The Financial Services Unit (FSU) plays a crucial role in the economy and development of the Commonwealth of Dominica. As the main regulator for Dominica’s international financial services sector, the FSU oversees the licensing and regulation of offshore banks, insurance companies, mutual funds and registered agents.

The FSU works to ensure that Dominica maintains compliance with international regulations and standards for anti-money laundering, know your customer procedures, and transparency. At the same time, the FSU aims to provide an attractive environment for legitimate international business and investment on the island.

This article will provide an in-depth look at the history, responsibilities, operations and future outlook for Dominica’s Financial Services Unit.

History and Establishment of the FSU

The Financial Services Unit (FSU) was established in 1998 through amendments to the Financial Services Act and the Companies Act in Dominica. Prior to the FSU’s formation, the responsibility for regulating offshore financial services fell under the Minister of Finance.

However, by the late 1990s Dominica recognized the need for an independent and consolidated regulatory body to oversee its rapidly expanding international financial sector. The FSU was strategically positioned under the Ministry of Finance to allow coordination while maintaining autonomy.

The FSU forms part of Dominica’s continuing efforts to build strong Anti-Money Laundering (AML) frameworks and attract quality offshore business. Along with the FSU, Dominica has also enacted critical pieces of legislation including:

  • The International Business Companies Act of 1996
  • The International Limited Liability Companies Act of 1998
  • The International Banking Act of 2000

The FSU’s establishment also coincided with Dominica ratifying the Basel Core Principles for banking supervision. By putting the strategic building blocks in place early on, the FSU enabled Dominica to better weather challenges in regulating offshore finance in the 21st century.

Organizational Structure and Mandate

The FSU operates as a department within Dominica’s Ministry of Finance but has independent authority provided under law. This arm’s length relationship allows coordination with fiscal policy while avoiding political interference.

The FSU’s mandate includes:

  • Processing and approving applications for offshore licenses
  • Ongoing supervision of licensees to ensure compliance
  • Revoking licenses or taking disciplinary action when necessary
  • Creating policy proposals for new legislation
  • Advising the government on international standards

The FSU’s main activities include:

  • Developing stronger KYC, AML and CFT policies
  • Performing risk-based analyses of licensees
  • Conducting onsite inspections of offshore entities
  • Gathering and disclosing statistical data on the sector
  • Enforcing financial reporting requirements
  • Implementing new regulations and best practices

The FSU is led by a Director who oversees departments responsible for policy, banking, insurance, mutual funds, IBCs and international affairs. The Unit had an approved staff of 20 civil servants as of 2018. Funding for the FSU comes from the Government’s budget as approved by Dominica’s legislature.

Licensing and Supervision

The FSU is responsible for issuing and renewing licenses for all offshore banks, trusts, insurance companies and intermediaries operating out of Dominica.

Entities seeking a license must submit an application along with a business plan, financial statements, references and details on sources of funds. The licensing process involves thorough due diligence including:

  • Background checks on directors and shareholders
  • Assessing the entity’s governance structure
  • Verifying availability of resources
  • Ensuring adequate systems and controls are in place

Once licensed, entities pay annual renewal fees and are subject to ongoing reporting and supervision by the FSU. Licensees must submit audited financials, have regular risk assessments, and maintain strict Know Your Customer (KYC) procedures.

The FSU will periodically conduct onsite inspections to ensure compliance and monitor risks. Exams evaluate factors like:

  • Adequacy of books and records
  • Capitalization levels
  • Internal controls and risk management
  • Quality of business operations
  • Adherence to AML/CFT requirements

Enforcement actions like fines, suspension or loss of license may occur if violations are found. The FSU regularly publishes its supervisory guidelines and findings to encourage transparency.

Reporting Requirements and Procedures

The FSU requires all licensed entities to submit reports on a regular basis, including:

  • Quarterly financial statements – Details on assets, liabilities, earnings, capital reserves and provisions.
  • Annual audited financial statements – Externally audited accounts signed by an approved auditor.
  • Annual return – Updates on directors, ownership, structure, activities and health of the entity.
  • Suspicious Activity Reports – Submitted when a transaction raises red flags that funds may be illicit.
  • Large Transaction Reports – Filed for single exchanges over $10,000.
  • Miscellaneous reports – Transactions with related parties, changes in ownership, new offerings or services, material events.

Reports are submitted electronically through the FSU’s web portal. They are closely analyzed by examiners and auditors for any irregularities. Follow-ups or onsite visits may be initiated if risks are identified.

Financial information is used to update the FSU database and shared with international regulators like the Eastern Caribbean Central Bank. Strict security protocols protect sensitive client data from unauthorized use.

Combating Illicit Activities

A core function of the FSU is vetting license applicants and monitoring offshore activities to deter financial crimes like:

  • Money laundering – Cleansing funds obtained through criminal means.
  • Terrorist financing – Providing funding for terrorist groups or acts.
  • Tax evasion – Illegally avoiding tax obligations.
  • Fraud – Wrongfully depriving others of money through deception.

The FSU employs a risk-based approach to detect and prevent abuses within Dominica’s financial system:

  • Stringent licensing requirements weed out ill-intentioned applicants.
  • Onsite examinations ensure controls are in place and working effectively.
  • Transaction monitoring identifies suspicious account use warranting closer inspection.
  • Information sharing with authorities in other jurisdictions provides intelligence on emerging threats.
  • Asset tracing follows the money to uncover laundering schemes or terrorist ties.
  • Criminal prosecutions are pursued when substantial offenses are uncovered.

These actions allow the FSU to protect Dominica’s reputation, reduce corruption, and sever links between offshore finance and crime.

Adapting to International Standards

A major focus for the FSU is monitoring and implementing global best practices for financial supervision. Key international bodies include:

  • Caribbean Financial Action Task Force (CFATF) – Sets regional anti-money laundering standards. Dominica is a founding member.
  • Financial Action Task Force (FATF) – Sets AML/CFT standards followed by over 200 countries.
  • International Association of Insurance Supervisors (IAIS) – Establishes insurance industry principles. Dominica joined in 2001.
  • Offshore Group of Banking Supervisors (OGBS) – Provides guidance for international banking regulators.
  • Basel Committee on Banking Supervision (BCBS) – Develops global banking oversight standards and practices.

The FSU regularly reviews recommendations from these bodies and updates Dominica’s regulations and operations accordingly. This ensures alignment with international norms on transparency, cooperation and risk management.

Key changes driven by emerging global standards include:

  • Tighter know-your-customer and due diligence rules
  • Increased information sharing between regulators
  • Required registration of directors and reporting of ultimate beneficial ownership
  • Greater oversight of politically-exposed persons
  • Standards for consolidated supervision of financial groups
  • Focus on risk-based monitoring and proportional application of rules

Contribution to Dominica’s Economy

While small in absolute terms, offshore financial services make an outsized contribution to Dominica’s economy compared to other sectors. Key benefits include:

  • Government revenue – The sector directly provides over EC$9 million annually through license fees. There is also significant tax revenue.
  • Employment – Over 500 well-paid professionals work directly in offshore finance. Many more benefit indirectly.
  • Economic diversification – Reduces reliance on agriculture and tourism by diversifying the economy.
  • Cross-border investment – Provides access to international capital markets and funding channels.
  • Advanced professional services – Lawyers, auditors, advisors and regulators gain specialized expertise and credentials.
  • Infrastructure – Demand from international clients improves telecoms, business services, transportation links and other infrastructure.

Maintaining a reputable, well-regulated jurisdiction also promotes general foreign direct investment and business formation beyond just offshore finance as well.

Initiatives for Growth and Development

While the offshore sector is maturing after years of rapid expansion, the FSU continues to strengthen its regulatory framework and offer incentives to attract high-quality finance businesses.

Some current initiatives include:

  • Transitioning to risk-based consolidated supervision of groups/conglomerates.
  • Allowing outsourcing and back-office functions like IT and customer service to be based in Dominica.
  • Developing niche competencies around fund administration, structured finance vehicles and digital asset services.
  • Partnering with universities to ensure qualified local talent continues to rise up the ranks.
  • Expanding bilateral cooperation and information sharing with foreign regulators.
  • Digitizing reporting systems to facilitate automation, analytics and information exchange.
  • Encouraging existing licensees to expand products and services offered from their Dominica base.

With its regulatory regime stabilized, Dominica aims to facilitate responsible growth while protecting its hard-earned reputation as a transparent and compliant jurisdiction for international finance.


As we have explored, the Financial Services Unit plays an integral role in upholding standards, facilitating legitimate business and protecting Dominica’s economy from offshore financial risks.

Two decades after its formation, the FSU continues to evolve by implementing new regulations, developing talent, leveraging technology and responding to global challenges and best practices.

With a sound foundation now firmly established, the outlook is positive for Dominica’s financial services sector to expand in a sustainable and socially responsible manner for decades to come.