DOMINICA: A NEW ATTEMPT AT OFFSHORE FINANCIAL

C O N F I D E N T I A L BRIDGETOWN 001934 SIPDIS SIPDIS SOUTHCOM ALSO FOR POLAD E.O. 12958: DECL: 10/14/2016 TAGS: EFIN ECON EINV ETRD PGOV PREL DO XL SUBJECT: DOMINICA: A NEW ATTEMPT AT OFFSHORE FINANCIAL SERVICES AND ECONOMIC CITIZENSHIP REF: A. BRIDGETOWN 1898 ¶B. BRIDGETOWN 1072 ¶C. BRIDGETOWN 875 ¶D. 03 BRIDGETOWN 257 Classified By: CDA Mary Ellen T. Gilroy for reasons 1.4(b) and (d). ¶1. (C) SUMMARY: Dominica plans to resurrect both its economic citizenship program and its offshore financial services sector. Both programs previously left scars on Dominica's reputation, and so the government is emphasizing that it will implement these programs with appropriate regulation and increased due diligence. The appointment of Julius Timothy as the Minister of Economic Development and Planning raises some questions about Dominica's commitment to a new course because of his service as finance minister during the failure of the previous offshore financial services sector. END SUMMARY. ¶2. (U) Dominica is striving to revitilize its economic citizenship program and its offshore financial services sector. Prime Minister Roosevelt Skerrit has publicly stated multiple times that offshore financial services will play a crucial role in economic recovery. PM Skerrit named Julius Timothy to head these programs as Minister of Economic Development and Planning. Timothy was the co-founder of the opposition United Workers Party (UWP),but he crossed over to the ruling Dominican Labor Party on September 25 to accept the ministry portfolio. Timothy also served as finance minister during the UWP's last stint in government (1995-2000). ¶3. (C) This is Dominica's second attempt at both programs. The previous UWP administration, which was widely considered corrupt, initiated Dominica's first versions of the economic citizenship and offshore financial services programs. The financial services sector lacked crucial regulation, bred corruption and money laundering, and resulted in the blacklisting of Dominica's financial sector by various international organizations and financial institutions. According to the current press secretary, Sean Douglas, once the DLP took power in 2000, the government pushed out the "dodgy" banks responsible for these problems and put most owners of these financial institutions in jail. One of these banks, Carib Bank, is still under investigation by the U.S. Internal Revenue Service (IRS). ¶4. (SBU) Dominica's economic citizenship program has also generated serious concerns, particularly about the types of people purchasing citizenship and the purposes for which they were using Dominican passports. In the 1990s, Dominica issued over 600 passports to citizens of China, Russia, Ukraine, Pakistan, India, and other countries (reftel D). The economic citizenship program recently came under scrutiny when Dominica took Switzerland to the International Court of Justice over the Swiss decision to strip a Russian-born Dominican "diplomat" of his diplomatic status (reftel B and C). ¶5. (C) Government officials are emphasizing that both programs will not repeat the problems of the past. Douglas stated that PM Skerrit plans on diligently regulating the offshore financial services sector and increasing due diligence to avoid repeating history. Kevin Wessell, CEO of Companies Incorporated, an American company, supported this comment. Wessell visited with PM Skerrit in late August looking for opportunities in this new sector. According to Wessell, it is clear that PM Skerrit is trying to create a transparent sector, incorporating substantial due diligence. Futhermore, Wessell hopes other U.S. businesses will join him in this sector to help ensure that the regulations are to U.S. standards and compatible with U.S. laws. Officials say the same concerning the economic citizenship program. Both Douglas and Rayburn Blackmoore, Minister of State in the Prime Minister's office, stated that the government is always reviewing the economic citizenship program to make it tighter and increase due diligence so as to avoid compromising the integrity or name of Dominica (reftel A). ¶6. (C) IRS Attache is tentatively traveling to Dominica next week to meet with the Attorney General, who supervises the Financial Intelligence Unit. In this meeting IRS Attache hopes to learn more specifics about how the government of Dominica plans to regulate these two programs and what it means by due diligence. Post will report on this meeting in septel. ¶7. (C) COMMENT: At first glance, it appears Dominica is honestly striving to establish a transparent offshore financial services sector. PM Skerrit has already shown his dedication to financial reform through his government's implementation of a politically unpopular International Monetary Fund restructuring program. As of yet, the government shows little evidence of corruption and all sources agree that plans for these new programs include regulatory oversight. The wild card, however, is Timothy. His service as finance minister during a corrupt administration and the failure of the previous offshore financial services sector raise questions about his suitability to run these programs now. Post will continue to monitor the development of each of these programs. END COMMENT. OURISMAN