Corporate Governance / Published legislation and draft legislation

Anti-money laundering and financing of terrorism law

Law 155-17

The anti-money laundering and financing of terrorism law 155-17 was passed on 1st June, revoking law 72-02 on laundering of assets from illegal drug trafficking.

The new law’s provisions cover:

a)   A definition of actions that will be classified as money laundering, infractions preparing the ground for or facilitating money laundering and/or the financing of terrorism, as well as the applicable legal penalties.

b)   Special investigation techniques, international legal cooperation and assistance, and precautionary measures applicable in the area of money laundering and combatting the financing of terrorism (AML/CFT).

c)   AML/CFT prevention and detection and measures against the financing of arms proliferation in prohibited activities. Administrative penalties applicable in the event of non-observance.

The law provides a comprehensive definition of key concepts. It specifies assets or goods that are susceptible to being used for illicit activities and names the competent authorities. It provides definitions of shell banking, agent banking, real beneficiary, objective circumstances, client, extended due diligence, simplified due diligence, preparing the ground for or facilitating crimes,  serious offences, seizure or freezing of assets or goods that can be repossessed or confiscated, instruments, money laundering, suspicious transaction, bodies/institutions that oversee regulated entities, applicable penalty, politically exposed person (PEP), product, minimum wage, money or securities transfer services, without delay, regulated entity, AML/CFT approach-based supervision  and front company.

Criminal offences

Articles 3, 4 and 5 of the law identify the criminal offence or offences associated with money laundering and the criminal offences of financing terrorism, indicating the sentences and fines applicable in each case.

Under this law, people incurring a criminal offence of money laundering will sentenced to between 4 and 10 years in prison, and fines equivalent to 100 and 400 multiples of the minimum monthly wage.

People who have incurred criminal offences linked to money laundering will be liable to sentences of between 6 months and 6 years in prison, together with fines equivalent to between 40 and 60 minimum wages.

Those who have incurred a criminal offence of financing terrorism will be sentenced to between 20 and 40 years in prison.

The law specifies that when a criminal offence can be attributed to a legal person, whatever the responsibility of the owners, directors, managers, administrators or employees, the company or enterprise in question will be subject to one or all of the following penalties:

a)   A fine of at least 2000  multiples of the minimum monthly wage, or the value of the assets laundered

b)   Definitive closure of premises or establishments

c)   Prohibition from carrying out in the future activities of a similar nature as those in the exercise of which the crime has been committed, abetted or concealed

d)   Withdrawal of licence, rights and other administrative authorisations

e)   Liquidation of the legal person

Procedural provisions

In addition to the special investigation methods provided for in the Criminal Procedures Code, the law recognises the legitimacy of whistle-blowers and “controlled deliveries” in moving an investigation forward and when passing judgment on any infraction committed during the investigation.

Where no bilateral or multilateral convention has been ratified by the Dominican Republic, the authorities may provide the widest level of cooperation, based on the principle of reciprocity between nations, applying the same principle to sentences that have been handed down by a judge in another sovereign state.

The law also empowers the authorities to make inquiries and obtain information in the name of their foreign opposite numbers and to set up joint investigation teams to carry out cooperative investigations and, where required, to sign bilateral or multilateral agreements.

Precautionary measures on property

The judge handling the case has the power to order, at the Public Prosecution Office’s request, without prior notification or authorisation, an:

–    Abduction

–    Seizure or provisional freezing of property or banking  products

–    Block on the transfer of fixed assets

Without prejudice to the above, the Public Prosecution Office may adopt precautionary measures on an ad hoc basis, writing a resolution setting out its reasons, in those cases where a delay could endanger the investigation or cause the goods to be destroyed.

Regulated entities

The law classifies the following as entities having the obligation to detect and prevent ML/FT:

a)      Regulated financial entities:

–    Financial intermediation institutions

–    Securities brokers

–    Individuals who intermediate in currency swapping, exchange and remittance

–    The central bank of the Dominican Republic

–    Legal persons who are authorised or licenced to serve as trustees

–    Cooperative Saving and Credit Associations

–    Insurance and reinsurance companies and insurance brokers

–    Investment fund management companies

–    Securitisation firms

–    Stock and securities brokers

–    The central securities depository

–    Issuers of initial public offerings of securities.

b)     Non-financial regulated entities, understanding as such those natural or legal persons exercising other professional activities, whether commercial or entrepreneurial, that are liable to be used for money laundering and the financing of terrorism (ML/FT):

Prevention and detection of ML/FT

Regulated entities must adopt, develop and execute a risk-based Compliance Programme that is suited to the organisation, structure, resources and complexity of their operations.

The programme should be rolled out in all domestic affiliates and subsidiaries abroad and must cover:

–    Policies and procedures for AML/CFT risk assessment and mitigation strategies

–    Policies and procedures to ensure high standards of hiring and continuous on-the-job training of its public officers, employees and directors

–    System of disciplinary sanctions

–    Code of ethics and good conduct

–    External audit in charge of verifying the effectiveness of the compliance programme

The law lays down that financial groups and economic clusters should have a unified compliance programme.

Regulated entities should also develop policies and procedures that include due diligence based on potential risk, taking into account simplified, extended or reinforced measures concentrating on identification or diagnosis, measuring and control, monitoring and mitigation. They are required to ensure that they keep documents, data and information that is updated and appropriate to their levels of risk.

Furthermore, the law requires regulated entities to implement a methodology that allows them to identify, control, mitigate and monitor potential AML/CFT risk events; its scope should encompass the following risk factors or variables:

–    Clients

–    Products and/or services

–    Geographic areas

–    Distribution channels

The law requires regulated entities to store their records of transactions, due diligence measures, account files, commercial correspondence and the outcomes of analyses made, for at least 10 years after the commercial relationship has ended or after the date of the one-off transaction. They must also appoint a Compliance Officer, who should hold a senior position and have the technical skills necessary, to be responsible for supervising strict observance of the compliance programme. This officer will liaise between the regulated entity and the Financial Analysis Unit (FAU) and the supervisory body.

Administrative sanctions

Before the competent authority opens administrative disciplinary proceeding, it will check whether the supposed administrative actions or breaches would be classified as criminal offences. If they do, they must be reported to the Office of Public Prosecutions so that the corresponding investigations can be opened.

Regulated entities, public officers and employees are liable for administrative sanctions if they do not comply with the law. To this end, the breaches have been classified as very serious, serious or minor.

People in positions of administration or leadership in the regulated entities will be held accountable for the offences that are attributable to the legal persons where they carry out their roles.

The administrative sanctions that are applied to regulated entities will depend on whether the entities are in the financial sector. The sanctions will be applied as follows:

a)   Financial regulated entity:

–    Very serious offence: Fine of DOP5,001,000.00 to DOP10,000,000.00

–    Serious offence: Fine of DOP2,500.001.00 to DOP5,000,000.00

–    Minor offence: Fine of DOP1,000,000.00 to DOP2,500.000.00

b)   Non-financial regulated entity:

–    Very serious offence: Fine of DOP2,000,001.00 to DOP4,000,000.00

–    Serious offence: Fine of DOP1,000,001.00 to DOP2,000,000.00

–    Minor offence: Fine of DOP300,000.00 to DOP1,000,000.00

Precautionary freezing of assets by virtue of the United Nations Security Council resolutions

The law delegates on regulated entities the task of verifying whether a client, real beneficiary or potential client figures on the lists issued by United Nations by virtue of the United Nations Security Council resolutions 1267, 1988, 1718 and following. If they are found to be on these lists, the regulated entities must proceed without delay to freeze the goods or assets of the client and/or real beneficiary, and must also notify the Public Prosecutions Office and the FAU of the measures taken and keep those assets frozen unless they receive notification from the courts to lift this measure.

Non-compliance with the indications in the paragraph above is classified as a very serious administrative breach.

Institutional organisation

The Government of the Dominican Republic has an Anti-Money Laundering & Financing of Terrorism committee, which is a collegiate body in charge of the efficient running of the system that prevents, detects, controls and combats money laundering, the financing of terrorism and the financing of the proliferation of weapons of mass destruction. It is made up of representatives from:

–    Inland Revenue Ministry, which occupies the Chair

–    Attorney General of the Republic

–    Ministry of Defence

–    Chair of the National Drugs Council

–    Chair of the National Drug Control Department

–    Banking Supervisor

–    Securities Supervisor

The Financial Analysis Unit (FAU) department acts as the Committee’s technical secretary and takes part in the meetings as a non-voting member.

The bodies that oversee regulated entities also have the power to regulate, supervise, oversee, scrutinise, demand information, conduct extra and in situ inspections, and to impose sanctions on regulated entities and their staff, applying a risk-based approach with policies and procedures that have the following stages:

–    Identification or diagnosis

–    Measuring and control

–    Monitoring and mitigation

 

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