US Virgin Islands grapple with European Union blacklisting

The United States Virgin Islands has been blacklisted. The European Union in mid-February added the territory to its ‘dirty money’ or money laundering blacklist.

After a recent string of major scandals and investigations involving money laundering and what the EU deems ‘lax controls on terror financing’ at some large European banks, the block is tightening regulation and oversight on money coming into the Union from certain countries.

According to the EU Commission, “banks and other entities covered by EU anti-money laundering rules will be required to apply increased checks on financial operations involving customers and financial institutions from these purportedly “high-risk” jurisdictions.”

The 28 member bloc will officially vote to approve the new list next month. However, some concerns have been raised by member-states, namely the United Kingdom, over the inclusion of Saudi Arabia — an important gulf ally for London.

Unfortunately, if the new list is approved the US Virgin Islands will be subject to increased oversight that could cause headaches for the islands in term of financial relations with the Union.

In addition, all other United States territories were added to the list, along with Panama, Nigeria, Libya, Botswana, the Bahamas, Ghana and Samoa. Already on the list from prior years were Afghanistan, North Korea, Ethiopia, Iran, Iraq, Pakistan, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen. Countries removed from the list this year include, Bosnia, Guyana, Laos, Uganda, and Vanuatu.

Surprisingly, this is not the first time the US Virgin Islands has been blacklisted by the EU. Just last year it joined a handful of other countries on the tax-haven blacklist.

Then-Governor Kenneth Mapp (I) decried that blacklisting as “unjustified” stating that it was implemented with no evidence from the EU to support its decision.

The new administration of Governor Albert Bryant Jr. (D) has had a similar response to this year’s new blacklisting, albeit delivered in a more mild manner.

“Of course the administration disagrees and we are disappointed but we are continuing to work with Treasury on correcting the matter,” Government House Spokesperson Richard Motta said Thursday. “It is not just us. It is all the territories and as territories we have to work with Treasury on this,” he added.

The Treasury Motta is referring to is the United States Treasury. It issued its own contentious and in depth response following the blacklisting. Arguing vehemently it  “has significant concerns about the substance of the list.” Chief among the United States concerns are the methods used by the EU to develop the new list, and also its confusion over why the Treasury was not consulted before the announcement.

In addition, the Treasury is arguing the same legal framework used on the mainland for financial transactions and money laundering also applies to all of its territories.

Although the US Treasury is defending its territories against what it may rationally perceive as unreasonable and unjust blacklisting, it is important to note that just two weeks prior to the EU’s decision the FBI raided a bank in San Juan, Puerto Rico in connection to money laundering concerning circumventing US sanctions on Venezuela. The FBI has stated this raid is part of a larger investigation that includes entities within the the US Virgin Islands.  

“The United States is waging a war against money laundering,” FBI spokesman Luis Rivera-Santana said. “Puerto Rico and the US Virgin Islands are battlefields in this war.”

It will be intriguing to observe how this blacklisting plays out for for the United States and its territories. The mainland will need to perform a delicate balance between defending its territories against what it considers outside obstruction, while at the same time policing them based on laws and regulations already in place.

For the US Virgin Islands, this song has been sung before. It understands internationally it and its sister territories will come under different scrutiny than the mainland.

It will continue, as Gov. Bryan Jr. alluded, to cooperate with US and EU authorities in hopes of resolving this matter, and removing itself from the both blacklist in the near future.