BUILDING AN INTERNATIONAL FINANCIAL CENTER IN THE

UNCLAS SANTO DOMINGO 001998

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/CAR, TREASURY FOR SARA GRAY

E.O. 12958: N/A
TAGS: EFIN DR
SUBJECT: BUILDING AN INTERNATIONAL FINANCIAL CENTER IN THE
DR

REF: SD 0992


1. (U) Plans to build a privately operated international
financial center in the Dominican Republic are moving forward
with construction slated to begin as early as the end of this
year. On August 6, Charge met with representatives from the
Independent Financial Centre of the Americas (IFC) and their
lawyers from Patton Boggs to discuss the proposed project
which will be located in Guayacanes, about an hour east of
Santo Domingo. Patton Boggs has helped to draft a law that
may be considered by the Dominican Congress later this month
to create a financial trade zone that would exempt IFC from
local banking and financial regulations. The Chief Executive
of IFC, Gaetan Bucher, said IFC,s independent regulatory
framework will be based on best practices from around the
world. Despite the fact that IFC will not be subject to
local financial laws and will only do business outside of the
DR, Bucher believes the project will improve the DR,s global
image by helping to overcome negative perceptions of the
country,s weak financial sector (Reftel).

Scope of the Project


2. (U) IFC,s long-term goal is to establish an investment
banking platform for the Latin American region in the DR.
According to Bucher, IFC currently has 88 employees and has
invested USD 46 million in research since 2004. Bucher said
they are talking to U.S. banks regarding a potential bond
issuance in order to raise additional funds. IFC outlined
their 25-year business plan to build a financial center as
well as homes, schools and other &first-world quality8
public services, including electricity and water, on 7000
acres of land located along the southeast coast an hour from
Santo Domingo. IFC estimates it will create 26,000 jobs over
25 years, half of which would be in financial services and
the other half would be support positions. Construction is
targeted to begin at the end of this year and the center
would open for business in 2010 or 2011. IFC is planning to
market the Caribbean lifestyle, as well as the availability
of first world services, including healthcare, within the
financial zone, to help attract high quality financial
experts from around the world. IFC,s Head of Security noted
that there would a strong emphasis on security to counteract
the DR,s reputation for high crime rates. Initially most of
the financial sector employees would be recruited from
overseas since the DR does not have the human resources
necessary to staff the financial center. Bucher noted that
he plans to work with local universities to offer
scholarships and tailor the curriculum to increase capacity
in the financial sector. However, this is a long-term goal
that will take time to achieve.

Regulatory Oversight


3. (U) According to Bucher, IFC will establish an independent
oversight board that will then choose the members of a
separate regulatory board. Although IFC insisted the
independent boards would help to insulate the company from
political influence, IFC said it would present a slate of
candidates for the oversight board to the Dominican
government,s Monetary Board for review. The company is
seeking independent funding for these two boards in order to
keep them separate from the owners of IFC. The draft law
that Patton Boggs has written in consultation with a local
law firm requires that all financial transactions take place
with entities outside of the DR. IFC would be subject to
local criminal laws, however none of the local banking or
financial regulation laws would apply. Patton Boggs said
they hope the draft legislation will be considered by the
Dominican congress later in August. They did not seem to
have any doubt that it would be approved. (A copy of the
draft legislation will be sent to WHA/CAR by email.)


4. (SBU) When asked by EMBOFFs what precautions would be
taken against money laundering, IFC said it would establish
linkages to the Financial Action Task Force on Money
Laundering (FATF) and the Financial Crimes Enforcement
Network (FinCEN),as well as create a specialized financial
intelligence unit (FIU) that will correspond with the GODR
FIU and other FIUs around the world. Bucher acknowledged
that an independent FIU, that is not a government entity, is
a new concept and it is not clear how it would interact with
its government counterparts. IFC said its FIU would have an
investigative unit, but that it would be unable to pursue
criminal charges. Bucher said he did not think the DR,s
weak financial system would impede IFC from being successful.
He also added that he believes IFC could help improve the
DR,s global image. However, he did not address the need for

reform to strengthen the financial sector.


5. (U) Bucher, the Chief Executive of IFC, is a Swiss banker
who grew up in the DR. He has close ties to the Vecini
family, which has a controlling interest in various sectors
of the economy and is the main investor in IFC. Bucher said
IFC has been working closely with Deloitte London and Patton
Boggs on the creation of the regulatory framework for the
project. IFC hired Thomas Quinn, former Director of the U.S.
Air Marshal Service and Secret Service officer, as the Head
of Security. They are hoping to recruit financial experts
from Europe, as well as the U.S., to emphasize the global
nature of the center. Bucher noted that they are seeking to
attract high profile financial experts to serve on the
regulatory and oversight boards. He hopes the inclusion of
several well known names will enhance the credibility of the
project and send a message that the company is serious about
maintaining strong oversight. IFC said they have support
from contacts in Washington for the project, including former
U.S. Ambassador to the DR Charles Manatt. According to
Bucher, IFC and Patton Boggs have briefed some members of
Congress, including Rep. Donald Payne, Chairman of the
Caribbean Caucus, and officials at Treasury on their plans.

Comment


6. (SBU) A DHS representative in attendance at the meeting
noted the GODR must work to amend its weak monetary and
financial law. DHS also commented that the GODR FIU is not
very effective and that the government must improve basic
infrastructure before it can bring the financial system to a
higher standard. Although the DR stands to gain from IFC,s
large investment in jobs and infrastructure development, it
is not clear that it will see any improvement where it is
needed most, in the weak financial and banking industries.
It is of course possible that these weaknesses are part of
the attraction for IFC which is seeking freedom from local
regulatory oversight. This project raises concerns about the
attraction of locating a company in a country that does not
have a strong record of enforcing laws against corruption and
money laundering.
BULLEN