This post is also available in: Spanish
On June 1st 2017, Dominican nationals and residents woke up subject to a new Money Laundering framework. Law No. 155-17 replaced outdated money laundering statute No. 72-02, which had been enacted with a main focus on money laundering derived from illegal drug-related activities.
The executive and legislative branches pushed for the approval of this new statute in record time during the first half of 2017, following guidance from The Financial Action Task Force of Latin America (GAFILAT), a G-7 regional organization. Non-adherence to said general guidelines by Fall 2017 could have caused the country to be blacklisted and seen its access to major international capital markets-which the D.R. has grown very fond of in the past few years-closed.
After all the buzz this topic has received in the general media, we are certain most Casa residents, be it Dominican or foreign, are already wondering if and how this new law will affect them. Their worries are not at all unfounded: The main impact this new statute will have on everyday life, will be the limits it imposes on cash operations. New strict limits have been set for cash payments in certain operations the law outlines as potential vehicles for money-laundering schemes, such as:
- Payments for real estate above RD$1,000,000.
- Payments for motor vehicles above RD$500,000.
- Payments for jewelry above RD$450,000.
- Payments for corporate share transfers above RD$250,000.
One major change for the real estate market brought by this new law, is that now, regardless of the amount involved, Registrar of Titles are requiring buyers to also file evidence of payment through a non-cash method in order to process their title conveyances. Not complying with this new requirement, will mean that their conveyance will be rejected and title will remain in their seller’s name, with all the risks that entails. So, if for example, purchase price payment for a US$400,000 villa is made through an international wire transfer, the Registrar of Titles will be requiring the buyer to deposit his bank’s wire or swift confirmation for this exact amount and the wire’s full details. Before this new law, the parties would limit themselves to mentioning the price in the signed deed of sale and that said price had been paid in its entirety without any further details.
Similar procedures have been set up at the Tax Office (DGII) for motor vehicle title transfers and at Chambers of Commerce for corporate share transfers. These new filing requirements are already causing increased uncertainty within the real estate and legal industry as the law is too vague as to what exactly these registries are allowed to require as evidence of payment. The Presidency’s Legal Advisory Office is already working on the new law’s application ruling which is expected to address and clarify these uncertainties.
Another major change pertains to the number of parties which are now subject to reporting activities derived from money laundering preceding infractions. Before this law only financial institutions were considered as subject reporting parties. The new statute now includes a list of non-financial subject parties, such as real estate brokers, casinos, attorneys, notary publics, accountants, which will now have to establish new money laundering due diligence and know-your-client procedures, report any irregular activities, all in accordance to the law’s new compliance and reporting requirements.
Lastly, and perhaps one of the other key novelties of this new law is that it is much more encompassing than the prior statute (which had only focused on illegal drug activities) as it establishes a wide and extensive list of 30+ felonies and infractions which are now considered as money-laundering preceding criminal activities, such as: Financial crimes, Bribery, Cross-border bribery, extortion, tax evasion and other tax-related infractions, insider trading and use of privileged or confidential information, market manipulation, hi-tech crimes, infractions committed by public officials, environmental infractions, unjustified enrichment, and any other criminal infraction subject to a prison term of 3 years and above.
Alfredo A. Guzmán
Alfredo A. Guzmán Saladín, attorney and partner at Guzmán Ariza, Attorneys-at-Law (www.drlawyer.com), the Legal 500 Latin America recommended lawyer. The firm is a full service national law firm founded in 1927 and dedicated to servicing the needs of international investors in the Dominican Republic, with seven offices located in La Romana, Santo Domingo, Punta Cana, Las Terrenas, Sosúa-Puerto Plata, Samaná and Cabrera. A Casa resident, Alfredo is based at the firm’s La Romana and Punta Cana offices and may be contacted at [email protected] or (809) 550-6400 – (829) 259-3058.
* This article was contributed by Alfredo A. Guzmán, attorney and partner at Guzmán Ariza.