company; (x) provide a registered, commercial, postal or administrative domicile for a company or any other legal entity; (xi) act or arrange for a person to act as a nominal stockholder for other parties.
- Requirements that all regulated parties adopt, develop and execute a compliance program focused on a risk based approach, with policies and procedures to: (i) evaluate money laundering and terrorist financing risks; (ii) manage and mitigate risk; (iii) practice client due diligence or enhanced due diligence; (iv) continued monitoring; (v) maintain transaction registries; (vi) designate a compliance officer and determine its functions; (vii) report unusual transactions to the Financial Analysis Unit; (viii) among others.
- Limits on payments in cash for the transfer, acquisition, participation, and use of real estate, motor vehicles, airplanes, cargo ships, watches, jewelry, lottery and sports betting tickets and prizes, and stocks or shares; unless, reliable proof is provided with regards to the payment method.
- An increase in the cash transaction threshold which triggers a registration and reporting obligation by the regulated parties to the anti-money laundering authorities from USD 10,000.00 to USD 15,000.00.
- An extension of the maximum period to file an unusual transaction report before the anti-money laundering authorities to 5 days.
- A new catalog of infractions with different sanctions depending on the severity of the infraction.
To comply with the New Law, we envision that financial and non-financial regulated parties will have to evaluate and enhance their compliance efforts against money laundering and terrorist financing activities. Specifically, regulated parties will need to create new compliance programs or enhance their current programs to make sure those include additional training and contain sufficiently robust policies, procedures and controls.