Does Puerto Rico Belong on the Dirty Money List?

The European Union has a list of places where banks may indulge in money laundering or terrorist financing. Puerto Rico has just been added to that list. The European Commission added quite a few places to the list this week, including Saudi Arabia, Panama, Nigeria, Puerto Rico, American Samoa, the U.S. Virgin Islands, and Guam.

This brings the list up to 23 jurisdictions.

Saudi Arabia and Panama both have protested, saying that they are working hard to keep their finances clean. Great Britain spoke up for Saudi Arabia, where the UK has a number of banks and other financial interests.

Puerto Rico Financial Institutions Commissioner George Joyner called the inclusion of Puerto Rico on the list of “high-risk” jurisdictions “laughable.” He complained that the European Commission had not consulted with Puerto Rico before making the decision. El Nuevo Dia reported that the criteria for the “dirty money” list appeared to include the perception of being a tax haven.

The United States spoke up for its territories, too. “The commitments and actions of the United States in implementing the FATF standards extend to all U.S. territories, and that the same Anti-Money Laundering and Countering the Financing of Terror (AML/CFT) legal framework that applies to the continental United States also generally applies to U.S. territories,” said the U.S. Treasury.

The European Commission says that the list doesn’t directly accuse anyone of wrongdoing, but calls out jurisdictions that have “strategic deficiencies” in their rules that may allow money laundering.

Consequences of the list

There are no sanctions against places that end up on the “dirty money” list, but European banks have to take extra steps to do business with financial institutions in those places. There may also be public relations issues if jurisdictions on the list are seen as untrustworthy.

This could affect Puerto Rico significantly, since the territory is working to establish credibility in financial markets. El Nuevo Dia described the listing of Puerto Rico as “outrageous.”

The EU has one month to confirm or change the new list. The United States has announced its rejection of the list, citing the fact that the European Commission didn’t contact the U.S. territories or give them an opportunity to contest the listing.

Territories, but no states

No U.S. states appeared on the list of jurisdictions considered “high-risk” by the EU. This is true even though the anti-money-laundering laws of the United States specifically apply to U.S. territories and states alike. This is specifically stated in the relevant guidelines: “For purposes of this requirement, the United States includes the states; the District of Columbia; the Commonwealth of Puerto Rico; the Commonwealth of the Northern Mariana Islands; U.S. territories and possessions, including Guam, American Samoa and the U.S. Virgin Islands; and Indian lands, as defined in the Indian Gaming Regulatory Act.”

Whether Puerto Rico is actually more financially risky than the states, or simply perceived that way, it is a problem of being a territory. Statehood would solve it.

Tell your legislators that it is time for statehood.

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